Bouncing Mortgages: San Diego Short Sales and Foreclosures

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by Roberta Murphy

bouncing mortgages
San Diego Short Sales and Foreclosures

For almost two years now, there have been serious rumblings and grumblings in San Diego real estate circles about Option ARM and interest-only loans that could put a number of buyers in default–resulting in a big spike in San Diego short sales and foreclosures. We call them bouncing mortgages.

I initially gave the issue detached interest, because our clients tend to be a conservative lot when it comes to borrowing. We deal with few real estate speculators and most of our clients are solid buyers of San Diego primary and secondary homes.

My interest in these instant gratification loans is no longer a detached one, because the fallout from these ARMs is contributing to market weakness. Some of our conservative clients are seeing their San Diego home values stagnate or decline, in part due to these lending practices. It has been reported that 7 out of 10 option arm borrowers are sticking to the minimum payment schedules and in so doing, are stacking up substantial additional debt.

Many now owe more than their homes are worth. In San Diego County, short sale advisories on listings are appearing within our MLS on a daily basis, and will ultimately affect appraisals and valuations. In short sale transactions, the lender agrees to accept less than what is owed on the property (and obviously less than the prior appraised value).

In his Nations Housing column, Kenneth Harney writes that John G. Walsh, senior official at the Federal Comptroller of Currency, is sounding a quiet alarm:

We’ve had consumers tell us they didn’t know after 60 minimum payments on a (payment-option loan), they would owe more than they did when the loan was brand new. They should certainly understand the basic bargain: The price of a low payment now is a much higher one later. I think it goes without saying that someone, at some point, should have explained this to borrowers with these loans.

In defense of lenders, I am sure many did explain the consequences and hazards of these loans. I am also certain that many of these borrowers were counting on their homes appreciation to more-than-cover the accumulated debt on their negative ARM loans. ((Why does this so remind me of the investors who were slaughtered by margin calls during the stock market wipeout just a few years ago? Are these the same people who turned that same mentality to real estate?))

The fallout has begun. Once again, San Diego and Southern California are on the bloody edge of the real estate envelope. There are people getting wiped out in this market, and there will be those who make fortunes. We are advising our clients to sit tight if they do not need to sell and if they do, to price their property aggressively. With buyers, we use the same caution, negotiate strongly, and advise them to stick with blue chip properties and locations (usually coastal San Diego and singular luxury properties). We cant help but remind them of that dictum in the securities market:

Don’t try to catch a falling knife.

Nothing is permanent, except for change.

By the time the masses have turned their real estate investment and speculation dollars to unappreciated geographical markets, smart money will already be moving back to our balmy coastal climes proving once again that nothing can take the place of location, location, location.

2016 Note: There are few short sales, foreclosures or bouncing mortgages in San Diego these days. However, any we can find are listed below. If you have any questions, please feel free to call Roberta or Scott Murphy at either 760-942-9100 or 760-613-6190 or email scott@sandiegopreviews.com

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1709 Las Posas Road Camarillo, CA 93010

$699,000
3 Beds
3 Baths
4,217 SqFt
Status Active Under Contract
MLS # 11013058
Property Type Single Family Residence
Price Type --
This is a great deal for 2 homes. This property has so much to offer. SHORTSALE PRICE SUBJECT TO LENDER APPROVAL.

67926 Whitney Court Desert Hot Springs, CA 92240

$135,000
3 Beds
-- Bath
1,895 SqFt
Status Active Under Contract
MLS # 41459320
Property Type Single Family Residence
Price Type --
This is a SHORT SALE. Beautiful home, very well take care of. Nice area. 3 bed. 2 ba. No need to preview.

2863 Silver San Jose, CA 95135

$780,000
4 Beds
2 Baths
1,655 SqFt
Status Active Under Contract
MLS # ML81239736
Property Type Single Family Residence
Price Type --
Great Location Single Family Home! Great school district! A Must See!

739 E Rowland Street Covina, CA 91723

$540,000
3 Beds
2 Baths
1,790 SqFt
Status Active Under Contract
MLS # 14765527
Property Type Single Family Residence
Price Type --
APPROVED SHORT SALE!! One lender only. There is an swimming pool. Please send your offers for your buyers. Thanks you for showing.

74582 Stage Line Drive Thousand Palms, CA 92276

$59,900
2 Beds
1.5 Baths
1,248 SqFt
Status Active Under Contract
MLS # 214026393DA
Property Type Manufacture 433
Price Type --
This is a Fannie Mae HomePath property located in the Gated Community of Ivey Ranch. With approximately 1248 square feet, 2 bedrooms and 1.5 baths, this is a great price and great opportunity to own as an investment, second home, or primary residence. Enjoy golf in your own community. Ivey Ranch is a Guard Gated Community with golf, community pools, a clubhouse, and abundant greenbelt areas. Come take a look!

1865 Bluebonnet Court Morgan Hill, CA 95037

$550,000
3 Beds
2 Baths
1,612 SqFt
Status Active Under Contract
MLS # ML81431245
Property Type Single Family Residence
Price Type --
Great area in Morgan Hill..Investor special homes does needs some work. Price to sell fast.

207 Hazelwood Drive South San Francisco, CA 94080

$639,000
4 Beds
3 Baths
1,560 SqFt
Status Active Under Contract
MLS # ML81437153
Property Type Single Family Residence
Price Type --
Excellent location in Sunny part of South San Francisco near El Camino Real. Just two blocks away from Brentwood Shopping Center. 3BR/2BA up with updated kitchen and bathrooms. Hardwood floors. Second Unit down with 1 bedroom 1 bath not permitted. Code violation on the property.

627 Terrace Street Salinas, CA 93905

$148,999
3 Beds
2 Baths
1,300 SqFt
Status Active Under Contract
MLS # ML81438218
Property Type Single Family Residence
Price Type --
SHORT SALE, BUYER TO VEFIFY ALL INFORMATION, GREAT FOR INVESTORS AND RENTAL PROPERTY WITH BUILT-IN TENANTS. AS-IS, LOTS OF POTENTIALS, NEEDS SOME WORK.

1692 Beverly Street Porterville, CA 93257

$92,000
2 Beds
1 Bath
1,342 SqFt
Status Active Under Contract
MLS # ML81438801
Property Type Single Family Residence
Price Type --
Short Sale 2 bed 1 bath

30624 Janlor Drive Agoura Hills, CA 91301

$525,000
3 Beds
2 Baths
1,708 SqFt
Status Active Under Contract
MLS # 216006984
Property Type Stock Cooperative
Price Type --
Cash offers only for a quick sale. Need offer immediately for this short sale. House needs new kitchen, new bathrooms, air conditioning. Pool filter does not work. Jacuzzi is also not operational. Great opportunity for a contractor. 3 bedrooms, 2 bath, on cul-de-sac street. Home backs to shopping center on Thousand Oaks Blvd.

516 W Juniper Street Oxnard, CA 93033

$285,000
2 Beds
1 Bath
832 SqFt
Status Active Under Contract
MLS # 216009357
Property Type Single Family Residence
Price Type --
Cute Little Bungalow Home in the Heart of Oxnard. 2bed 1Bath, Hardwood Floors, Cozy Kitchen and Dining Room. Great Starter Home.

1112 W Cedar Street Oxnard, CA 93033

$309,000
4 Beds
2 Baths
1,932 SqFt
Status Active Under Contract
MLS # 217000311
Property Type Single Family Residence
Price Type --
Great Opportunity For Contractor or Investor. This 4 Bedroom, 2 Bath is in need of work, but has lots of potential. Located in wonderful neighborhood close to elementary schools, shopping area, parks, beach and local mountains. Property needs a lot of repairs.

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