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Families Hit Hard by the Mortgage Crises

By: Rebecca Castro

Many news headlines warn about the foreclosure crises and how it has affected the economy.  Unfortunately, the “story” and the urgency normally stop there.  For thousands of families a foreclosure is more than “losing your home” it means losing the “American Dream”.

The most recent report by the Federal Reserve Bank of San Francisco released January 2011, warns that the Inland Empire and San Diego counties are the hardest hit areas in Southern California.   These counties have seen a steep decline in home prices over the past 5 years.  Sometimes homeowners have lost as much as 50% or more in equity.

To understand the current situation, we must explore the cause of this effect.  At the height of the bubble in 2005, just about anyone could find financing for a home loan.  These were the no-document, stated income, no-money down, high interest loans that were sold to a community that easily trusted in the “American Dream”.

The boom crippled families who were sold into buying even if they weren’t financially ready.  Many loans were adjustable rate or type of balloon payment.  A borrower would normally get a low initial payment or a “pick-a-payment” situation.  If only the minimum amount continued to be paid, the principle balance continued to increase.   Just around the same time that home prices were too high, people stopped buying, and loans started to adjust to a “normal payment”.  Then just like that BOOM…the real estate market crippled families left to pick up the pieces. Faced with mortgage payments that had doubled and falling home prices, vary few home owners had the option of refinancing to a reasonable payment.

Many families fall victim to fraud and are unaware until it is too late that they have lost their home.  In other cases the home owner may feel threatened or scared and do nothing.  In immigrant families, because of unemployment and lack of resources, more and more families have uprooted and moved their children back to a country they don’t even know.

There is no doubt that facing the fact that they may lose a home to foreclosure is a difficult situation for any family.  However, there are still options available for homeowners if they don’t let fear hold them back.  The first reaction is normally “how do I save my home” when realizing they are against the wall.

Loan Modification scams have come out of the wood work to pray on desperate homeowners.  For example, at this time last year January 2010, over 90,000 families initiated trial payments for the government sponsored HAMP program yet only about half actually were approved for the modification.

As time goes on more options will be available to families looking to buy again after surviving this situation. Early this year one of the largest lenders, Wells Fargo Bank, released a program to finance buyers who have recently had mortgage trouble and used alternatives to foreclosure like a short sale.  The buzz in the industry is that more banks will soon offer the same type of programs for credit scores as low as 500.  This is great news for the average homeowner looking for foreclosure alternative options.

After knowing the affects a foreclosure can have, it is refreshing to hear about a team of professionals that decided to make a difference.  “We answer questions for all home-owners free of charge”, said Leonard Bernal, Broker.  The groups of Real Estate and Legal professionals that participate in this free community service are bi-lingual in Spanish and English.  They answer questions related to refinancing, loan modifications, government programs, bankruptcies, foreclosure alternatives, protecting yourself from fraud, and even what to expect if your home has already gone to foreclosure.  Their website has information and resources free to homeowners.

The most important thing to remember in a distressed property situation is to get educated on all of your options.  Many times because of the emotional aspect it is easy for con-artists to pray on a homeowner’s desperation.  In most cases, if a home-owner gets the right help early enough, they will have more options to choose from.  Action is the first step toward change. Encourage those you know struggling with this issue to make a difference in their life.



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