The American Nightmare -- Home Foreclosure

LIVING THE AMERICAN NIGHTMARE
FORECLOSURES ON THE RISE: As the housing market softens, a combination of consumer naivete and aggressive lending means owners with subprime loans are increasingly getting sucked down a financial black hole
Carolyn Said, Chronicle Staff Writer
Sunday, July 29, 2007
To many people in the affluent Bay Area, losing a home to foreclosure sounds like a Depression-era relic or a Rust Belt phenomenon. Our real estate prices have defied gravity for so long; our job market is so strong; our cachet as a place to live seems so obvious. How could foreclosures happen here?

Faces Of Foreclosure

But in recent months, the Bay Area has proven to be home to numerous victims of the subprime loan debacle. Just like elsewhere in the country, people here with tarnished credit or limited funds bought houses that proved to be beyond their means, often putting little or no money down, and borrowing money through exotic, expensive loans that were virtual time bombs set to soar to unaffordable levels after an introductory period.
Aggressive mortgage brokers, voracious lenders and naive consumers combined to create an unstable situation. The tipping point came a year and a half ago when real estate prices started to flatten or fall in some areas. Suddenly, home buyers who had planned to refinance saw that door slammed shut because they no longer had equity in their houses and their "introductory rate" mortgages quickly became unaffordable as interest rates -- and their monthly payments -- rose. This year, almost 1 million people nationwide will enter a stage of foreclosure, according to RealtyTrac.com. That great tidal wave is ravaging the already beleaguered real estate market and causing repercussions from Wall Street to Washington, D.C.
In the second quarter of this year, 2,206 homes in the nine-county Bay Area were lost to foreclosure, according to real estate service DataQuick Information Systems. That was the highest number for this area since DataQuick started tracking foreclosures in 1988, and an almost nine-fold increase from 258 foreclosures in the April-June period last year. Also in the second quarter, DataQuick said 7,696 Bay Area homeowners received notices that they were in default on their mortgage payments -- the first step in the foreclosure process. That was more than double the 2,910 default notices received at the same time last year.
Some observers say that many of those facing foreclosure should never have bought a house. To be sure, many consumers were seduced by the American dream of homeownership and so financially unsophisticated that they didn't apply due diligence. For Bay Area residents, more than a decade of consistently rising home prices may have led to a mob mentality of people overeager to jump into the real estate market, confident they would quickly gain equity.
On the other side of the equation, many lenders pushed the envelope. For example, Ameriquest Mortgage Co., the nation's leading subprime lender, is now paying $325 million to 725,000 borrowers nationwide for allegedly improper sales practices, including failing to adequately disclose home-loan terms and rates, refinancing borrowers into inappropriate loans, inflating home appraisals, and charging excessive fees and prepayment penalties.
Foreclosures have a much broader impact than just misfortune for the people who lose their homes. Within neighborhoods, they cause real estate prices to sink because houses on the verge of foreclosure or already foreclosed upon often are resold at lower prices. That, in turn, has a ripple effect on the overall real estate market. Increasing foreclosures are one reason the current housing downturn has proven to be more severe and long-lasting than anticipated.
Foreclosures also take a deeply personal toll. As shown in these profiles of several Bay Area homeowners who got in over their heads, a foreclosure goes through many stages, and is an extended and complex process during which homeowners desperately search for solutions to save their homes and salvage their credit ratings.
Foreclosure trail
Foreclosure is a complicated process that usually takes many months. Here are some of the steps involved in a foreclosure.
Default: When a homeowner falls behind on mortgage payments -- how far behind varies with different lenders -- the bank sends a notice of default and records it with the county recorder's office. Homeowners can try to rectify the situation by bringing payments up to date or refinancing. They can try to sell the house, but selling for less than they owe on the mortgage -- a "short sale" -- requires approval from the lender and can have negative tax consequences. The percentage of default notices that result in foreclosure is rising. DataQuick Information Service said one year ago only 12 percent of defaults resulted in foreclosure. This year, 45.4 percent of defaults ended up being foreclosed.
Notice of trustee sale: Three months after the notice of default, the lender can announce that it is putting the property up for auction. The lender notifies the homeowner and files a notice with the county recorder's office. It is common for auctions to be postponed, sometimes multiple times and often at the last minute, as the homeowner tries to stave off foreclosure.
Auction: Properties are auctioned on the courthouse steps in the county where they are located. Because sales are all-cash and "as is," the vast majority of homes revert to the lender at auction. Once a house has been through a courthouse auction, a trustee's deed is filed with the county signifying that it no longer belongs to the homeowner and is a foreclosure.
Resources
Here are some places homeowners facing foreclosure can turn for assistance.
Your bank: Lenders stress that homeowners should contact their lender immediately if they have trouble making their mortgage payments. Ask to speak to the workout department. Ask if your loan can be modified, for example, by adding a year onto its term. Ask if you qualify for "forbearance" -- temporary reduction or suspension of payments.
ACORN Housing -- http://www.acornhousing.org/; (866) 672-2676 or (888) 409-3557: This nonprofit has programs with many lenders to help homeowners negotiate affordable loan workouts, payment agreements and foreclosure prevention. It also advocates for policy reforms to stop predatory lending.
Neighborhood Assistance Corp. of America -- http://www.naca.com/; (888) 302-6222: Nonprofit has a $1 billion fund to offer below-market refinances for people who are at risk of losing their homes. Homeowners must meet a variety of qualifications.
NeighborWorks America Homeownership Preservation Foundation -- links.sfgate.com/ZMV, (888) 995-4673: This community development group offers free foreclosure-avoidance counseling and assistance contacting lenders.
HUD-approved housing counseling agencies -- links.sfgate.com/ZMW (800) 569-4287: The U.S. Department of Housing and Urban Development sponsors housing counseling agencies throughout the country that offer advice at little or no cost.
This article appeared on page A - 1 of the San Francisco Chronicle
Gold Cross of America – http://www.gold-cross-services.com 407-284-9357 This nonprofit provides loss mitigation services to homeowners to keep them in their homes. You may also join and donate to help other homeowners that are facing foreclosure.