How luxury home icon lost his fortune

-The Orange County Register

If all goes as scheduled, luxury home icon John McMonigle will lose his offices on Wednesday. Thirteen days later, his pet project of the past eight years, the Villa del Lago estate, goes on the auction block.

In the 22 years since the Oklahoma native came to O.C., he has risen from humble beginnings to top luxury home salesman in the county. Now he’s in bankruptcy court seeking protection from about $50 million in unpaid debts.

Here are highlights of his career and what led to his financial unraveling:

1989: John McMonigle leaves Oklahoma for Orange County, arriving with $73 in his pocket.

1993: McMonigle breaks into luxury real estate, working for mentor Bill Feeney at Waterfront Homes in Newport Beach.

1995: McMonigle marries Robin Weller, daughter of the CEO for Nestle USA.

2000: McMonigle and partners co-found Strada Properties, an independent brokerage near Fashion Island.

2003: Strada is sold to the Coldwell Banker real estate chain. McMonigle and partners buy 12 ½ inland acres in Newport Coast and plan the Villa del Lago estate.

2005: McMonigle raises price for Villa del Lago to $50 million. A month later, McMonigle is named Coldwell Banker’s top salesman based on dollar volume of homes sold. He holds that title for three consecutive years. The McMonigle team sells 34 homes for a combined total of $206 million in 2005, tops for O.C., according to Brea consultant Pat Veling.

May 2006: McMonigle lists the Portabello Estate in Corona del Mar for $75 million. Some say the home was overpriced.

April 2007: La Jolla Bank gives McMonigle’s partnership a $21.6 million construction loan for Villa del Lago.

November 2007: La Jolla gives McMonigle a $9.4 million construction loan for his new headquarters building.

October 2008: Nervous about the market, McMonigle sells his 10,700-square-foot Shady Canyon home – listed for $10.9 million at one point – and moves into a rental.

February 2009: Portabello temporarily taken off market. McMonigle tentatively raises price for Villa del Lago to $87 million on his website.

April 2009: McMonigle opens 20,000-square-foot headquarters building near Fashion Island, with plans to lease out some of the space to tenants. Lease commitments, however, “evaporate.”

August 2009: Robin McMonigle and children move to Dallas.

December 2009: Federal banking regulators close La Jolla Bank and transfer assets to OneWest Bank.

January 2010: OneWest decides to withhold just under $2 million from Villa del Lago’s construction loan and denies access to $4.25 million in cash being held as collateral. Construction stalls. Monigle defaults on La Jolla/OneWest loans for two Newport Beach condos, saying later he did so in retaliation for the bank’s “breach.”

May 2010: Villa del Lago officially hits the market at $57 million.

July 2010: Portabello Estate comes back on the market with $25.4 million price chop. McMonigle defaults on the Villa del Lago construction loan. McMonigle also has stopped making payments on two other OneWest loans, including one for his headquarters building.

October 2010: Portabello Estate sells for $34.1 million, less than half its original asking price. McMonigle announces that he has formed an independent brokerage.

January 2011: McMonigle drops Villa del Lago price to $37 million.

February 2011: OneWest files suit seeking to foreclose on Villa del Lago, the McMonigle Group headquarters and three other properties.

April 2011: Robin McMonigle files for divorce. McMonigle files for personal bankruptcy one week later.

June 2011: Foreclosure auctions scheduled for the headquarters on June 8 and for Villa del Lago on June 20.

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Foreclosures down for 7th straight month

-CNN Money

The number of foreclosure filings issued in April plunged 34% from a year ago -- the seventh straight month of declines.

And there were just 69,532 homes repossessed last month, a 32% fall from the peak last September just before the eruption of the "robo-signing" scandal, in which banks were found to be mishandling the foreclosure process.

Will the seeming good news continue? No way, said Rick Sharga of RealtyTrac, which issued the latest monthly figures on Thursday.

Even with the drop, there were nearly 220,000 foreclosure filings during the month, including notices of default, scheduled auctions and bank repossessions. And there are 3.7 million borrowers at least 90 days late on payments. Normally a large percentage of them would already be in foreclosure. They are not -- for two reasons.

One is that ongoing regulatory issues. Banks want to make sure their procedures are all in place. Second, the banks have already saturated many markets with repossessions they've put back on the market. "Banks can't move inventory fast enough, at prices high enough, that they're excited about foreclosing on any more homes," said Sharga.

On the other hand, there are a couple of reasons to believe the conditions may be improving. Hiring has picked up, enabling some borrowers to resume paying their bills. Banks are also doing more to keep borrowers in their homes. In March, banks completed 77,000 mortgage modifications without government assistance, according to Hope Now, a coalition of mortgage servicers, investors and private counselors. That was 26% more than in February.

"What's important," said Faith Schwartz, the head of Hope Now, "is that these modifications are much more affordable. They should perform much better."

Home prices, however, continue to erode. That's a problem because it pushes more borrowers "underwater," with home loans worth more than the value of their homes. That removes an important financial cushion should the borrower run into financial problems. And it given incentive to "strategically default," or walk away from their homes and mortgage payments.

The percentage of underwater owners of single-family homes has now reached 28.4%, according to real estate web site Zillow. That will worsen if home prices fall further.

"Home value declines are currently equal to those we experienced during the darkest days of the housing recession," said Zillow Chief Economist Stan Humphries. "That's going to put more homeowners in default." Home prices have fallen so fast lately that Humphries changed his 2011 outlook, forecasting a 7% to 9% price drop for the year, up from 5% to 7%.

Just as falling home prices result in more foreclosures, rising foreclosures hurt home prices by swamping housing markets with repossessed homes. Bottom line is that the crisis could last for years, according to Sharga. It could be 2014 before the housing market returns to a more normal condition. 

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Foreclosures Trapped by a Lack of Lawyers

-Wall Street Journal

Moves by banks to ditch law firms snared in the "robo-signing" mess are spreading delays and confusion to borrowers, while angering judges grappling with thousands of foreclosure cases now trapped in limbo.

The trouble began when U.S. banks and government-owned mortgage giants lost confidence in some law firms that handled a huge volume of foreclosures. After controversy erupted last fall over the shoddy review of loan documents known as robo-signing, banks dropped some law firms.

Finding replacement lawyers who can pick up the slack quickly has been a struggle. While the resulting slowdown means that fewer houses are being seized, late fees are piling up for homeowners seeking a loan modifications. Investors who own bonds backed by those mortgages could face higher costs from the snags.

"It's causing chaos because nobody knows who's representing whom," says Thomas Ice, a foreclosure defense lawyer in Royal Palm Beach, Fla.

The problems are particularly acute in Florida, one of 23 U.S. states where foreclosures must be processed through courts. Last fall, Fannie Mae and Freddie Mac terminated their relationship with the Law Offices of David J. Stern. At its peak, the Plantation, Fla., firm handled nearly 20% of all foreclosures in the state.

In March, the Stern law firm told judges across Florida that it was unable to file the necessary paperwork to withdraw from 100,000 cases. Florida's attorney general is investigating allegations that the firm routinely forged notarized documents. The firm denies the accusations and is challenging the attorney general's jurisdiction in court.

"There's nobody to call to expedite any of these things. My clients are in limbo every day," says Craig Lynd, a founding partner of KEL Attorneys, an Orlando, Fla., law firm.

Two of his clients, 58-year-old Ruth Diehl and her husband, have been in talks with a J.P. Morgan Chase & Co. unit for more than two years about a loan modification on their home in Ocoee, Fla. The bank agreed to offer different loan terms at a court-ordered mediation session last summer, where it was represented by the Stern law firm.

But the deal wasn't finished, Mr. Lynd says, and efforts to force compliance with the agreement in court was hampered by the removal of the Stern firm from the case. A different law firm was assigned to the case, and J.P. Morgan asked the new firm to reach out to Mr. Lynd, said a J.P. Morgan spokesman.

Ally Financial Inc., the GMAC Mortgage parent in which the U.S. government owns a 73% stake, transferred to other lawyers its foreclosures previously assigned to the Stern firm.

Lisa Butterfield, who is trying to surrender her Middleburg, Fla., home to GMAC through a "deed-in-lieu" of foreclosure, says she has heard nothing from the new lawyer who was assigned her case. "You finally think, 'I'm finally going to get this settled,' and then it's not," she says. She moved last year to take care of her parents but still pays the utilities in hopes of reaching a deal with GMAC.

An Ally spokeswoman says the "situation in Florida is challenging, given the large number of borrowers in foreclosure and the number of quality law firms to manage these cases." She declined to comment on Ms. Butterfield's situation.

Mr. Stern has blamed former foreclosure clients for failing "to take into consideration any succession planning" when they terminated his firm, according to a written response to a Florida judge. Jeffrey Tew, a lawyer for Mr. Stern, says banks have withheld millions in legal fees and are to blame for delays.

A Fannie spokeswoman says transfers of foreclosure files from terminated firms to new lawyers have been completed. Fannie has approved 16 law firms to handle its cases in the state, up from nine firms last year. Freddie uses 14 law firms in Florida, up from four.

Peter Blanc, the chief judge in Palm Beach County, Fla., with nearly 9,000 cases from the Stern firm, last month urged Mr. Stern to reconsider his decision to walk away from cases. Another problem: Two law firms that got some of the Stern cases were later dropped by Fannie, Freddie and banks.

"Whatever anyone thinks the cost of David Stern's implosion is, quadruple it," says Richard Shuster, a real-estate lawyer in Miami.

On Friday, Judge Blanc will start convening special hearings to reassign hundreds of cases a day until the backlog is cleared. "If nobody shows up" on behalf of the banks, "we will dismiss the cases," he says. If that happens, banks would have to essentially start over.

In February, Fannie terminated its relationship with Ben-Ezra & Katz after the Fort Lauderdale firm notified Fannie that some paralegals took inappropriate technical shortcuts. Marc Ben-Ezra, a principal at the law firm, says the firm is trying to withdraw from 15,000 cases "cooperatively and responsibly."

But other firms taking over those foreclosures "tend to be overwhelmed," while some clients have seized files and told his firm to no longer act on their behalf. "It's bad for everybody," Mr. Ben-Ezra says. On Thursday, the law firm said it is suspending its foreclosure practice until further notice.

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