C-Ville: Development - A tale of two foreclosures

HOME \| CONTACT \| WRITE TO THE EDITOR \| WORK AT C-VILLE

Issue #20.50 :: 12/09/2008 - 12/15/2008

A tale of two foreclosures

And a look at their place in the scheme of things

BY WILL GOLDSMITH

There are many good reasons to read C-VILLE. Among them: to find out if your landlord is facing foreclosure and you may have to move out in a month.

Lauren Frick, a graphic designer at C-VILLE, was perusing the latest issue of the paper last week when she stumbled across a notice of a trustee sale on Augusta Street, where she lives in the Rose Hill neighborhood. Augusta is not a big street—which of her neighbors is facing foreclosure?, she idly wondered.

Doug McGowan bought 1216 Augusta St. for $304,500 in 2005, and refinanced the next year with a pay option adjustable rate mortgage. Now, the property is in foreclosure, just like another property owned by McGowan.

Turned out, it was her—the notice was for the house she lives in, 1216 Augusta St., and the person in foreclosure is her landlord, Doug McGowan, a real estate agent at RE/MAX. Also turns out, McGowan has another property, this one at 332 Minor Ridge Rd. in Albemarle County, in foreclosure.

McGowan’s tale—as told not by him but by court records—is a glimpse at a small piece of the larger story of the real estate bubble and mortgage meltdown that led to the recession of today.

The larger story, in brief, dates back to the early part of this decade, when swaths of investors around the globe sought safe ways of investing their money, particularly after the dot-com bust cooled the ardor for stocks and mutual funds. Wall Street money managers offered investors what seemed to be as safe a bet as could be made: mortgage-backed securities, financial thingamajigs that are essentially a bunch of mortgages bundled together. Since American home prices were constantly rising, and since few of those gosh-darn hardworking American homeowners went into foreclosure, those mortgage-backed securities seemed awfully safe. Better yet, their rate of return paid off much better than did U.S. Treasury bonds. So those global investors bought a lot of them.

So many, in fact, that investors ran out of gosh-darn hardworking American homeowners who traditional mortgage lenders thought could repay loans. Around the same time, however, Fannie Mae and Freddie Mac lowered documentation standards on some loan qualifications—people could get lots of money without proving they made the income to repay. Driven by the rabid demand from Wall Street for mortgages to bundle, mortgage brokers created mortgage options with higher interest rates for people who traditionally wouldn’t have gotten a loan. With ready access to such cash, more speculators got into the housing game, further inflating housing prices by flipping properties.

Here we return to McGowan: In 2005 and 2006—the height of the housing bubble—he bought and refinanced the two properties now in foreclosure using some of those exotic new mortgage “products.” Previously, homebuyers would have to put down 10 to 20 percent typically. But by investing only $15,225 of his own cash, McGowan was able to buy two local houses at the same time.

On May 31, 2005, he bought 332 Minor Ridge Rd. for $237,500. McGowan didn’t make any down payment to buy the 1,800-square-foot house. Instead, he got the money from Virginia-based* Resource Bank in the form of two deeds of trust (Virginia’s way of doing mortgages), one for 80 percent of the price ($190,000), the other for the remaining 20 percent. His interest rate? 7.625 percent.

A few days later, McGowan bought 1216 Augusta St. for $304,500. Presumably because this one was clearly an investment property, he put down 5 percent for the four-bedroom house, financing the remainder with two deeds of trust from now-defunct Lehman Brothers Bank. Interest on the loans was initially 8.125 percent. But this one also had an adjustable rate rider that meant that in five years, his rate could go up to as high as 14.125 percent.

The interest rates on these properties were high even for the time, according to Matt Hodges, principal of Compass Home Loans. But no-money-down loans, he says, weren’t uncommon then.

Thanks to rising assessments, McGowan might have been able to escape without foreclosure on these properties had he not refinanced both houses in October 2006 with now defunct American Brokers Conduit, using a product called a “pay option” adjustable rate mortgage. Under this deal, McGowan got loans of $321,000 for the Augusta property and $263,250 for the Minor Ridge house—$42,250 more than their sale prices combined. But the first month after refinancing, his interest rate would jump to 8.1 percent and fluctuate monthly up to 10.35 percent. More disturbingly, his minimum monthly payment didn’t even have to cover the rising interest—meaning that even by paying the minimum, the amount that he owed could grow every month. The principal owed on the Augusta house, for instance, could go up as high as $401,250.

“I never liked that product and I never offered it,” says Hodges, who didn’t do business with McGowan. “I was disturbed that our industry even offered the product.”

It’s unclear what McGowan was thinking in entering such a deal. A clause in the contract prevented him from reselling the property for two years without paying a huge penalty. Perhaps he thought he would make enough income to cover the loss while at the same time believing, like most people did, that housing prices would continue rising at such a clip that he could break even when he sold the properties in a couple years.

Regardless, that same week, he purchased a 4,200-square-foot McMansion on five acres off Garth Road for $962,750, financing the purchase (once again) with no money down and an adjustable rate rider that put him paying between 7.375 percent and 13.375 percent in interest.

McGowan would not comment on his actions for this story. “Can’t help you,” said McGowan, who asked that his name not be used. “It’s a very, very difficult thing to go through. And mentioning somebody’s name in a story like that is detrimental.”

A little more than two years after McGowan refinanced, the Minor Ridge property will go to the highest bidder on December 11. The Augusta property comes up for auction January 6. If a bidder doesn’t offer more than what McGowan owes, then whichever bank that now owns the first deed of trust will likely keep the properties.

The foreclosures are not only bad for McGowan. Likely, they will drop home assessments in the Rose Hill and Wynridge neighborhoods where his properties are located. That means less money for local government. If the neighborhoods are seen as distressed, it could make it harder to get loans to buy in those neighborhoods, creating a vicious cycle of declining value.

On a macro level, those foreclosures hurt as well. If bundled, the bad loans decrease the value of the mortgage-backed securities they’re pooled in. If enough other mortgages in those pools sour like McGowan’s, financial institutions lose assets and fail.

That is, unless U.S. taxpayers come to the rescue. Hence the bailout of both some of the banks that own the shaky mortgage-backed securities and, through bailing out Fannie Mae and Freddie Mac, some of the homeowners who took out the loans they now can’t repay.

“It’s not fair to you and me,” says Hodges. “But it’s justified because it helps support property values.”

Since McGowan doesn’t live in the homes he owns in foreclosure, he’s unlikely to receive help lowering his monthly payment from his lender. Since he is not “too big to fail,” he is allowed to fail. His tenants will likely have to move on. And all of us will be a little poorer.

C-VILLE welcomes news tips from readers. Send them to news@c-ville.com.

*Corrected 12/10/2008: The article originally misidentified Resource Bank, of Virginia, as an Illinois-based bank with the same name. The Virginia-based Resource Bank was acquired by Fulton Bank of Lancaster, Pennsylvania.

Comments

The renters have the right to sue Mr. McGowan,, who does not want his name used because he has been exposed as someone who does not do arms length business. Thank you for exposing this realtor/agent to C-ville as well as Va. There is something to be said,, for making an honest living. Thanks,, J

JvLDecember 9th, 2008 07:12am

It's only defamation if what they say isn't true, and all of this is a matter of public record. Thanks for letting us know the hazards of renting. One thing renters and buyers alike can do is check public records to make sure you know who owns the house and how bad liens are on it. One would hope such a step wouldn't be necessary, but in today's economy, one can't be too careful.

LCBDecember 9th, 2008 09:38am

The current economy in Charlottesville has been hard on many people, especially those in the housing industry. Those don't just include Realtors, but loan officers, title companies, builders, suppliers , even pest inspection companies and movers. I could continue the list but I think you get the idea. Many of us have seen our incomes fall 75% from just a few years ago. Your article, "A tale of two foreclosures" was a story that could have been written about many of us but unfortunately you chose to make it about one person. Shame on you. The Realtor in question is only one of many facing foreclosure and bankruptcy so why was it necessary to make the story just about him? Was it only because the graphic designer at your paper was his tenant, or was it also because the Editor of the C-ville also lives two doors down on Augusta Street (which was not included in the article) and is upset that this foreclosure could devalue her property. It all just seems vindictive. If you ask me it makes for poor journalism. Many, many people made the mistake of buying into the "pay option ARM" product. Those of us who have been around for a while, and had already experienced what negative amortization could do to a loan balance, may have stayed away from them. However, I can tell you that most lenders in this town were shouting the benefits of this loan from the roof tops about three years ago and many people bought into that concept. Today, I know of several Realtors and Lenders who have now been foreclosed on because they relied on this bad loan product. I also know that many homeowners are out there with the same type of loan and have no clue that they probably now owe more than what they originally borrowed. This is only the tip of the iceberg. Much more is about to come with the fallout of the Pay Option Arm. But, hind sight is 20/20. We all make mistakes and if we all had it to do over we would have all saved more money and spent less during the good years. Your article singled out one individual who works hard and supports a family. He come to work every day and is here to late at night trying to make ends meet. He couldn't predict what would happen to the housing market and he is a victim of it, just like thousands of others that you didn't name. There are many more just like the Realtor in your article that are just barely hanging on by the skin of their teeth. Just about every restaurant and big box store in town has a Realtor working there part time just to keep their head above water. It must be a slow news day when all the C-ville can find to write about is someone who is down on their luck and struggling financially to even survive. Your article could have proved it's point just as well without mentioning the Realtors name. Yes, it is all out their in public records but then someone has to really want to know the details to take the time to look. You made it easy for them to find out and damage the reputation of a fine man who has worked very hard but right now is facing a difficult time. --

Judy SavageDecember 9th, 2008 01:03pm

Mr.McGowan is not unique in his use of completely legal and easily available credit. Nor is he unique in suffering the consequences of riding the wave a bit too long. He was hardly dishonest but, as a Realtor,and as a landlord, it is unfathomable to me why he did not let his tenants know what was going to happen.The tenants certainly have the right to sue but, it is my opinon that it would be a waste of time. To my knowledge, The Virginia Residential Landlord Tenant Act does not provide for damages to be paid to a tenant if the property in which they are live is in forclosure.

Richard BellDecember 9th, 2008 01:12pm

@Judy Savage: Thank you for commenting. Will's story makes plain, I think, that McGowan is an example —perhaps an extreme one —of the recklessness that coursed through the housing bubble ("McGowan’s tale—as told not by him but by court records—is a glimpse at a small piece of the larger story of the real estate bubble and mortgage meltdown that led to the recession of today."). The decision to publish his name is not informed by either Lauren Frick's status as his renter nor mine as a homeowner on that street. Indeed, McGowan has two properties in foreclosure -- one on another street. I cannot imagine writing a story of a business closing on the Mall, let's say, and not publishing the name of the owners because they're hard-working people who stay late and made a mistake. To take the analogy further, your comment about "vindictiveness" would suggest that the only reason to publish the name of failing Mall business would be out of anger that C-VILLE would be surrounded by empty storefronts. That's just not how we make editorial decisions. The account that Will gives, of Lauren learning for the first time about the foreclosure by reading C-VILLE is accurate and complete. Renters are subject to this fall-out too, it is clear, but of course it remains to individual landlords to do the right thing and alert their tenants in a timely and conscientious way.

Cathy HardingDecember 9th, 2008 01:41pm

ANYONE who buys a home for over $900,000 gets no tears or sympathy from me when they lose 75% of their income (Judy's figure, not mine.) A home that costs 75% less than $900k is still $225k. Maybe someone needs a lesson in the idea of living modestly. Seems like McGowan should try that from now on. You too, Judy.

JessicaDecember 9th, 2008 02:52pm

You obviously knew that publishing his name was potentially crossing the line when you ended your story with "was it wrong for C-Ville to publish McGowan's name?" Although he did make some poor decisions, I feel the story is a bit "too close to your homes" for it to truly be a story that just reports the facts. In this case, reporting the facts AND exposing his name probably gave Ms. Harding and Ms. Frick some satisfaction, that's just human nature. In my opinion, you crossed the line for some satisfaction which just doesn't sit well with me.

clDecember 9th, 2008 03:11pm

One additional point to consider in publishing Mr McGowan's name: It is NOT the case that his home is in foreclosure. Obviously that would be a deeply personal misfortune and it would be hard to find the merit in publishing that detail if that's all there were to a story. He appears to have made BUSINESS investments, and in that way we are treating these foreclosures and his story as an emblematic business story. We take no pleasure in his misfortunes, of course (and frankly, it seems odd to impute such motives), but I think it bears reminder that his is not the case of homeowner who risks losing his domicile because of a faulty lending and credit scheme. He is losing investment properties and putting other people out of their homes.

Cathy HardingDecember 9th, 2008 03:23pm

Judy Savage, This is a matter of public record. C-ville has no obligation not to publish. Mr. McGowan was given the opportunity to comment, and he declined. If there's "another side" of this story, he was given the opportunity to tell it. Essentially, the short response to your sanctimonious commentary is "Boo hoo." And here are some questions for you: Why aren't you identifying your own job status and your company? Why aren't you identifying yourself as President of the Charlottesville Area Association of Realtors? And while we're at it, with the economy in the toilet and even realtors facing foreclosures, and realtors taking on part-time jobs, why are asking prices still so high in a city that has 18 months of inventory? Just wondering. But you're right: there IS "much more to come" by way of foreclosures in this area--and nationwide.

Fred RichardsDecember 9th, 2008 05:23pm

If you have not noticed foreclosure is a community issue, say what you want, it is knocking at plenty of doors, no one is protected. There is no income, location, or race issue when it comes to loss of job and not being able to pay your bills. Instead of slinging names around, engage in dialog on how best to help our community. Even if there were bad loans/lenders, bad realtors, bad what ever, everyone took advantage of what ever they could. Everyone connected benefited. There was no yelling when money was put in your pockets. It is time to think about the people that will be impacted. Who did what doesn't matter-what matters is how do we prevent our homeless population from getting larger. I was sadden to read this article. I wish the media would use their paper to "educate the consumer" more rather than hang out their laundry. No one wins. It did not come across as an article to help folks. I see an article where I am quoted and part of my presentation printed to a group was put in the C-Ville paper. I guess I am okay with that since it came across as information that can help someone, even though I do not remember giving an interview or my material.

Shelley MurphyDecember 9th, 2008 06:43pm

Fred Richards, When you posted your comment, did you see a field for "Title"? I think its clear from Judy's comments that she works in his office and is a Realtor. Second, she didn't write that letter as a Realtor and CAAR President. She wrote that letter as a friend of Mr. McGowan and many others that we know (and I'm sure that you know) who are in the worst financial shape of their lives. Third, I'd like to know what world you live in where Realtors decide what the prices are going to be. If we had that kind of control, don't you think we would be slashing them so that we could earn a living? Homeowners set the prices, not the Realtors. Finally, as some one else said, The Cville knew that they might be crossing the line by asking readers if they thought they were wrong by publishing his name. And speaking of being "sanctimonious", I hope you have followed Suzie Orman's advice and have saved 12 months of living expenses lest you lose 75% of your income and the same thing happens to you. You never know...There but for the grace of God, go I.

Tara SavageDecember 10th, 2008 10:04am

“Can’t help you,” said McGowan, who asked that his name not be used. “It’s a very, very difficult thing to go through. And mentioning somebody’s name in a story like that is detrimental.” He didn`t finish the sentence. Detrimental to whom? BTW How dare Cville call "Realtors" ,"Agents". An industry with such a long, remarkable, notable, outstanding, inventive, creative history deserves better. There. Find some defamation in that. Now to the question: To disclose or not to disclose a name? Now we are into oxen goring.

CorneliusDecember 10th, 2008 10:25am

To be clear: C-VILLE didn't ask the question for the sake of ethical guidance. We are solid in our handling of the public record. We asked the question to stimulate discussion and get opinions, as Mr. McGowan was of the view that mentioning his name was "detrimental."

Cathy HardingDecember 10th, 2008 10:29am

@Shelley Murphy - You pegged it. Readers would have been better served by useful information on what to do in these situations than one-sided hatin' on The Man. The WaPo did a better job with an article like this recently. The issues are somewhat different, but handled more with actionable "what's next?": http://www.washingtonpost.com/wp-dyn/content/article/2008/12/08/AR2008120803801_3.html

RachaelDecember 10th, 2008 11:37am

There's simply no logic by which it makes sense to omit the realtor's name. There's no ethical or legal argument by which that makes sense, at least that has been named here or that I can summon. The landlord's failure to inform his tenant that her home was being foreclosed on is particularly reprehensible. Though I can envision myself being dumb enough to buy two houses that I couldn't afford, I have a tough time imagining that I'd fail to mention an impending foreclosure to my tenants.

Waldo JaquithDecember 10th, 2008 12:08pm

So confused, this is not a personal attack on Doug. Doug represents the hundreds of thousands that were misled by mortgage companies (not brokers, they're not generally smart enough to know what they're selling) and which led to a national crisis, no doubt there are hundreds of Dougs living amongst us here in Charlottesville. Doug shouldn't feel ashamed at all unless he felt like he was smarter then the nat'l gov't, Clinton administration, and the ex CEOs of Countrywide, Lehman Brothers, etc. It's unfortunate for his tenants, but it sounds like he has a family and few other life changing issues that he might need to of taken care of first. As for C-VILLE, what an amazing article that has stirred up so much debate back and forth while at the same time diving in to what took place on a micro level that has affected this country on a macro level. I've seen all the replies, I would be interested to hear Doug's opinion...

FactsureDecember 10th, 2008 12:31pm

@Fred Richards, you've put it succinctly. @rachael, this isn't the WaPo, fwiw. @Waldo Jaquith, as usual, you're the voice of reason in this town. @Tara Savage--going to assume that you're the daughter of Judy? Go console her on your own time. As President of CAAR, when she makes a statement in the media, she's not just "Judy Savage," she's President of CAAR. Guess what? Not everybody drank the Kool Aid and bought property that they couldn't afford at interest rates that are usurious. Sure, Doug McGowan is one of just a few million who did this. But there are *millions and millions more* of us who did not, and yet are suffering the economic consequences of his bad business decisions, which have contributed to wiping out the wealth of people who really *are* the victims of such stupidity. You seem like you need to defend this type of bad decision making because it's close to home. LOL about "homeowners setting the prices." You, and every REALTOR, know that it is REALTORS who show sellers what properties have been selling for in the area, and then proceed from there. At least, that's the way it has been in the past. Now it will be buyers who are setting the prices. REALTORS have a bad rap, often deservedly, as greedy salespeople and shills. It's no wonder people are turning to the Web for representation.

solonDecember 10th, 2008 01:01pm

Your powers of deduction amaze me. I am Judy's daughter. I'm also a realtor and a human being. And so are the people who made poor business decisions. (just so you know, I'm current on my mortgages and have a fixed rate with money down on everything...check it out). The point of the whole thing is the use of his name. He wasn't greedy, he just made the wrong decision and got hit hard by the economy. And by the way, the Internet doesn't offer representation.

Tara SavageDecember 10th, 2008 02:49pm

If you don't take a risk you will never get ahead. Unfortunately, Mr. Mcgowen took a risk that did not pan out. Like someone else said, if the PEOPLE who work at C'Ville were so affirmative in their conviction that the person should be named, then why ask the question you already know the answer to. It seems that someone needs a little positive affirmation at work?? Everyone is entitled to their owns opinion, but at the expense of another? Charlottesville is still a small town and in all likelihood it will be detrimental to Mr. McGowen’s business.

COME ON PEOPLEDecember 10th, 2008 03:12pm

Factsure - Doug bshould/b be ashamed - he bills himself as a sophisticated expert on Real Estate transactions - and he charges a rather hefty percentage of the deal for that expertise on each transaction he facilitates. Mrs. Savage and others frequently tout that expertise quite publicly. Boo-Hoo indeed. You don't get it both ways, and it was obvious to plenty of people this was a train wreck waiting to happen. Ms. Savage - it may be obvious to you, another Realtor, that your mom is the President of CAAR, but it's not to the casual reader of Cville. Good on Cville for publishing this.

Scott RuffnerDecember 10th, 2008 03:31pm

This is a very sad story. I do find it hard to fathom that as a REALTOR, Mr. McGowan would purchase at such a high interest rate with an ARM. My mom is a REALTOR and when I bought my house she had me shop for a very low interest rate @5.7% in early 2007, no ARM, but I did manage to buy with a 100% loan after understanding what they payments would be and knowing that my husband and I could afford those payments. While my mom used her earnings from the real estate boom to purchase investment properties, she did not push her finances to the limit and is still quite comfortable even though she is not earning what she did in the boom... she is sitting on investment properties until the market makes a turn. If Mr. McGowan was that aggressive with his own real estate purchases, I hate to see what he pushed his clients into as their agent. As for the use of his name, I feel that it was warrented. I wish Ms. Frick the best of luck as she is unexpectedly forced to find housing on such short notice with the busy Holiday season upon us.

ADSDecember 10th, 2008 03:34pm

Rather than be angry and point fingers, I think we need to look at the larger problem here....yes, many people bought properties they now can't afford. For everyone who is pointing fingers at Mr. McGowan...before you cast the first stone...Do YOU have credit card debt, an educational loan, a car payment? If you owe anyone anything then you have bought something you can't afford. You are speculating. Borrowing money is always a risk because you may find yourself without the means to pay it back. Our country grew through speculation...from the men and women who came here to find a better life, to the California gold rush or to the growth of our industry. At the moment everyone is paying for our recent round of speculation. If you own stocks or mutual funds you are speculating and unfortunately the market has turned and we are all suffering and will probably continue to suffer for some time to come. I know there is immense anger about the housing market right now...everyone is hurting but I think blaming the Realtors is very misguided. Realtors DO NOT set the prices ...consumers set the price...the market sets the price. If you come into an area and buy a home you are now setting the bar for what you are willing to pay in that area. Blaming the Realtors for the housing market is like blaming a sales clerk for the price of a dress. She hasn't set the price, she just helps you try it on. GOOD Realtors provide a service, just like good lawyers, house cleaners, mechanics...with one difference...they don't get paid unless they sell something. They try to help buyers and sellers find each other, negotiate a deal and get the paperwork completed with the least amount of stress for all parties involved. By the way I am not a Realtor, but I have used a Realtor everytime I have bought or sold a property and I can not imagine going through the process without representation. I am sorry to hear about anyone going through bankruptcy and I am pretty sure that Mr. McGowan would not choose to be going through this...just as none of us would choose this outcome. I think many of us are going to find foreclosures close to us or perhaps be involved in one personally. I imagine it is hard enough to go through something like this without having everyone jumping in and commenting on your financial judgement.

SuzanneDecember 10th, 2008 04:14pm

I have been reminded of the interview with C-ville back in November, so take back that portion of my posting above, the rest I stand by.

ShelleyDecember 10th, 2008 05:06pm

On a personal level, I feel empathy for McGowan, even if it is his own lack of acumen, judgment, math skills that allowed him to take out so many loans at such obscene rates. He's in a tough spot. On the business level, however, this is valuable information to have not just about the realtor, as pointed out @Scott Ruffner, but also about the particular real estate agency. The Savage duo don't seem to understand that they are hurting their business prospects and alienating future buyers and sellers by posting comments that are so highly unprofessional on a website that will be read by thousands and thousands of people. Caveat emptor. (That's "Buyer beware," Tara). Anyway, in this market, it's not really necessary to have a buyer's agent. What's necessary is a good RE lawyer.

prospective buyerDecember 10th, 2008 05:52pm

I just ran 14 miles--what fun and warm..no wind...but I did read all of the comments about Doug McGowan's and friends response to this situation..About 2 miles to go ,I really felt I needed to send something on this page....I'm a sinner and I really think during this time despite you differences ,you all need is to be thankful for what you have.....All of us have taken chances in this life--some more than others(I;m not one of them).Please do not attack but show love during this Holiday Season ps: please give something to ones less fortunate..Dan Pettitt

Dan PettittDecember 10th, 2008 06:49pm

Cville bubble blog has a post about the houses that are for sale next to the Augusta St place, including another foreclosed house a few blocks away. http://tinyurl.com/6ogd8c

brigadoomDecember 10th, 2008 07:26pm

I have no sympathy for Dave McGowan. He's a big boy, he got greedy, and he lost. If your property goes into foreclosure it becomes a matter of public record anyway so who cares if C-ville published a story? It does appear, however, that C-ville is beating its "little guy" drum with populist bravado for the tenant, but she certainly does deserve sympathy. Ms. Savage (both of you), you are indeed hurting yourselves and your reputations. The last thing realtors need to be doing right now is hurting their reputations. That's as stupid as...speculating on homes you can't afford. @Factsure.."misled by mortgage companies" my @ss! As one of the millions who rented and saved up to buy a house he could afford, and had to pay a lot more thanks to homebuilders, lenders, realtors, and other self-interested shills overinflating the price of a home (and a special thanks to our politicians for forcing Fannie and Freddie to guarantee loans to people who couldn't pay them)...I say f--- any greedy SOB who bought more house than he/she could afford. Give it back to the bank and rent like the rest of us did when we couldn't afford to own a place.

SparkyDecember 10th, 2008 07:48pm

I’ve seen variations of this story a dozen times over this year in newspapers in other parts of the country where the housing bubble collapsed much faster than it has here in Cville. Renters sign a lease, move in and pay rent, meanwhile the landlord pockets the rent but doesn’t keep current with the mortgage, allowing the property to fall into foreclosure. Usually the renter then discovers this the day the bank shows up with the eviction notice. If you keep collecting the rent check, but you know the property is heading for or in forclosure - It seems to me like fraud.

TrvlnMnDecember 10th, 2008 08:57pm

My post was in defense of someone who is in a terrible situation and who I know has personally jumped through numerous hoops to correct it. I have never said he was right, he did make mistakes. I personally am extremely conservative in my advice and in my own business but I too have been affected by the decline in the real estate business. I did put large amounts of money down on my personal property and investment properties and I used to have lots of equity. I've seen a lot of it disappear along with a lot of my stock market funds. I am not alone in this. However, this problem is so huge and complex it can't be blamed on just one person. Yes, I am the 2008 President of the Charlottesville Area Association of Realtors and I am the broker of REMAX Assured Properties but I was speaking as a friend of this man who is being held up as some kind of villian which he is not. This year has seen the value of homes decline, the stock market crash, record unemployment and a major builder in town go bankrupt. It is a sad time for all of us in the housing industry but I find myself in a position to look for a silver lining in all of this doom and gloom and attempt to keep the spirits up of those I represent. My point was that, in my personal opinion, when many others (including some other Realtors and Lenders)are in the same situation that Mr. McGowan now finds himself, it does no good to hold just one up to public ridicule. I still feel this would not have been done had C-ville staff not been personally involved. My clients know that I always look after their best interest, there is no doubt in that, and that is why a majority of my business comes from referrals from past clients and will continue to so. Defending someone from personal attack when they are down does not make me an unethical Realtor but a friend.

Judy SavageDecember 10th, 2008 09:11pm

Will he lose his realtors license for not having told his tenants about the foreclosure? Was he sending the rent to the bank or just pocketing it? The guy shouldn't be defended. People paid more for housing the last few years because of speculators like him. Now the speculators want us to pay for their mistakes. If they had made money, I'm sure they wouldn't have shared it with us.

fdr2001December 11th, 2008 08:13am

After reading the article and many of the comments - I do feel bad for the realtor mentioned in the article - I do not agree with the mentioning of his name - so I am choosing not to use it in my comment. I also do agree with Judy that everyone invlolved in the buiding industry has been hurt by the recent recession and decline in home prices. One item that I find odd - is that the paper that printed this article has no issue in taking money for advertisments from these realtors and local builders but then turns around and finds a way to bash the locals that are involved in the building industry. Everyone is trying to make it thru this mess and I find it appalling that a paper that makes money off the ads of these local realtors and builders would then turn around and print a story that tears them down. Yes I do agree he got in over his head and if it was just him then you could print this article and his name, but with 1 out of 10 homes now late on mortgage payments - I do not think that is fair to do what you did. If you are really as anit-development as you have seen over the years than stop taking the revenue that comes with the advertisment dollars spent by the builders and realtor industry. In my opinion you want your cake and to eat it too!

CWMDecember 11th, 2008 11:24am

@ Judy Savage, I think you're probably correct in saying there are many other Realtors or realty professionals in the same situation as Mr. McGowan. I hope you will use your position as CAAR President to advise them to take the hight road in diclosing information of such a determental nature to their tenants. As a renter in this city, I find it sickening that Mr. McGowan would not have the decency to alert tenants of impending eviction! Bad fortune or not, that's beyond despicable! I think The C-ville should publish a list "Landlords who Screw Their Tenants". I wonder how many Realtors would make the list?

C'Ville RenterDecember 11th, 2008 11:30am

To me what shocked me was he was a realtor, a supposed specialist is purchasing housing and made these decisions. I actually worked for a bank during the housing boom and left my job rather than continue to sell products which were bad for consumers because I could see the long term impact. (The bank I worked for has since had a lot of trouble due to these loans) My question is, why is Judy Savage supporting him, rather than saying, "Wow, he made some really bad decisions he should have known were bad decisions. Sure other people got caught but we as realtors should be better educated." The whole purpose of hiring a realtor is because they have a unique knowledge. Actions such as Doug's destroy this advantage. To restate it, why should I use Assist-2-Sell to buy or sell? Because I don't get the expertise of a realtor. But if Doug's actions are emblematic of realtor decisions, then I shouldn’t trust their advice and I might as well save money with Assist-2-Sell. If it isn't, then Judy should not be defending Doug, instead telling us how she is going to help ensure this doesn't happen again. A lot of the current crisis has been caused by industries not regulating themselves, both real estate and banking. I worked in the industry and passed up a lot of money for not making loans I could have but felt were wrong for the consumers. In the end, my low sales numbers added pressure at my job, combined with the fact I didn't want to be associated with a company that would try and force these loans, finally made leave. (Voluntarily I will point out) Those with an education in loans and a long term view COULD see this coming. But many ignored it because the money was too good. Now when they get their hand caught in the cookie jar they don’t want to face the "shame." But in the end, your actions are your actions.

Trevor ShandDecember 11th, 2008 12:12pm

How many Realtors in the Charlottesville area contributed to the housing bubble (in turn helping to pad their own pockets through 6% fees on ever-increasing sale prices) by flipping and otherwise recklessly speculating in properties using exotic mortgages - or by specializing in represented those that engaged in that sort of behavior? My guess is that it's a similar percentage to the number of them that are now down on their luck. As much as they try to pass the blame onto banks and mortgage brokers, Realtors cannot wash their hands of a mess they helped create. They certainly helped feed - in words and in actions - the mindset that real estate was a perpetually appreciating asset. Mr. McGowan placed a aggressive bet, then doubled-down and he lost. To call him a "victim" is stretching the word far beyond its true meaning.

JR JacksonDecember 11th, 2008 01:03pm

To correct CWM, its 1 out of 10 homes with mortgages that are behind in payments. Almost 1/3 of homes do not have mortgages. Also, some of the worse offenders of mortgage borrowing have multiple homes that are behind on. The vast majority of homeowners are not behind on payments because they borrowed what they could afford.

fdr2001December 11th, 2008 01:03pm

For what it's worth, I bought two houses and sold one house (between 2004 and 2006) using Doug as my realtor. He was knowledgeable, completely upfront and honest. Regardless of the choices he made with his personal finances, his professional work for us was impeccable.

BryanDecember 11th, 2008 02:49pm

c-ville weekly continues to prove that its management and staff belong in amateur hour when it comes to publications...the ugly red-headed stepchild of the hook and every other decent publication out there...BUT...this guy should have notified his renter way earlier and not collected the rent check.

dirk digglerDecember 11th, 2008 05:48pm

The fact that this story is so one-sided and solely focused on one person's mistakes certainly makes it seem like publishing it was a way for Ms. Frick to "get back" at Mr. Mcgowan. If she didn't work at C-VILLE, would this story have ever been written? C-VILLE should have incorporated the events mentioned in this article into a story about the housing market and it's effect on Charlottesville - that is, the Charlottesville community as a whole, not just their graphic designer.

SamDecember 11th, 2008 06:14pm

I wonder how many of you who have posted could stand to have your personal finances and personal business practices scrutinized publicly. It is always easier to pile on than to empathize. In many of the articles in both regional and national publications, there has been advice and information offered on how readers can learn from these situations and arm themselves with more information in order to make better informed decisions. I agree that if the tenant wan't a C'ville employee and the editor wasn't looking out for her own nearby property value, then the article would have been written from a more objective point of view. The worldwide recession has hurt man hard working and

SusanDecember 12th, 2008 04:30pm

Riddle me this, batman....what was I supposed to take away from this article? It was not ever clear. As a business owner, I can tell you one thing that is crystal clear to me - I will not spend my advertising dollars in your publication anymore. Kudos to throwing someone under the bus and shooting your own self in the foot.

Barbara StreisandDecember 12th, 2008 07:42pm

The title of this piece very clearly tells us that this is a "tale,"--meaning that we are going to get not just facts about Doug McGowan's purchases, high mortgage rates, and foreclosures, but also further details about actual people, rather than just the financial facts that one would find at a courthouse, online in City/County records, or in the public notice of a foreclosure auction. That two of the "characters" in the "story" are C-Ville staff members is thoroughly transparent. So anybody objecting that this is not a "news story"--you're right. And it doesn't pretend to be.//What are we supposed to take away from the piece? 1. If you're a renter, you need to ask the landlord about the financial profile of the property. If s/he can't or won't provide an answer, don't rent. This doesn't just apply to landlords who own one or two properties, bu also to larger LLCs. 2. Renters are at the mercy of other peoples' bad financial decisions. 3. We've also learned from the President of CAAR, though she was speaking as a "friend," that apparently there are a number of Realtors and lenders who are facing foreclosure. That is, through poor decision making or because they're "victims" of the housing bubble they helped to create, they now have serious financial losses. Therefore, what we've also learned is: 4) If you're looking to purchase a house and are interviewing Realtors to represent your best interests, you may wish to ask them about their own personal portfolios: when did they buy, how did they finance, in what shape are their properties now, etc. Because do you really want somebody with an unfortunate personal portfolio helping you to make one of the largest purchases of your life? (You may, if they're "learned" from it. But you should know the facts.) Finally, 5) We've also learned that lots of us here in this comments forum have points of view that others don't share, but we're all very passionate about them. This has turned out to be one of the more compelling pieces run by C-Ville.

Mr. BubbleDecember 13th, 2008 12:13pm

This article is really about being more vigilant in these times. It does not matter that Doug McGowan is a realtor. What matters, is that as a landlord, he did nothing to inform his tenants that they were in danger of being forced to look for a new residence. He acted within the law, but out of greed. Plain and simple. He did not what to loose the income from these properties. However, since we do know that he is a realtor. I for one will not do business with him. He has proven that he is low on moral fiber.

SteveDecember 14th, 2008 09:01am

seems to me the worst thing this guy did was lie to his tenant through ommision. Was he just going to let her get a notice of eviction from the sherrif?Thats where i lost respect and to me this is something that is probably happening all over and is a story by itself.

the real storyDecember 14th, 2008 04:46pm

Judy Savage writes: "My post was in defense of someone who is in a terrible situation and who I know has personally jumped through numerous hoops to correct it." Yeah, like inform his tenants they're gonna be on the street block i a few weeks? Sorry, but you make me sick. And MxGowan's sheer greed and stupidity, what with buying 3 properties within weeks, and doesn't have the assets to actually own them. I'm calling it as I see it: SCAM artists. Thanks for publishing your names, Savages. I'll be sure to stay away from your services...

SympDecember 16th, 2008 10:43am

The real story here, if there is one, is that the tenant got left out of the loop by her landlord regarding the impending foreclosure of her rental... why it then veered off into raking this guy over the coals of his tragic errors doesn't inform me about anything except how this guy got in over his head. There was a Cville story a few years ago about a guy who got caught peeping into the girls locker room at his business. He ended up very badly indeed. At times like this, for some reason, Cville seems to smell blood and "savage" its subject to the point that real tragedy occurs. Maybe it's a local phenomenon. There also was a story in the Progress about a tragic highway accident. A driver ran off the road, over corrected, and hit another vehicle. Awful. But then the writer went into the fact that the driver had "had trouble in North Carolina" and other personal details that had nothing to do with his driving... just personal laundry to show off. Not journalism. So the guy should've told his tenant. That's the story. Period.

BillDecember 16th, 2008 01:13pm

Bill wrote: "So the guy should've told his tenant. That's the story. Period." Really? That's whole story? I don't think so! The real story is actually the way people have no morality, especially those who feel they are 'above' simple tenants, and that the only thing that counts is business. Look at Savage and her incredibly self-centered, almost sociopathic stance: poor McGowan, he invested with money he didn't have, and he's trying so hard to make things right. That's total bull. The real story is that "the guy should have had a legal obligation to provide ample notice AND to provide relevant information as to the ownership of the properties he was renting, at the time of lease inception". Why is it tenants have little to no rights outside of Section8 housing? The real story is that there's 2 Americas: one for those that play the system which is entirely geared towards them, and those than cannot or will not. So now, McGowan, Savage et al should take their lumps and stop crying about it. Same for the damn banks, investment outfits, etc. What they want is to make great, easy money when times are good, and then abdicate the actual risks when it doesn't go their way. I say: enough!

SympDecember 16th, 2008 01:46pm

Oh boo hoo, yes, those poor tenants. While it sucks to suddenly discover you have a month to find a new place, I find it hard to be sympathetic towards them in the big picture. They've already found a new place, and it's not like they're out on the streets. They didn't come home to find an eviction notice and a note saying they have to be out the next day. They don't have a clue what it's like to be homeless.

MarDecember 16th, 2008 10:08pm

For those of you who have the luxury of knowing it all and being perfect in every way then go ahead and cast your stone. I'm sure your invincibility to making any poor decision would benefit this world greatly. This must be an awesome power to hold. Take some advice, if you have this ability, try to use it for good. “Get your facts first, then you can distort them as you please.” Twain

VoRDecember 17th, 2008 10:40am

This article was just emailed to me by one of my close friends. Like so many other people who have posted before me I am disgusted with CVILLE and the entire staff. I personally know Doug and he is a honest person, a wonderful Father, Husband and friend. I think it is very sad how everyone has attacked him, the Savages and the entire industry. I am not a realtor nor do I have anything to do with that industry. It's disturbing when we live in a society where we are not more concerned about the individuals and there families welfare. We would rather say we are trying to inspire some good debate. I network with a lot of small businesses and am a local business owner. I would never advertise or help support a company like CVILLE who never seems to have or follow any moral compass. If we are all looking for the next big story why dont we talk about how bad the advertising companies are hurting in this town. Local magazines are packing up shop, CVILLE has laid off lots of people and yet here we are attacking a local Father who still has to provide for his family. Shameful!!!!!

SHAMEFULDecember 17th, 2008 12:01pm

Symp... uh, did you even read what I wrote? It's pretty clear that "the real story" IS that the landlord neglected to tell his tenant. I didn't explain that the tenant's legitimate concerns were neglected because that's clearly understood. The reason I've joined this melee is because the writer did NOT need to then unpack and expose the poor judgment the landlord exhibited by being caught up in the general hysteria of speculative over-leveraging of his borrowed assets. The tenant's need to be protected is the story here. Explaining what a tenant's legal rights are, and warning tenants what to look for would be a good wrap-up to this story. But instead, showing zero compassion for the landlord's predicament (he's going bankrupt and losing his rental business) the article takes a vindictive turn or at the very least shows extremely poor journalistic ethics. Sadly, CVille isn't known for its delicate touch.... having contributed to at least one suicide in the past under similar circumstances of overreaching. Let's not forget, CVille is owned by people who made national headlines when they forced out the original founder and took his magazine away from him... must be something extra in their Evian that curbs empathy. All very legal I'm sure, but all they care about is money.

BillDecember 18th, 2008 12:08am

Bill: frankly, I'm, not interested in the background politics of Cville concerning this case, whether or not they're the dark entity you're trying to depict or not. What I'm interested in is the bent of this community to be so capital friendly while giving no importance to the little guy. I've witnessed this time and again here, and in fact, it matches much of the attitude throughout the US, and in particular the South, where there's quite a bit of lingering old-world slavery thing going on. Not necessarily against blacks anymore, but against anyone who's not where the money is. It's pathetic. For what it's worth, I personally have plenty, but I'm disgusted by the generalized attitude that if you don't own your home, you're nothing. And that's what transpires through this story. I think it’s pretty much confirmed reading through the poster’s concerns for this McCowan character. I have little sympathy left for greedy incompetence given the dire straights others, more deserving, are to be found in.

SympDecember 18th, 2008 08:55am

Shameful: How can you say that Doug is an honest person, when he decided NOT to tell his tenants that they needed to find a new place to reside? Doug could have saved himself from this outing by doing the right thing. The right thing was to tell his tenants. Not to let them find out on their own or by coming home and finding a vacate notice tacked to the door. He deserves what he is getting for not doing the right thing.

SteveDecember 18th, 2008 12:03pm

Have your say

*Name:

*E-mail (will not be published):

*Message:

Spam prevention. Enter the code from the image below.

* Required

Your comment will be displayed after it has been reviewed by our editors. Please refer to our comments policy if you have any questions, or email editor@c-ville.com.