Moreno Valley story: One buyer, two cycles, three foreclosures

Interesting portrait of the economic cycle of boom and bust in Moreno Valley in today's L.A. Times. It goes kind of like this: Buy a house in the '80s boom, lose it to foreclosure; buy another house in the post-2000 boom, refinance it twice, lose it to foreclosure. Then buy a third house -- a foreclosed house -- in 2008.

That's the story in three acts (three houses) of Bob Chiordi, as told in today's paper by Peter King.

Act 1, the first house:

Chiordi first heard about Moreno Valley from a friend in the mid-'80s. Priced out of the red-hot Los Angeles and Orange County housing markets, he joined the caravans of first-time home buyers rushing east into the so-called Inland Empire.

... And then, with recession and base closures, California fell into hard times. Moreno Valley, and Bob Chiordi, fell harder. ... Chiordi soon discovered he owed far more on his house than what it was worth, and so, he said, "I just walked away."

Act 2, the second house:

By 2002 the Riverside Press-Enterprise was editorializing about the "Moreno Valley Comeback."

Chiordi rode this tide up. He sold his business, went to work as a branch manager at an auto dealership, bought a new house and, as real estate values soared, refinanced it twice, taking out money to pay down old debts and for a family vacation. He had purchased the house for $160,000. It was now worth $420,000, at least on paper.

... In June (2008), with the bank moving to seize his home, Chiordi filed for bankruptcy.

Act 3, the third house:

With financial help from his extended family, Chiordi will be moving this month with his wife, two grown children and two grandchildren into a house they've bought on a hill in the eastern corner of town. It's a tidy beige structure, built only four years ago, with a terra cotta roof and a backyard view of Moreno Valley spread out below. It had fallen into foreclosure last April, and the price was right

Analysis/bloviation: This is the third or fourth anecdote I've heard from the Inland Empire about a person who was losing a house to foreclosure, and then turned around and bought a less expensive foreclosed house. As a personal economic strategy, it has a certain logic: why struggle to keep paying an inflated 2005 price for a house when you can give it back to the bank and get something similar at a discount? As a broader trend -- if in fact it is a trend -- it could encourage "voluntary" foreclosures, because it sends a message to the 2005 buyers that they are throwing their money away.

--Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles

Photo Credit: L.A. Times

Comments

[tarbubble]

Stories like this make my brain hurt. I am semi-speechless. This is but one of the millions of cells that make up the body of the financial meltdown. It's like meiosis - they just keep multiplying. And here i've been financially locked out of owning a house because of... of... ________ (fill in your own vulgarity) like this guy.

[S Burke]

There is an economic theory called "The Fallacy of Composition" - what's good for you on an individual basis can be ruinous to the overall economy. Mr. Chiordi could be the embodiment of this theory.

After losing two homes to foreclosure in the past 15 years, each after a few years of ownership, he's now lining up the purchase of a third home? What lender would knowingly issue a mortgage given his past behavior? Perhaps he's not the buyer, and one his relatives will be the titleholder on this mortgage.

In hindsight, his actions were foolish, not matter how reasonable they seemed at the time. Raising his indebtedness by more than two-and-a-half times on the second home over five years defies reason.

That he considers himself moral and justified in these actions simply raises my hackles. Some people weren't cut out to be homeowners, and Mr. Chiordi seems to be one of them.

[The original RZ]

I'm amazed that Chiordi was even able to get a second house after a first foreclosure. Maybe enough time had passed between his mid-80s house and his 2002 purchase for his credit to be restored. But there's no way that he should have been able to purchase a house in 2008.

My question: Aren't people like Bob Chiordi ashamed? And if not, why not?

[vilmosz]

Loathsome behavior and another example of the moral hazard underpinning irresponsible actions. Recall that Cramer himself counseled "homeowners" to walk away from properties declining in value. Video is still posted here: http://maddmoney.blogspot.com/2007/07/cramer-says-just-walk-away.html. The new wrinkle is that these rats crawl out of their holes and do it all over again.

[RichW]

Good story Peter. This man epitomizes the problem with non-recourse loans and lax bankruptcy laws.

[RB]

about the only positive thing I can say is that (obviously) everyone has different tolerances for risk. (some might say, myself included, that we access reality differently and see, say, a $160,000 house as a $160,000 house and not one worth a half million or more.) anyway, I wish houses were seen as homes and a place for someone to live out of the elements rather than a commodity to make the buyer extremely wealthy. I know that is a pipe dream, but it sure would be nice and I guarantee that foreclosures would be rare or non-existent if it were so.

[jbunniii]

I suppose it's too much to hope that this man has not reproduced.

[dclogang]

The guy pictured looks like he is thinking really hard.

I wonder if it's "wow, I can't believe they gave me a loan" or
"Wow, I wonder if I could buy MORE houses since they let me buy this one!?"

[TC]

Something does not sound correct. Ok, so he walked on his first house and then over-financed his second. Now, he is basically living with his children who most likely are carrying the loan.

I bet if we took an in depth look we would find that this guy has no savings, no 401k or investments, and basically blew all the refi money living beyond their means and job swapping. I would be surprised if he owned a car, and if they do they probably are paying over 10% financing on it.

Sadly, there are probably alot more folks like this, boomers who tried for the dream, wanted to be middle class, and now find themselves on the outside looking in. I certainly sympathize, but they broke the golden rule in that your home is a place to live, not an ATM.

Commuting, career swapping, refinancing, failed business ventures, foreclosing, living beyond your means......a deadly combo.

[Maxo]

Most of these comments are just pathetic. Bankruptcy/foreclosure is not against the law. When real estate is inflated beyond any reasonable level, you get what you deserve. Paying of a mortgage doesn't have anything to do with morality in the first place.

"hope that this man has not reproduced" get a life! We're not in Nazi Germany.

[Mike]

This has all been said before, but, it is wrong to criticize an individual for being immoral without criticizing the industry as a whole.

When I bought my house, my lender actively kept trying to get me to borrow more and promised me that I could afford the payments that I would have had; my appraiser staked his reputation on telling me that my house had a certain value; and my home inspector told me the house was in good repair. Every single one of these people stretched the truth and were paid well for it.

And then I am supposed to feel that paying a mortgage is a moral duty?

I am a little bit underwater now, but, it is not so great that it outweights my sense of duty. But, I have my threshold, too, and the forclose-and-buy strategy is an attractive one that I'll entertain if the time comes.

[sfvrealestate]

I just don't get how -- in the world -- he could have gotten financing for this new house with such a recent foreclosure. Unless it's a loan from the relatives. Peter, can you provide details?

[Jackie Romulo]

Hearing stories really piss me off. I know my home has gone down in value since I purchased a little over a year ago but I am not making any plans to "walk away". I bought it so I can have a home for my growing family, and that's exactly what it is. A home that we can live and grow together in. It's that first, investment second. Ugh I'm so angry right now because I know there are many many more people like this guy who have done and are doing the same thing he is.

[anonymous]

Bob Chiordi is a crook, plain and simple. It's bad enough to live beyond your means and spend money you don't have. It's criminal when you walk away when it's time to pay it back.

[Phyllis Harb]

I hope the banks requested/demanded a down payment from the buyer. If they did... he lost his down payment, on the first two homes. And assuming a "reasonable" down payment on this home... at least there is a personal "stake" in the home.

BUT what is really the most shocking is that the banks allowed him to pull all of his equity out of the last home (with his credit history). That seems like a poor credit decision by any standards.

[watusi]

"When I bought my house, my lender actively kept trying to get me to borrow more and promised me that I could afford the payments...."

and so, Mike, did you take the money that was apparently forced on you? Are you saying that the bank fed you a line, an appraiser and a home inspector fed you more of the same, and somehow it's all their fault now that you're underwater? What are you, 5?

Next time, just throw away the junk mail from the bank.

[TWillie]

He has just enough religion to make him extra dangerous. If he was my father I would kick him out for going public.

[JDZ]

There will always be people like BC who will ask people to finance their lifestyles, despite ample evidence there will be no repayment. I would have thought most of us learned that when we were 5 or 6 years old. The difference now is in the "sucker" lending institutions who agree to hand over their cash. We have credit reports and scores for a reason, so a lender "knew or reasonably should have known" of a person's flake factor. Lenders got themselves and us into this mess, and now want us to get them out. The fact that some fool asked for money is nothing compared to the jackass that gave it to him.

[oh boy]

I don't lean toward the moral hazard aspect. I think the logical economic strategy for anyone would be to walk.

However, this guy and many many more like him are morons plain and simple.

[vilmosz]

I posted earlier after reading Peter's summary. I have since read the entire article. I have to say I regret my original criticism of this particular man. The article does offer this everyman story against the backdrop of amorality and incompetence at the municipal and business levels. With little education and a level of foresight that goes no farther than the morsel of cheese hanging before their eyes, a society of such men has gone off the deep end. They were sold a bill of goods with credit card commercials, they believe that if they act right, God will step in and save them. It's simply tragedy on a huge scale and all I can say is there but for the grace and I hope it doesn't touch us. That's all.

[Mike]

@watusi

"and so, Mike, did you take the money that was apparently forced on you? Are you saying that the bank fed you a line, an appraiser and a home inspector fed you more of the same, and somehow it's all their fault now that you're underwater? What are you, 5?"

No, I didn't take their money. No, I'm actually 37. I bought a home I could afford comfortably. I've never refinanced.

It is not their fault as an individual entities. No one person or one bank branch has that kind of power. But, it is, in fact, the fault of the sum total of hundreds of thousands of such people distributed throughout the nation. It is the moral failings of an entire industry.

No one individual can be an expert in all things, at some point I had to take the advice of others. I did all the research I could. I talked to the most knowledgable people to which I had access. I made the best decisions I could. And I, like millions of others, got burned.

And so maybe I don't feel the need to be the better man. Sure, blame me if it makes you feel better about yourself. But now that I'm in the game and I've learned the rules, I'm going to play by those rules.

[Mucker]

Mike, I made an assumption from your first post that you made a sane decision as described in your response. Watusi epitomizes the lack of thinking skills prevalent on blogs and present in much of our culture (indeed even into the halls of Congress and Pennsylvania Ave).. I call it "filling in the blanks" and work to pay attention as to how easy it is to do it. Stop and think it through is not ingrained in our impulse driven country. Watusi's reaction to you is the practice realized.

[john]

Forget the clutter thoughts of morality, when you look at whats going on with wall street and all those genesis that are suppose to master the economy.

I just want one question answered. How did he get another house when he filed bankruptcy and was in the foreclosure process. The guy needs to write a book.

[ry]

dclogang wrote:

----The guy pictured looks like he is thinking really hard.

I wonder if it's "wow, I can't believe they gave me a loan" or
"Wow, I wonder if I could buy MORE houses since they let me buy this one!?"-----

I imagine that he's saying, with all due respect, a la G.W. Bush,

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again."

-ry

[Laker]

tarbubble :"... i've been financially locked out of owning a house because of... of... ________ (fill in your own vulgarity) like this guy...."

tarbubble ,
Actually, because if guys like this, you could soon afford a home at a price that you never thought would come again.
We are about to see a collapse in prices never seen before. That means over correction that will put even a bear like myself in huge surprise.
Over correction my friend and only because of these voluntary foreclosures...