An entire neighborhood is vanishing by way of a little-known effect of the foreclosure crisis: owners of small apartment houses defaulting on their payments.
Myrtle Court, a cul de sac near Demaree Road and Highway 198, is losing its residents as lenders foreclose on a string of attractive fourplexes built in the late 1990s and evict those living inside. Lenders have repossessed or in the process of taking back at least eight of the 12 apartment houses that occupy the block-long street, all from the same owner.
Neighbors Charles Head and Larry Thomas have witnessed the exodus and know they will soon be packing their own bags. Head's fourplex is scheduled for a trustee sale on Tuesday, and Thomas, whose unit was reclaimed by a lender July 14, plans to be gone by next month.
The lender, Countrywide, offered Thomas a "cash for keys" deal that pays him $1,500 if he moves out before the 60 days he is entitled to by law. "I don't want to move," Thomas said. "But Countrywide doesn't want the liability of someone living here."
Increasingly, residents of duplexes, triplexes and fourplexes are being evicted because lenders that foreclose treat the buildings as residential property, not commercial, said Robin Kane, a Fresno real-estate consultant who is studying foreclosure trends in multifamily housing.
Smaller apartment buildings can be purchased with the same kind of financing used to buy single-family houses, Kane said.
That means some buyers took on risky loans in hopes that property values would continue to rise.
Kane's research found 50 complexes of four units or fewer in Fresno County that, in the last seven months, have been reclaimed by banks or are going through foreclosure.
By contrast, only three large complexes in the county have been lost to foreclosure since January 2007.
Head, Thomas and others who remain in the brightly colored units on Myrtle Court see the eviction notices and wonder what happened.
The picture remains murky, but the owner, real-estate broker C.J. Willoughby, also known as Charlene Jorgensen, owed hundreds of thousands of dollars to lenders foreclosing on trust deeds from 2003, 2005 and 2006, according to documents recorded in Tulare County.
Willoughby couldn't be reached for comment at her listed phone numbers or the address on her real-estate license.
At least four lenders financed the apartment houses on Myrtle Court, said Head, who has been investigating the circumstances surrounding the defaults.
Head said he will wait until after his building is repossessed to decide what to do. Thomas said he will use the $1,500 from Countrywide to help pay for a security deposit and first month's rent at a new apartment -- which might not come with a washer and dryer that was included in his $695 monthly payment on Myrtle Court.
Both also have been laid off from their jobs. The irony is that Head worked in construction and Thomas worked for a bank. The collapse of the housing boom came around to slap them a second time.
Things are tough all over. Foreclosures are soaring as the adjustable-rate and subprime loans that helped fuel the real-estate boom adjust to higher interest rates, squeezing borrowers. And property values have tumbled.
Not all affected Myrtle Court residents are being forced to move. Occupants of a fourplex now controlled by Freddie Mac are being allowed to stay on month-to-month leases.
Thomas said he plans to try to get his security deposit back from landlord Willoughby, who, occupants said, has proved difficult to contact. "I've been there four years, and suddenly no one could get hold of her through any of her numbers," said Arlene Hernandez, who moved out last weekend.
Arlene and Bobby Hernandez said the first indication of trouble came two months ago when they found a note on the door that indicated the property was to be sold or foreclosed upon.
"My husband called Charlene [Willoughby], and she said to disregard it," Arlene Hernandez said.
Then, two weeks ago another note was attached to the door -- a cash-for-keys settlement letter from a lender.
The couple said they called the 800-number listed on the note, but couldn't get through. After getting an eviction notice, the couple borrowed money from relatives and moved over a weekend.
The Hernandezes got their security deposit back after running into the complex's maintenance man, who she said he relayed the request to the owner. "We were sick to our stomachs," Arlene Hernandez said. "My husband said this is the saddest thing he's ever seen."
Homeowner and tenant advocates say they are seeing more renters being forced to move as lenders foreclose on investment property.
Kane said some lenders were so overwhelmed by the tidal wave of foreclosures that it is simply easier for them to vacate the properties and resell them as fast as possible -- even though that doesn't always make practical sense.
Empty apartments don't generate rent and don't generate the price that full units will, Kane said. They also attract vandals, he said.
A state law passed in July requires lenders to give tenants 60 days' notice unless they agree to a cash-for-keys settlement, said Mona Tawatao, an attorney with Northern California Legal Services. Residents also should get their security deposits returned, she said.
Lenders are not required to keep tenants in place, although owners of larger apartment complexes often do because it is easier. "In a large building, it's a matter of practicality. But legally there isn't that obligation to keep them," Tawatao said.
Jennifer Rakaphoume, interim executive director of the Community Housing Council at Manchester Center in Fresno, said some lenders didn't have time to establish guidelines for evicting multifamily housing occupants.
As a result, tenants get confused. "Who do you consider the landlord [after a foreclosure]?" she asked. "The entity no longer owns the property."
Dan Page of the American Apartment Owners Association said the Myrtle Court tenants who received cash offers to move fared better than many. "We hear situations where the bank just shows up and gives them 24 hours to move. It's crazy because there are folks living there and paying rent."
FAIR USE NOTICE. This document may contain copyrighted material the use of which may not have been specifically authorized by the copyright owner. Tenants Together is making this article available on our website in an effort to advance the understanding of tenant rights issues in California. We believe that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.