One Man, Nine Foreclosures

Posted by: Chris Palmeri on May 14, 2008

On the same day the RealtyTrac reports that the nation’s foreclosure filings surged 65% in April to 243,353, Reuters has this wild tale of one man responsible for nine of those foreclosures.

Shawn Forgaad, software product manager from Santa Cruz, Calif., says he speculated in a major way during the boom, buying nine houses with Pay Option or negative amortizion loans. Now his house of cards is crashing down.

One out of every 519 homes nationally received a foreclosure filing in April, RealtyTrac figures. Some 53,000 were repossessed. The country, meanwhile, marches on to what could be one million foreclosures for the entire year. Washington debates what to do to fix the mess.

California cities account for six of the ten U.S. markets with the highest foreclosure rates. Forgaad, the speculator, says he’s learned his lesson and is moving his family to lower-cost North Carolina where they can start fresh.

“On the surface it looks like total devastation but it’s just the opposite,” Forgaad told Reuters. “I’m confident our lives will be much, much richer as a result.”

Reader Comments

Eddie Carr

May 14, 2008 10:54 PM

This situation seems to be pretty common among those hit hard by this first wave of foreclosures. Those caught in foreclosure situations are often times real estate investors who found a good way to cash flow, or so they thought. Then their loans turned on them like this poor fellow. As a result we're looking at one of the greatest opportunities we may ever see to get involved in real estate. We may never again see properties discounted like they are due to foreclosures and the real estate crisis. While searching this opportunity I found a great Google Maps mashup that lists real estate in Florida and distressed properties across the nation. It's been a great help to me in finding discounted properties and details about them.

michael

May 15, 2008 2:14 PM

Only 9? Here in Las Vegas (where the "OMG PEOPLE ARE LOSING THEIR HOMES!!!1!" panic is at a fever pitch), it's not unusual to see individuals and companies with dozens of foreclosures.

This is why the 'crisis' exists in the financial sectors, but not on main street, despite the rare homeowners who made dumb gambles, lost their homes, and get the headlines.

Charlotte Hughes

May 15, 2008 2:57 PM

He gambled and he lost! We need to go back to basic financial planning; individuals who can not afford to gamble, should stay out of high risk situations. I find it amazing the amount of individuals who bought into ARM loans and I am shocked our government did not do anything, at the minimum, to educate the public on these loans. The only ones gaining in this high foreclosure market is the afluent who can afford these "bargain basement prices". I do not blame the affluent for taking advantage of these great buys. I blame the states for not making personal finance education in our public schools mandatory. I, also, blame the government and the lenders for allowing these loans to high risk individuals. The low income and the uneducated were duped. The rest of the country is having to suffer the consequences.

Bill Whelan

May 15, 2008 3:16 PM

Is richer really the right word here?
At least the government did not take our money to bail out someone this foolish.

Lou Pizante

May 16, 2008 6:10 PM

What would be an interesting metric is the number of foreclosures on owner-occupied, versus investment, properties. This information is contained in the loan application, as investment properties are both more expensive and less regulated than owner-occupied. The problem, though, is the frequency of fraud committed by borrowers, brokers and loan officers. Because it is easier to qualify for an owner-occupied property, there was a high occurrence of misprepresentation on the applications. In some cases the borrower may have committed the fraud or was complicity. In other cases, it is alleged that brokers and loan officers committed the fraud. In any event, this metric would shed some more light on the issue but would ultimatley be suspect.

tom

May 16, 2008 9:19 PM

that's just too bad BUT they should not have bought more house than they could pay for!!! I have no intention of bailing anyone out. I say, suck it up loser and pay your bills!!!!! better yet, let someone buy your house for much lower than you paid for it.

Randy

May 16, 2008 10:18 PM

This guy should be going to jail!

ballbuster

May 17, 2008 10:14 AM

After losing over a million $$ for his stupidity, greed, and gullibility, this California pollyana says, "I'm confident our lives will be much, much richer as a result." Let this be a lesson for all the fools who do not believe that the number one scam in California is real estate, real estate, and real estate. The lure of easy money produce more real estate agents in California than any other states. The NAR's propaganda that real estate will always appreciate fuels unabash greed. The mortgage manipulators do fast and fancy loan papers that are sold to Wall St whose special skill rewash them, repackage them, and resell them to unsuspecting buyers. This whole scam is now exposed. The liquidity crises is a punishment for the scamers as well as for innocents. For those speculators who has lost big I hope this is a long lasting memory. Like Dot.com, tulips, and silver, Real estate speculation is now dead---until the next generation forgets.

snoz

May 18, 2008 3:52 AM

A new TV sit-com called "Flipper Gone Wild" is now showing nationally. It stars Shawn Forgaad and how he, like thousands of Get-rich-fast suckers, fell for the real estate scam perpetrated by real estate interest groups. The first episode shows an association of real estate people telling people a house is not just place to live with your family but it's an investment. They instruct all to invest in real estate because it is a safe investment; no one ever can lose money investing in real estate; real estate value always goes up; the best place to invest in real estate is California,the home of Hollywood and beach lifestyle, and the place where "Flipper Gone Wind" is produced. The episodes before the last all show happy-go-lucky folks making hundreds of dollars on real estate; smiling and singing all the way to the bank; real estate agents are happy too as well as builders and mortgage lenders. In the last episode, we find Forgaad filing for bankruptcy while thousands of others line-up behind him. Forgaad ends the show with his one finally word of wisdom, "I'm confident our lives will be much, much richer as a result." Lights out. Camera stops rolling. The Show is over. But the credit rolls on and on, because there are thousands of walk-on extras.

Michael

May 23, 2008 12:51 PM

Bummer. I wonder if he ever considered his exit strategy? What goes up most go down. He might have to wait a while to get a loan. ArtesianVC.com

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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