…has been unoccupied since the financial crisis of 2007. As I understand it, someone bought it during the heady housing-boom days of 2006, when it would have been worth about $150,000, but in short order mailed the keys back to the bank that held the mortgage and left town.
There were a couple of early, unsuccessful attempts at sheriff sales to recover unpaid property taxes. But the property has lain dormant since, until the mortgage owner held an online auction a month or so ago.
The most interesting part of this to me is that there had been a lien against the house of around $600,000, or almost 4x the eventual selling price.
I presume this loan was part of a larger package sold to institutions, the nuts and bolts of which I have no idea about. I think the rationale for keeping it on the books for such a crazy amount must have been:
–the 2006 mortgage could have been for, say, $300,000. If so, the major purpose for seeking the original loan was to take the money and run, but the mortgage-holding entity never detected this and relied on the original appraisal
–the entity that held the loan continued to accrue unpaid interest and penalties, showing this in the accounting statements either as income or an addition to reserves, even though no money was coming in. …making a big minus into an apparent plus
–there was no mechanism in the package for regular portfolio pruning–seizing a non-performing property, paying accrued taxes and selling it
Please comment if you have any ideas.
–I think we’re in the early days of a cyclical shipwreck of unusually large size in the office building market in the US. My guess is that we’ll be seeing a similar period of loan holder reluctance to write either office building asset value or the loans they secure down to fair market value
–my guess is that this mortgage is part of a large package that has come to the end of its life and is being liquidated. It would be a lot worse if banks were clearing the decks of housing exposure to accommodate a large inflow of dud office building loans.