Are Lenders Redlining Entire Cities?

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by Roberta Murphy

Redining in San Diego
Redlining San Diego Real Estate?

Redlining is a term that describes the unethical if not illegal practice where lenders red line a neighborhood or community, making it very difficult for buyers to purchase in these afflicted areas.

I have recently heard from a couple of direct lenders, Countrywide Home Loans and Bank of America, that most if not all of San Diego County real estate is in the red zone.

Qualifying for current red zone status simply means that the subject property is located in a declining market area. The impact of this colorization is significant to both the San Diego real estate market as a whole and to first time home buyers in particular.

How this version of redlining works creates a no-win situation for buyers putting down less than 5 percent.

Even if a buyer has negotiated a bargain purchase price, say 10 percent under market value, the appraiser will automatically deduct another 5 percent from the contract price to determine a value. In other words, a borrower cannot get away with putting less than 5 percent down.

I spoke with Brian Brady a couple of weeks ago about this matter. I had been told by a representative from a large direct lender that San Marcos, CA was in a red zone, and would be subject to different lending standards. Brian bristled at the thought of redlining, declaring it an illegal practice unless an entire region were painted red.

Well, it seems that most, if not all of San Diego County real estate, is swimming in blood.

One of our agents is struggling with a couple seeking to buy their first home in the Shadowridge area of Vista, CA. The buyer is an automobile service manager in nearby Carlsbad and his wife is an attorney. They are conservative in lifestyle, and can afford payments on a $417,000 home. However, they are short on down payment. And with current lending guidelines and the unavoidable prospect of buying in a red zone, they can no longer qualify for the 100 percent loan Countrywide Home Loans had promised.

And what makes this particular case so interesting is that the home is a foreclosure held by Countrywide as an REO (real estate owned). Any reasonable person would think that Countrywide Home Loans would jump through hoops to get this liability off their books especially with buyers like these.

Wouldn’t reasonable minds agree?

Listed below are all current listings of homes for sale in Shadowridge area of Vista:

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1679 Sunset Dr Vista, CA 92081

$2,000,000
5 Beds
4 Baths
1,918 SqFt
Status Active
MLS # 180042029
Property Type Single Family Residence
WOW, JUST WOW! This property is special from the moment you walk on the premises. If you are looking for horse ranch property with plenty of space around you this is it. There are 2 houses on the property, one is not permitted but in use by family members (3 Bed,2 baths). The other is permitted (2 Bed,2 baths). The horse stable holds approx. 20 horses, all in separate stalls. The office and tack rooms are also part of the stable. There is one HUGE riding arena, and more. Call Mia Worley 760.688.9077 Neighborhoods: Rancho Mar Vista Equipment: Shed(s) Other Fees: 0 Sewer: Septic Installed Topography: LL, Guest House Est. SQFT: 1800

1425 Genoa Drive Vista, CA 92081

$530,000
4 Beds
2.5 Baths
2,230 SqFt
Status Active Under Contract
MLS # 180047441
Property Type Single Family Residence
Beautiful community in Shadowridge neighborhood, 4 bedrooms 2.5 baths, private patio, sliding glass doors, vaulted ceilings. Swimming pool and spa, close to shopping centers, schools, churches, golf course and easy access to Hwy 78

1102 Hacienda Drive Vista, CA 92081

$850,000
2 Beds
1 Bath
656 SqFt
Status Active
MLS # 180053042
Property Type Single Family Residence
Up and coming town of Vista just S of the 78 on corner lot. The property consists of a 2bd, 1 bth detached home built in 1950 with a total square footage of 656 sq ft. The lot contains two APN #s totaling to just over 2 Acres. Are you looking for the convenience close to freeway access & shops? Calling all developers/investors this property is zoned C-2 and is proposed commercial cannabis location depending on Nov 2018 vote. Visit city website to verify property use, zoning, and characteristics.

1966 Spyglass Cir Vista, CA 92081

$639,000
3 Beds
2.5 Baths
2,224 SqFt
Status Active
MLS # 190001013
Property Type Duplex
Wow! Beautiful and rarely available VIEW home with backyard access to the fabulous SHADOWRIDGE GOLF COURSE! Enjoy this spacious 3 BR/3 BA, open floor plan home, with MASTER BEDROOM DOWNSTAIRS, vaulted ceilings and large upstairs loft. This home features views from most all living spaces and has been highly upgraded with new flooring, remodeled kitchen, fireplace, powder, wrought iron fencing and more. Situated on the 8th hole overlooking the pond, the home is in one of Vista's best neighborhoods.

1028 Prospect Vista, CA 92081

$695,000
3 Beds
2 Baths
1,040 SqFt
Status Active
MLS # 190004253
Property Type Single Family Residence
Opportunity. Estate flat lot or build 3 new homes, sewer connected and underground electric installed for new development. Call the City of Vista, zone variance for multiple units have been issued to many owners,use your imagination.Room for contractors to park your vehicles and have extra income from the home.

1160 Branding Iron Drive Vista, CA 92081

$1,637,000
5 Beds
3.5 Baths
2,596 SqFt
Status Active
MLS # 190004818
Property Type Single Family Residence
ATTN: BUILDERS / INVESTORS - Great opportunity for new construction/spec homes on large open lot in prime location! Rezone application for R-1 to an E-1 estate currently in progress (approval hearing scheduled for April 2019). Upon approval, this beautiful 2.97 acre property can be split to build up to 4 single family homes. Property currently has a 5 bd/ 3.5 bath home which produces monthly rental income. See attached for tentative site map.

2116 Solara Lane Vista, CA 92081

$567,925
3 Beds
3.5 Baths
1,426 SqFt
Status Active
MLS # SW19022612
Property Type Condominium
Experience a wealth of opportunities that can lead to a lifetime of memories for you and your family at Verano at Skyline, a flourishing new community in Vista. Parents will find the perfect setting to arrange play dates and watch their children build friendships at the community pool. You can enjoy nearly perfect year-round weather as you explore the Southern California beaches less than 10 miles away. For those who enjoy culinary delights, endless dining options can be found just minutes away. When you

1154 Via Santa Paulo Vista, CA 92081

$364,999
2 Beds
2 Baths
1,512 SqFt
Status Active
MLS # SB19061720
Property Type Manufactured On Land
Great opportunity to own in Vista Del Mar Community! Very nice quiet street! Come relax in the community pool, spa or play a game of pickle ball with your neighbors! Great for entertaining guests! Has great ocean breezes! Has skylights in kitchen with recessed lighting too. Also has a nice portable island, custom fireplace, beautiful flooring, granite counter tops and much much more. Nice gazebo in back yard along with a driveway. On top of that, this house has SOLAR to keep your expenses down! Solar will

1154 Via Santa Paulo Vista, CA 92081

$364,999
2 Beds
2 Baths
1,512 SqFt
Status Active
MLS # SB19032475
Property Type Manufacture 433
Great opportunity to own in Vista Del Mar Community! Very nice quiet street! Come relax in the community pool, spa or play a game of pickle ball with your neighbors! Great for entertaining guests! Has great ocean breezes! Has skylights in kitchen with recessed lighting too. Also has a nice portable island, custom fireplace, beautiful flooring, granite counter tops and much much more. Nice gazebo in back yard and also a driveway. 13; On top of that, this house has SOLAR to keep your expenses down! Seller will pay off in full before escrow closes. Great location with plenty of things to explore in San Diego County! Shows nice!

1854 Olympus Loop Drive Vista, CA 92081

$650,000
4 Beds
2.5 Baths
2,272 SqFt
Status Active
MLS # 190007401
Property Type Single Family Residence
Welcome to Shadowridge! Light & bright turnkey home located walking distance to grocery store, restaurants, coffee shops, and schools. Large floor plan with both spacious living room and family room downstairs. Kitchen features granite counters, crisp white cabinets, stainless steel appliances and large social island. Private backyard provides perfect setting for relaxing or recreation.

2130 Sunset Dr Unit 77 Vista, CA 92081

$115,000
2 Beds
2 Baths
1,440 SqFt
Status Active
MLS # 190007999
Property Type Manufactured On Land
Great location with no rear neighbors. Separate Living & Family rooms! The Kitchen was previously updated. Wet bar. Most walls have been painted white. New carpet in Living & Master Bedroom. Double sinks, tub, & step in shower in Master. Two outdoor porches (Front & Back) + enclosed porch. The Back porch is shaded by an avocado tree & feels very peaceful & private. Extra wide carport w/ curved supports. Convenient location close to Costco, TriCity Medical, Carlsbad Mall & movie theater, Beaches, & more!

924 Wentworth Circle Vista, CA 92081

$499,000 - 3Br/2Ba -  for Sale in Vista, Vista
New
$499,000
3 Beds
2 Baths
1,328 SqFt
Status Active
MLS # 190010876
Property Type Stock Cooperative
This beautiful single level home in the desirable community of Shadowridge Greens is ready to move in. An end unit with newly painted walls, cabinets, doors and baseboards and new plush carpet just installed. Many upgrades make this a beautiful home. The kitchen has granite counter tops, stainless steel appliances, newly painted white cabinets with glass doors and wood floors. Shutters on all the windows, brick fireplace, vaulted ceilings and open floor plan make this a wonderful home.

 

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13 responses to “Are Lenders Redlining Entire Cities?

  1. Pingback: Real Estate/Buisness News » Blog Archive » Are Lenders Redlining Entire Cities?
  2. If you were in business of lending money……Would you lend money at prevailing rates to buyers today with less than 20% down?
    Yes, lenders are in the business of lending money but at what point do they insist on having some legitimate cushion against people walking away from their homes when times get a little tough.
    It may not be legal to “redline” but if I’m in business and want to stay in business, I’d find ways to do just that.
    Your clients are successful dual income consumers that sound like they may have to learn the lesson of their parents….save, live within their means , sacrifice, and the big lesson for us all….no one owes us anything.
    Your client may be different, each has a different story, but many need the lesson that we all are learning the hard way.

  3. Billy:

    We and our San Diego real estate buyers are negotiating terrific deals on very desirable real estate. Lenders should take this into account instead of subtracting an arbitrary 5 percent off the appraised value.

    The San Diego real estate market has enough problems without lenders adding unnecessary fuel to the fire.

  4. Susan: We were told by two direct lenders that the red lines have been drawn all around San Diego County and its real estate.

  5. Paul,

    I don’t think there is a particular red zone map for San Diego real estate; rather, the lenders painted the entire county a bright shade of red.

    To do otherwise would be a federal violation.

    Hope it’s removed soon.

  6. Wow…After reading the article as well as some of the comments…that is amazing to hear. I have heard about this before and also read some articles myself. Luckily we have never had any of this pop up in the Santa Barbara areas.

    Hopefully this is not the real case.

  7. Kevin:

    Redlining is a reality with San Diego real estate lending. Santa Barbara, because of prior limitations on building, may not be suffering the same fate.

  8. Well what more can we expect Because of continuous economic downturn, many realtors and business establishment were engaged in financial issues, they tend to get big loans in order for their business to survive in this time of depression.

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