The Faces of Foreclosure

Tuesday, May 27, 2008
Michael Coit
Santa Rosa Democrat

Mark and Rusti Lindsey are starting over, leaving behind an empty home they no longer can afford.

On Saturday, they sold off pieces of their former lives on the driveway of the Petaluma house they once called home.

The couple no longer needs pool gear because the house they now rent doesn't have a swimming pool. And they don't have room for a couch, mattress set and other furniture because their new home is considerably smaller.

Even though the Lindseys stopped paying their mortgage seven months ago, it remains difficult to leave behind dreams permeating the home they purchased in 2003.

"We're going to be OK, but it's going to be tough," Mark Lindsey said. "We wanted to try and move on. But we had so much emotionally wrapped up in this house."

Scenes like this are occurring with increasing frequency. Every week, lenders seize nearly 60 houses in Sonoma County from borrowers who have fallen behind on mortgage payments.

As the toll mounts, the face of foreclosure is changing. Once viewed as a distressing downfall, losing a home is losing some of its stigma as foreclosures become more pervasive.

Many foreclosure families, like the Lindseys, are moving into rentals. Others are leaving the area entirely.

Fewer and fewer are fighting to hold onto their homes, said Chris Smith, a CPS agent in Santa Rosa who sells foreclosed houses for Countrywide Home Loans. When the final day comes, most are eager to take a lender's check -- from $1,000 to $4,000 -- to leave so the house can be cleaned and put up for sale.

"For the most part they're amazingly cooperative. They've accepted the inevitable and they're moving on," Smith said. "They've had time to get used to the fact that their home is going bye-bye."

In Sonoma County, about nine months typically passes between the time a homeowner first falls behind on the mortgage payment and when a lender takes back the home.

Once they are sucked into the vortex of the foreclosure process, it is increasingly difficult to escape. Today, more than 60 percent of homeowners in default lose their homes to foreclosure, up from 5 to 7 percent historically, according to DataQuick Information Systems, a real estate research firm.

Families can't afford to keep homes for the usual reasons, such as a job loss. Others are trapped in loans that initially allowed borrowers to fit monthly payments into their budgets, only to have them jump 40 to 60 percent or even more when the mortgages adjust to higher rates.

Most are homeowners who purchased homes two or three years ago, around the peak of the housing boom. Many were drawn by both the easy financing and the seemingly endless ascent in home values.

Some owners refinanced loans to tap equity, turning homes into piggy banks -- a decision that left many on shaky financial ground when the housing market went into a steep decline.

The result: foreclosures have soared to record highs in Sonoma County, and will likely continue to rise over the next six months, if not longer. Last month, lenders sent 509 default notices to delinquent borrowers, the first step in the foreclosure process.

"Some people will just walk away," said David Rendino, a Rohnert Park agent who sells lender-owned homes. "It's a tragedy for people on an individual level."

Many families look for rental homes because they need the space and are accustomed to living in a house, according to real estate agents and rental agencies.

"Vacancies are going down and rents are going up," said Rendino, who also manages rental houses. "Every time we get a single-family residence, it's gone in a week or two. A two-bedroom apartment isn't going to cut it for a lot of these folks."

But apartments might be the only affordable housing option for families that have exhausted most financial resources. Still others leave the county.

"A lot of my Hispanic clients have gone back to Mexico," said Rigzin Vassallo, a Prudential California Realty agent in Santa Rosa. "Their credit is thrashed. They have to start over."

For the Lindseys, the joy of buying their first home has been displaced by anguish over financial difficulties that forced them out.

"We're just stretched," Mark Lindsey said. "With rising food prices and gas prices and everything else, it's a double whammy."

Paying the mortgage was not a problem in 2003 when the Lindseys bought their six-bedroom, 2,600-square-foot home in east Petaluma. They later refinanced to take out cash for a new furnace and hardwood floors, but regained that equity thanks to rising home values.

"There were indications that the market would keep going up and the income was good at the time," he said.

A job loss was the beginning of the Lindseys' financial undoing.

Mark Lindsey, who worked as a sound designer for a toy audio company in San Carlos, was laid off in November 2006 shortly after surviving a bout with bladder cancer. His job was the family's sole source of income while Rusti Lindsey home-schooled their daughter.

He attempted to build up what had been a side business in music licensing. The couple also took in two renters.

"It definitely helped, but it wasn't quite enough," he said. "There's only so much you can do."

Desperate to buy time and stay in the house, the couple refinanced again, tapping equity to pay the mortgage and other living expenses. Their monthly loan payment, which started at $2,600 when they purchased the house, jumped to more than $3,700.

They started falling behind on the mortgage payments and, in November, stopped making payments. The default notice arrived in February.

The Lindseys hope to sell their home. But they are counting on the lender to accept an offer of $499,000 when the couple owes $680,000. If the so-called short sale is rejected, the bank would take back the home and attempt to sell it.

Whatever the outcome, the Lindseys' credit will take a severe hit for 5 to 7 years. Still, they managed to rent a home, though it's smaller and more expensive than they hoped.

"We really felt like we were against the wall. It was tough to find a place at all in Petaluma," he said. "There was just not that much around that had decent space. So this has been quite a squeeze."

In late April the Lindseys' moved into an 1,800-square-foot rental house. There is just enough space for the family and Lindseys' large home studio and office for his new Web audio business.

In sacrificing space, the Lindseys also cut their housing costs. They now pay $2,200 in monthly rent.

"We need to get our finances in order and get the business going. We'll see how things go in the next year or so," he said. "It's a step back, but in a way it's a step forward."

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