Partially-Built Foreclosure Properties Wrecked to Cut Losses
May 5th, 2009 by 
Joseph Smith
Sixteen partially-built foreclosure properties in the California city of Victorville were demolished by Austin-based Guaranty Bank because it figured that it would lose more money if it completes the foreclosed properties.
City officials were informed by the bank that the total costs of finishing and then marketing the foreclosure properties would surpass their sales proceeds, especially as home prices are still falling.
The bank also said that it faces fines from the city as the foreclosure properties, located in an abandoned housing area in Victorville, have been invaded by squatters, vandals and drug users. Victorville is one of the desert cities in Southern California’s San Bernardino County, about 85 miles east of Los Angeles.
Across San Bernardino County, home prices have dropped by 60 percent from their peak in 2006, based on data from real estate research firm DataQuick.
The median price for new homes in the city is $265,000, according to another research firm Hanley Market Intelligence.
The demolition of the 16 foreclosure properties indicated how the foreclosure crisis had affected mortgage banks which invested in Los Angeles suburbs that showed great potential during the boom. According to city officials, the foreclosed properties were constructed by California-based developer Matthews Homes in 2007. Guaranty Bank foreclosed on the builder in December 2008.
Guaranty Bank has been losing from loans extended to home developers. Like many other lenders in the home building industry, Guaranty has been foreclosing on residential developers whose housing projects have collapsed. Regulators have pressured Guaranty to move its foreclosure properties, but the bank could not find buyers as home values continue their downward direction.
The bank’s parent firm Guaranty Financial Group is also facing its own foreclosure-related problem: a cease and desist order from the U.S. Office of Thrift Supervision for its alleged unsound banking practices.
Guaranty spokesperson John Wessman asserted only 4 of the 16 foreclosure properties were almost complete and that the other units were just skeletons. He also added that the Guaranty executive who supposedly told Victorville reporters it would cost over $1 million to finish the project was not authorized to give information to the press.
Ron Willemsen, head of the Montclair-based Intravaia Rock & Sand which demolished the foreclosure properties, expressed surprise that the bank could not think of a better alternative to demolition.
