I can think of a few reasons off the top of my head …

1. If they refinanced the house, the refinance loan is recourse debt, meaning the lender could go after other assets.

2. They have sufficient other assets and want to buy in another town immediately and don;t want to ruin their credit.

3. They have other assets and want to move to the sidelines for 2 years and be ready with cash and a high FICO score to pounce when the time is ready and a bankruptcy would look bad.

4. They value their reputation more than their money.

5. San Diego has a lot of defense jobs. They may have job reasons why they don’t want to have a BK on their record, which might imperil their security clearance.

6. They’ve done the math and figured out that 50 or 100K today will shave 3% or more off their next loan in a couple years. In the long run they could potentially save money by eating a chunk today.

7. They are moving to another place for which they are buying on the cheap. They eat 100K on the sale, but are paying 200K less on their new place than they would have previously.

Remember, not everyone who purchased in the past 3-4 years has all their assets tied up in a personal residence.