"They [the Clauses] weren't going to get rich from their primary residence, that's for sure," said Tom Dewmar, owner of Frozen Tundra Assets, a property-management and marketing firm based in Ontario.
Dewmar, who is also the editor of the Great White North Properties Newsletter, says he's seen it all before.
"There's just not much of a market for a thirty-acre homestead that far north,” he says. “Zero demand means zero appreciation. If you're the Clauses, and you have to keep up with inflation, you're forced to look elsewhere for return on capital."
That's exactly where the problems began, sources close to the Clauses report. Records of various counties show that Mr. and Mrs. Claus purchased a double-digit string of properties in the United States in recent years. Rates were low and credit was easy, and the Clauses plunged in by the sled-full. They bought ten of their twelve properties in either 2005 or 2006, while an eleventh — a now-defunct condo project in east Miami — came along in early 2007.
"You're looking at a family investment portfolio that will suffer staggering losses," says Mary Fornster, a Morgan Stanley analyst who follows investment trends of the world's elite. "If anyone thought the Kringles were immune to zero-down, teaser-rate, the-gains-are-permanent temptation, they were mistaken. It's pretty sad, really.”
Fornster, who stresses that her firm has never had any financial relationship with the Kringle family, points to misguided investment advice and reckless loan underwriting as primary causes for this financial Nightmare Before Christmas.
“Had we been asked,” she says, “our advisors certainly would have steered the Kringles away from real-property assets at that time. The fundamentals were shaky. Then, as now, we continue to recommend silver and gold."
Other experts suggest that the Clauses/Kringles, like so many of their American and European counterparts, could remain uninterested bystanders in real estate for only so long. Property values skyrocketed month after month in places like California, Florida, Nevada, and Arizona. The lure of twenty-five percent annualized gains proved too much for them, and countless others, to ignore.
“Oh, their portfolio was diversified, all right,” Fornster says. “Right now, their estate basically has three classes of real property: ‘bad,’ ‘worse,’ and ‘monumentally horrific.’”
“Certainly we all appreciate everything the Kringles have done through the years,” she adds. “Airlifting bags-full of toys and gadgets across the globe in a single night – the logistics are nightmarish. But reality is what it is. The Kringles are bagholders of a different sort now.”
A Family Member Speaks Out
Emma Nelle Barnes has seen her share of struggles. At ninety-one years old, she remembers the days of her childhood — sepia-toned times when her cousin Kristopher could offset his then-modest holiday business expenses simply by holding off-season bake sales and publishing cookbooks full of cherished family recipes. As recently as 1983, Santa’s hardbacked Chewy is Good: A Celebration of Venison Throughout the Year (published under a pen name) reached bestseller status. Revenues were substantial. Reviews were glowing.
Beloved everywhere, and with such a prestigious reputation as their tailwind, Kringle business profits seemed a given. The family bank accounts were always at least stable, but most often growing. Previous market slumps — both stock-market-related and otherwise — dotted the past decades, but left little mark on the Kringle fortune. Even during the Great Depression, Ms. Barnes remembers, the belt-tightening was significant, but not earth-shattering.
But this downturn reaches deeper.
“Chaos visits them from all sides now, dearie,” says Barnes in hushed tones. She speaks with her famous cousins at least twice a month via telephone. “I know they’re worried sick. Fuel prices are high. Grain prices are high. Insurance and union costs for the elves are astronomical, and rising. Creditors call every hour. If the Grinch had really wanted to steal Christmas, this is how he should have done it.”
Ms. Barnes sums it up succinctly:
“And now, to top it off, you have this. This housing bubble. I just don’t know how it got this bad. But I can read the statements and the mail and the news. My family’s investments are in the shitter, dearie.”
No Remorse From Sellers
Darlene and Stewie Richards bought their Elk Grove, California home in the mid-1990s for a few hundred thousand dollars. It was a quiet neighborhood, warm and green and blooming with hydrangeas. The four-bed, two-bath, two-tone stucco (with pool) seemed a perfect place to put down roots.
And during the housing- and credit-explosion of the mid-2000s, untold swarms of property buyers thought so, too. Darlene recalls that during the first few days their home was on the market, her realtor took bids from more than 300 interested — and more importantly, prequalified — parties. When the smoke cleared, it was a sight-unseen investor who had turned in the highest bid.
A charming old gentleman going by the name of “K. Creengel.”
“I knew who he was right off,” Stewie Richards says as he clicks the doorlocks on his late-model Escalade. “No mistaking him. Corncob pipe. Button nose. I don’t mind saying it was more than a little odd, seeing that familiar face across the table from us at closing. I mean ... that beard. Never mind the two elves that came with him. It’s not every day you have to sit and wait for fancy-pants elves to go over all the contracts.”
He shakes his head, seemingly in disbelief of it all. “Who even makes three-piece suits that small? Jesus.”
Records show that Kringle’s family trust paid the Richards a total of just over $1.1 million for the home in 2006. It is currently for sale again, with a listing price of $720,000. It has been on the market for over one hundred weeks. The listing price has been reduced seven times.
“When I was a little girl, I wanted a pony,” Darlene Richards states. “I always asked Santa for a pony. Did I ever get my Christmas pony? No. Do you know that it took me forty-two years, two husbands, three sunroom renovations, and four granite-and-stainless-steel kitchen updates just to get that pony? I used the money from that home, plus a chunk of a cash-out refi on our rental place in Alabaster, and I bought us a pony farm in Missouri. Shetlands.”
If the Elk Grove home were to sell at its current listing price, the Kringles would be absorbing a loss of well more than $380,000. But Mr. and Mrs. Richards, who no longer live on the west coast, are not apologetic.
“I was a pretty good kid,” Darlene explains. “I kept my room clean, mostly. I helped with dishes at dinnertime. I carried a B-average in school. But still no pony from Santa. Every year — disappointment. Heartbreak. Well, that’s changed, hasn’t it? In a weird way, Santa finally gave me that pony. I just had to take things into my own hands.”
She shrugs and lights another Pall Mall.
“It’s capitalism. We won. He lost.”
The Old Man Loves Vegas
It crushes Emma Nelle to see what’s happening to her cousins up north. Put simply, the money is running out.
“The old man loves Vegas, surely he does,” she says as she steps out the back door into her cutting garden in Sioux Falls. “Until last year, Kris and his wife would visit the desert two or three times a year. They enjoyed the shows, sure. Blue Man Group was his favorite. But you’d be surprised. Mr. Kringle isn’t a bad Texas hold’em player in his own right.”
Such getaway visits led, as one might imagine, to the almost-inevitable purchase of two pieces of Las Vegas real estate. The Kringles’ timing could not have been worse.
“She [Mrs. Claus] tells me they’re down forty percent already,” Emma Nelle says. “Both properties. The whole subdivision’s in shambles. News crews down there day and night. The few neighbors still there just want to be left alone.” Emma’s face deepens, the sadness creeping in. “The things people are doing to the vacant houses — it’s just horrible. Signs glued to the windows. Signs stuck in the yards. ‘Whocoodanode,’ one of the signs said. Bright red letters.”
She looks up again, squinting. “What the hell’s that mean, anyway?”
Deck the Halls (with Neg-Am Loans)
Inside sources indicate that the financial precariousness which the Kringles now face can be traced, in no small part, to a mortgage-underwriting world which mispriced risk at every turn. And did so, it appears, at absurdly profitable levels.
“The guys who originated these loans made a pile of jack,” says Mr. Z, a mortgage insider with ties to Wackoverya Home Loans as well as several other real-estate entities. Mr. Z, whose business dealings still skirt the outer limits of the mortgage industry, prefers to remain anonymous. “I can tell you this much: Our man Santa got hosed on these deals, for sure. These are never-neverland sorts of loans. Pick-a-Payment ... Pick-my-Butt ... same difference. Fa-la-freakin’-la.”
Such high-risk loans were the norm in a credit world gone wild — a world where the idea of falling property values was as unacceptable as a dog-turd sandwich at the 41st Avenue Bistro in Sacramento.
“With prices where they are, our man in the red suit is buried like a baby penguin in polar-bear poop,” Mr. Z states. “God only knows what stinky deals these lenders would’ve thrown at the poor Easter bunny.”
Government officials are now turning an interested ear to the Kringles’ dilemma.
“I’m just not sure what we can do about it,” says Congresswoman Winifred Mandible, herself a proclaimed victim of six separate instances of predatory mortgage lending within the last four years. Like the Kringles, she too is facing the prospects of having several homes foreclosed and/or bulldozed by various lenders.
“What we’re seeing, at this time, is a need for more direct taxpayer-funded stimulus,” she told reporters at a mortgage-lenders conference last week. Mandible, who heads various subcommittees and chairs the Building and Urban Lenders League for Creative Responses And Proposals (BULLCRAP), says that plans to assist investors like the Kringles simply must take a back seat to other, more-urgent plans to aid first-, second-, third-, fourth-, fifth-, and sixth-time primary-residence homeowners such as herself.
“The American taxpayers’ pockets are deep and generous, I’m happy to say,” she told conference attendees. “But we must ask ourselves: Where are our efforts best directed? Where will long-term benefits best accrue? I believe we must take care of the American multi-homeowner, first and foremost, just as soon as we’ve taken care of our banks. And, of course, public servants like myself.”
So it becomes apparent that the Kringles, while so obviously in need of public-sector assistance, must simply take a number. And wait.
And children around the world must hope that his holiday season, though still six months away, brings the North Pole’s two most beloved residents more than just mistletoe, holly, and the moldy, stale fruitcake of home loans gone bad.
Labels: Mortgages, Odd 'n' Fun
