Trouble on Brian Austin Green’s Homefront
Actor celebrity Brian Austin Green (Former 90210 star and now dating screen siren Megan Fox) is selling his home on a short sale. He purchased the home at the height of the market in 2006 for nearly $2,000,000 borrowing almost the entire purchase amount which created a monthly mortgage payment of nearly $70,000 per month. Can you imagine servicing a debt load of that size? Apparently it was too much for even a superstar to handle. Sources say that the economic recession has hit Green hard and his Rep explained that the house is being sold on a short sale for “strategic investment” reasons.
My previous blog post this week ”Embarrassing Short Sale” described how the Mortgage Banker’s Association had to short sale their headquarters in Washington. The point of that article was show that short sales are occurring at every level from people and organizations you would never guess. Well, here’s another example with Brian Austin Green. No one’s immune to the short sale and foreclosure tsunami that is headed straight for us.
The big question you all had with the Mortgage Banker’s Association headquarters short sale was if they would be held responsible for the loss. Great question (and one that thus far no source is revealing). In the case of Brian Austin Green, in California, 1st mortgage purchase loans are non-recourse at the point of origination. I don’t know if Mr. Green refinanced his original purchase loan. If he did, his mortgage would become recourse and therefore, he could be held responsible for the difference. But I doubt he refinanced since his purchase was in 2006. So long as he doesn’t have a 2nd mortgage, if he only short sales his original 1st mortgage, he may be able to walk away with simply a 1099C Forgiveness of Debt form for the loss (as opposed to being held responsible for the difference). Hopefully the Mortgage Forgiveness Debt Relief Act of 2007 will come to his aid so that he doesn’t have a gigantic tax liability.
By the way, if you are one of my students living in the LA area, I say you go try to get this deal. You’re the best in the country at doing short sales, the deal might as well go to you!
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Hi Phil,
Very good information. I would really appreciate it if you would contact
me personally. I believe we share the same interest and I have a few
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Thank you.
Gail Christie
Does that monthly payment include PITI?
To keep his payment at 31% of his gross, he would only have to earn 228K per month or almost 2.74 million per year. I wonder what 90210 paid him? His girlfriend could give him a monthly allowance to help out with the bills, in return he could pick up the dinner tabs.
Gail, please feel free to schedule a meeting with me by going HERE
$70k a month? I am not a financial wiz but I think there is an error in that payment amount. You would pay off the entire principle in 28 months at that payment. A 30yr at 6.5% would be about $15k a month.
Just wondering what kind of mortgage he got?
Loan Shark?
Hi Phil,
You say 1st mortgage purchase loans are non-recourse at the point of origination. Can you please go into further detail what this means? I purchased my home in Southern CA in Dec 2005 at the peak of the market. It had a 1st and a 2nd at the get-go. My purchase price was $580,000. I put $58,000 down – 10%. The way my mortgage broker set things up was a 1st mortgage in the amount of $464,000 and a 2nd in the amount of $58,000. He said this was the best way to structure it to avoid paying PMI which he explained is assessed to people who put less than 20% down.
Anyways, I still have that same 1st, a little over 4 years later, owing $464,000 (cuz my payments were interest only) and my 2nd is around $136,000 (the value of the home HAD risen to around $700,000. Now it’s back down somewhere in the low $500,000s.) Both were with WaMu, so now Chase. Do you know if there’s any possible way at all that the ’2nd’ could somehow be forgiven?
If it cannot be forgiven and if I cannot keep up with the ‘too high’ interest-only payments for the property that has lost value I will consider a short sale. IF I decide to do a short sale, would I owe Chase the amount of the 2nd or would it be forgiven?
Great point! Way to do the math Robert. You’re right that the payment can’t be that large. Maybe it’s $20,000 – $25,000 a month with taxes and insurance and everything. That $70,000 came from the article I found on this but you picked up on an inconsistency. well done.
My students are trained on how to negotiate short sales on 2nd mortgages so that the lender agrees to issue a 1099C as opposed to holding the borrower responsible for the difference. If you decide to do a short sale, work with one of my people. They are the best in the country at this sort of thing.