Inland Residents Find Ways to Cope After Foreclosure

Sunday, April 19, 2009
Leslie Berkman
The Press Enterprise

The tidal wave of foreclosures hitting Inland Southern California is leaving thousands in its wake who, like victims of natural disasters, are challenged to find shelter and rebuild their lives.

Former homeowners, left with damaged credit and often lower income, are hunting for new homes in the rental market and sometimes finding it difficult to qualify.

Luckily for them, property managers in Riverside and San Bernardino counties say the real estate crash has flooded the region with rental houses. Because of falling home prices, owners who must move for work or other reasons are leasing the homes they leave behind rather than selling them. And investors are buying up foreclosed houses to hold and lease.

In this market, property managers say, few tenants have perfect credit, so those fresh from a foreclosure have a better than usual opportunity to qualify as renters.

Although many landlords flatly refuse anyone who has a bankruptcy or eviction, they will overlook a foreclosure for applicants who are employed and continue to pay their other bills, particularly if they had stellar credit prior to their mortgage difficulties.

Eric Eckstrom, vice president of Riverside-based WSR Sales and Management, figures that he signs leases with about two-thirds of people who come to him after foreclosure looking for a home to rent. He said most aren't shy about acknowledging they have been foreclosed on.

"The first thing out of their mouth is, 'I just lost my home; can you work with me.' My answer is yes," Eckstrom said.

A property manager has a fiduciary duty to his clients to reject tenants whose credit records put them at risk of defaulting on their rent, he said.

But he said often they can offset a variety of black marks, from car repossessions to large credit card debts, with a super-sized deposit. Because lenders have been delaying the foreclosure process, he said, sometimes homeowners who stop paying a mortgage have months during which they can save a stash of cash.

Randall Lewis, a vice president of Lewis Operating Cos., said in November the leasing staffs at Lewis Homecoming apartment complexes in Eastvale and Rancho Cucamonga began to see an influx of stressed people who lost their homes in foreclosure.

Some had not rented an apartment in at least a decade and needed extra help with the process as well as storage for house-sized furnishings that wouldn't fit into the smaller space, Lewis said.

But not everyone who loses a home in foreclosure will have sufficient income or credit to qualify for an apartment, Lewis said.

Jennifer Harrison, a real estate agent in the bank-owned property department at Re/Max Results in Moreno Valley, said many former owners tell her they are packing up and moving out of state to be with parents and other family members.

Harrison said the biggest fear of those facing the loss of their homes to foreclosure -- whether the former owners or tenants -- is that they may not have the means to move before they are evicted. After being evicted, they fear that the stigma would make it unlikely that they could qualify to rent anywhere, she said.

Facing Reality

Carol Byrd, a 42-year-old real estate agent, earlier this year tearfully watched her lender foreclose on a house with a pool, spa and view she had bought for $525,000 in Riverside and that had fallen in value to about $275,000.

The divorced mother of three children had fallen on hard times like others in her industry. Once pulling down an annual income of $200,000 to $350,000, she earned a fraction of that in her new job working for a company that lists bank-repossessed houses.

It was her boss, a broker at Re/Max Results in Moreno Valley, she said, who advised her to stop struggling when it was obvious that, on her current $3,200-a-month salary, she could not afford the modified monthly mortgage payment of nearly $4,000 a month that her lender offered her.

Her biggest worry, she said, was whether anyone would rent a house to her because her credit was poor.

When a friend withdrew an offer to let Byrd's family room with her, she appealed to a landlord who had listed a house for rent. She went to see him armed with a recommendation from her employer.

"I literally sat down and explained my whole situation for an hour, begging and crying. I was desperate," she said.

She said she landed the lease after paying a $2,100 deposit and the first month's rent of $1,625. She said the landlord also insisted on examining the condition of her former house to be reassured she would make a good tenant.

Byrd said it is a relief to have enough income to cover her household expenses, and she advises friends who are over their heads in mortgage debt that foreclosure is not such a bad alternative.

One of the biggest changes in Byrd's life, she said, is how she handles her finances. "I just pay cash for everything," Byrd said.

Her goal is to save enough to buy small investment homes that she can rent out to boost her income. She said she knows she will have to pay cash for the houses because she doesn't have a hope of getting a mortgage for a long time.

Short Sale

James and Rhonda Arias were at the verge of foreclosure on their Rancho Cucamonga home when they were able to arrange a short sale, in which their lender accepted a price of $400,000, although that was about $300,000 less than their mortgage.

The couple's hope is that a short sale will do less damage to their credit than a foreclosure. It was a smart move, said Robert Satnick, chairman of the California Mortgage Bankers Association.

The wait required by credit agencies to qualify for another mortgage drops from a minimum of five years to three if a homeowner opts for a short sale rather than foreclosure, he said.

The couple said they could no longer afford their mortgage last year after James, 37, was laid off from his job with a lender. Their household income shrunk while the monthly payment on their adjustable rate mortgage jumped from $4,300 to $5,800.

Each day he called his lender to get the loan modified to something they could afford, but he was unsuccessful.

After putting their house on the market, in mid March they moved into a two-bedroom apartment at The Homecoming in Eastvale for $1,500 a month.

The apartment is about a third the size of their former house. Also, it is part of a complex that includes a swimming pool and other amenities and it is within walking distance of stores, which is important since they are trying to get by with one car.

Before moving, James gave up his BMW and paid cash for a Toyota with 200,000 miles on it. Rhonda ditched her SUV. They also held garage sales to shed excess belongings.

Having adopted a more frugal life style, they now eat at home a lot more, Rhonda said. "If we do go out, we share and we make our kids share."

James said he is working on a masters of business administration while job hunting.

"We thought we would scale down completely, get rid of our stuff and save, save, save and start planning for our future again," Rhonda said.

Renter surprise

Homeowners are not the only victims of foreclosure.

Asia Montgomery, a 25-year-old single mother with four children, said she had been renting a two-bedroom home for about five months when a bank representative devastated her with the news that the home was in foreclosure. Montgomery, at the time pregnant, unemployed and living on welfare, said she left but couldn't find another two-bedroom apartment or house she could afford.

"I had to go to the Salvation Army and throw everything I owned into storage," Montgomery said. For nine months, she said, she and her children lived in various shelters and rented rooms.

Finally, in early April, she moved into a two-bedroom Riverside apartment with the help of the Salvation Army, which donated her first month's rent after she saved up for the deposit.

Two government sponsored lenders, Fannie Mae and Freddie Mac, recently launched programs aimed at giving foreclosure victims a reprieve, while reducing the number of vacant and abandoned foreclosed houses that are blighting neighborhoods.

Fannie Mae is offering renters in homes it has repossessed an opportunity to stay and continue paying rent on month-to-month leases until the homes are sold, and Freddie Mac is offering a similar temporary rental option to both tenants and former owners of homes it has foreclosed on.

The family home

Torrie and Donald King left a four-bedroom house in the Canyon Crest area of Riverside where they raised their family for 14 years and moved into a 1,000-square-foot apartment at Homecoming in Eastvale. They no longer have room for two of their grown three children who had lived with them, including a 19-year-old son attending college.

Giving up the family home has been heart-wrenching, the Kings say. But they could no longer pay their $3,700 mortgage after Torrie, 48, a first-grade teacher, had cancer that forced her to take a 14-month disability leave for surgeries and treatments.

Donald, 42, who is in auto sales, has seen jobs come and go and his earnings nosedive in the recession. Then there were other illnesses and deaths in their family that necessitated traveling and funeral expenses.

"Things kept snowballing and we kept getting further and further behind," Donald King said. He said they were offered a loan modification that made no sense because it rolled in their arrearages, resulting in a higher monthly payment.

The couple explained that they rented an apartment for $1,200 a month because they figured they could handle that on Torrie's salary alone. It was a prudent decision, since soon after their move to the apartment in early February, Donald learned that the Volvo dealership in Cerritos where he worked would close because of declining business.

But Torrie said it was difficult to move away from neighborhood friends.

The couple's dream is to have a house once more where their entire family can gather, perhaps a vacation cabin where they could spend the holidays.

Until then, they are doing what they must and concentrating on paying their bills. "You wake up in the morning and get up and say I got to do what I got to do," Donald said. "I put one step in front of the other."

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