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The mortgage woes of Ed McMahon may be coming to a head. His six bedroom, 7,000 square foot Beverly Hills home is scheduled to go up for auction on Oct. 2. The former Tonight Show announcer ran into financial difficulties earlier this year and his main lender Countrywide Financial, now a part of Bank of America, started the foreclosure process.
McMahon said at the time that his troubles illustrated the dilemma many Americans find themselves in as they took on more debt than they could afford. His story also shows the difficulty inherent in executing a so-called short sale, where a lender agrees to sell a home for less than what’s owed.
McMahon’s house is currently listed for $4.8 million. His broker, Alex Davis, confirms that Ed owes over $7 million on the property. Davis says several deals have fallen through because buyers aren’t offering enough to make Ed’s creditors happy. Incidentally there are all kinds of nice photos of the house on Davis’ Web site, including one shot of his in-home recording studio complete with Rat Pack photos and an oil painting of Johnny Carson.
Robert Lee, ceo of Foreclosuretrackers.com, is so publicity savvy, he could be a guest on the Tonight Show. He’s made several public overtures to buy Ed’s Countrywide loan over the past six weeks. Lee says he handed one offer to McMahon in person a few days ago. Lee’s site provides detailed data on foreclosed homes and strategies for purchasing distressed debt. He also offers seminars to help investors buy mortgage loans. Full access to his Web site costs $79 a month.
Lee says his strategy is to offer something less than the first loan is worth and then negotiate with other creditors. “Own the loan, not the home,” is Lee’s pitch. He says Ed owes Countrywide $4.5 million on his first loan and $800,000 in back interest. On top of that there are three other loans and a lien placed on the house by American Express that take the total up past $7 million.
Lee says that once he buys the first loan his strategy is to offer the junior lien holders ten cents on the dollar which is the going rate in these situations. “That guy is a decorated war hero,” Lee says of McMahon. “He’s been through a lot tougher things than this.”
Lee says he hasn’t heard from Countrywide about his offer. A spokesperson for the bank said she didn’t have enough information about the situation to comment. Davis, the real estate agent, says he’s resolved to not make a commission on this listing.
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.