w 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

For almost two years now, there have been serious rumblings and grumblings about Option ARM and interest-only loans that could put a number of buyers in default. 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 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. 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 already appearing within our MLS, 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 Nation's 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 l

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My interest in these "instant gratification" loans is no longer a detached one, because the fallout from these ARMs is contributing to market weakness. 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 already appearing within our MLS, 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 Nation's 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

ng, 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 already appearing within our MLS, 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 Nation's 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

Nation's 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

w 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?))

I think this fallout is just beginning. Once again, San Diego and Southern California are on the bloody edge of the real estate envelope. There will be investors 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. We can't 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.