COLUMN ONE : Regional Report : The Agony of Losing a Home : Lengthy recession pushes foreclosures to record levels in Southern California. And it is not just the poor and the working class who are being thrown out.

It is eviction day at the marshal’s office in Lancaster and Timothy Welch is waiting for the bad news. He is sitting on his sofa, smoking a cigarette, his few remaining belongings piled beside him, when he hears the knock and opens the door.

“You know what day it is?” a deputy marshal asks.

Welch takes a nervous drag from his cigarette, nods and lets the marshal in.

Welch bought the Cape Cod-style house in a new tract called Peach Tree Village during the height of the housing boom. But the confluence of a number of unfortunate events, including the loss of his job as a sound engineer and the housing slump, led him to the ultimate homeowner indignity--foreclosure.

“I knew this was coming so I tried to move as much stuff as I could and find storage space for the rest,” said Welch, 39, who has arranged to temporarily rent a room in a mobile home. “I just ran out of time.” He put out his cigarette and slumped on the sofa. “I didn’t want it to come to this.”

Foreclosures are at record levels in Southern California and thousands of homeowners are losing the biggest investments of their lives. In past recessions foreclosure rates also rose, but homeowners are more vulnerable now, housing experts say, because of the length of this recession--the longest since World War II--the high prices paid for homes in recent years and sharply declining real estate values.

“This is the worst I’ve ever seen it in Southern California,” said James Cornwall, president of a trustee firm that handles foreclosures for Home Savings of America. “Even during the recessions of the early ‘70s and ‘80s, we never saw this many homes going under.”

Foreclosures are up nationwide--the highest levels in about five years--but in Southern California the more than 15,000 foreclosures last year represent an all-time high, said Dave Ross, vice president of TRW Redi, a real estate information service based in Riverside.

In 1991, there were about 6,500 foreclosures (the majority residential) in Los Angeles County--almost triple the number in 1990, Ross said. In the Inland Empire, which has a much smaller population than Los Angeles County but almost as many foreclosures, the rate climbed from about 2,500 in 1990 to about 4,700 last year. Foreclosure rates also increased dramatically in Orange and San Diego counties.

Many of these people bought homes in the late 1980s, at the end of a period of rapid appreciation in Southern California, said Richard Peiser, director of USC’s Lusk Center for Real Estate Development. As a result, a large number had to spend almost half of their income on house payments--a much higher percentage than the national average. They were much more vulnerable when the recession hit, prices fell and houses became difficult to unload, Peiser said.

“We’re starting to look like the Texas housing crash of a few years ago,” Peiser added. “We’ll never be quite that bad off . . . but I expect it to get worse in California before it gets better.”

One of every 10 homes for sale in Southern California is owned by someone who is in default on mortgage payments, estimated Kurt De Meire, head of County Records Research, an Orange County real estate information service that tracks foreclosures. And Southern California homeowners who bought their properties with down payments of less than 20% of the purchase price have a default rate almost three times the national average, according to companies that insure home loans.

It is not just the poor and working class who are losing their homes, De Meire said. A new population is at risk today. More homes in middle-class neighborhoods are being foreclosed during this recession than ever before. Foreclosure rates are particularly high in areas that were overbuilt during the boom years of the 1980s, such as Lancaster, Palmdale, the Inland Empire and northern San Diego County.

Even upper-income professional people are losing their homes, mortgage companies say. Once they fall behind in their payments, people with large mortgage payments discover how difficult it is to catch up. If a family with a $400,000 mortgage has a setback and misses three payments, they owe the lender more than $10,000.

“We’re seeing foreclosures in every price range, in every kind of neighborhood,” said Edward Marsh, president of First Independent Trust Deed Services in Encino. “I’m seeing architects, doctors, accountants--all kinds of professional people losing their homes. I just talked to a lawyer who got into a bind, and now he’s losing a million-dollar house in Toluca Lake.”

Behind these foreclosure statistics are poignant family tragedies, bleak stories of lost jobs and mounting debt, where children are traumatized and parents often feel a great sense of shame and failure.

One man who bought a tract house near Riverside in the late 1980s was so ashamed to be facing foreclosure that he never told his neighbors, his friends or his parents.

“Some of the neighbors never knew until the day they foreclosed on us and we moved out,” said the salesman, who lost his house last year. “My parents still don’t know. They think we sold it at a loss and moved to an apartment to save money. . . . I guess we wanted to save the little dignity and pride we had left.”

He bought the house for about $135,000, but then his wife lost her job with an insurance company, and they began falling behind on their $1,300-a-month house payments. The house soon dropped in value and they were unable to sell it.

“We didn’t have much savings because we’d used it all for the down payment,” said the man, who asked that his name not be used. “We were struggling to hang onto the house, but we also were scrambling to keep the lights and gas on and groceries on the table. The stress was unbelievable--my wife, my kids, all of us were really hurting. Finally, we realized we just couldn’t do it.

“The day we walked away from that house was brutal. Everything we’d worked so hard for . . . down the drain.”

Foreclosure is “one of the most devastating things that can happen to a family,” said Helen Morran-Wolf, director of Foothill Family Service, a nonprofit counseling center in Pasadena.

“The home is a place of safety and stability,” Morran-Wolf said. “You suddenly take that away and it really wreaks havoc on a family. . . . It can be almost as traumatic as losing a loved one.”

Foothill rents office space to an agency that provides free financial counseling to people with debt problems. Since the recession began, an increasing number of these clients are facing foreclosure and have come to Foothill for family counseling, Morran-Wolf said.

The despair associated with foreclosure often creates marital problems and some couples have split up, she said. Children who discover “their home is not a safe place anymore,” and see their parents fighting to avoid foreclosure “are under great stress. . . . We see children who are tremendously anxious, who have difficulty concentrating in class and develop behavior problems in school.”

The surge in foreclosures has kept eviction agencies and county marshals busy. Before the recession, the marshal’s office in Lancaster, which covers the Antelope Valley, used to handle about one foreclosure eviction a month; now it does an average of 15. The marshal always issues a five-day warning before any eviction. Still, many people now stay until the marshal forces them out.

On a recent morning, two marshals spent several hours driving past countless housing tracts with empty sales offices and rows of stucco apartment complexes, evicting renters, still the majority of their workload. After seeing all the “professional deadbeats,” they said, they have become somewhat inured to many of the suddenly homeless renters. But foreclosure evictions are still painful for the deputies, the toughest part of their job.

“These aren’t deadbeats who are trying to beat the system,” said Deputy Marshal Ron Moore, cruising the back roads of Lancaster en route to yet another eviction. “These are families with little kids who can’t make their mortgage payments because dad got laid off. It’s tough to throw out families like this.”

When Moore recently evicted a couple from a $150,000 Palmdale house he encountered a scene that reflected the depth of this recession--a tableau of desperation he said he will never forget. The couple, who had both been laid off by an aerospace firm, were huddled under a blanket, with a small candle beside them. The electricity and the water had been shut off weeks ago.

The house was empty. During the previous few months, they had sold everything they owned, piece by piece, to buy food. The few belongings they had left were in a single plastic garbage bag.

“When we showed up, they just picked up their blanket and garbage bag and left the house,” Moore said. “They didn’t even brush their teeth or comb their hair. Nothing. Last time I saw them they were walking down the street carrying that blanket and garbage bag.”

While some families are fighting to hold onto their homes as long as they can, others have decided it is not worth the effort. They look at the value of their home, measure it against how much they owe “and then decide to just walk away from the house,” said Peiser of USC. This was rarely done in Southern California during past recessions, he said, because home values had not dropped significantly.

Rafael Knox of Pomona is two months behind in his mortgage payments and the lender has initiated foreclosure proceedings against him. But even though the house is now worth less than its purchase price, he is fighting to save it.

He began falling behind when he lost his job as an electrician. Car problems and $7,000 in plumbing and insulation repairs on his house put him further behind. He has been working as a handyman during the past few months and negotiating with his lender in an attempt to keep the house, which he has owned for six years.

“This is more than just a place to me,” Knox said. “I raised my kids here. I put a lot of hard work into this house. My wife and I planned all our dreams here. I can’t just walk away from it.”

Knox has been working with Consumer Credit Counseling Service, a nonprofit organization that offers free financial counseling, in the hopes of holding onto his house. During the past year, the Los Angeles office has been deluged with families facing foreclosure, said Pam Tobias, general manager of the office.

“In past years, there were ways people could get themselves out of foreclosure--they could count on overtime or get a second job,” she said. “But you can’t tell someone out in Lancaster or Palmdale to get a second job. That’s a joke. There are no jobs for them.”

During this recession, the biggest mistake most people are making, she said, is waiting too long before trying to resolve the problem. Many middle-class families, facing serious financial difficulties for the first time, are ashamed to even call a creditor, Tobias said.

Lenders usually declare a loan in default after a homeowner is about four months late on the mortgage payments. A homeowner then has about three months to either come up with the back payments or sell the house.

Homeowners who address the problem early on sometimes can avoid foreclosure, she said. Some lenders, overwhelmed with recently foreclosed properties, will allow people to repay past due payments over a period of time, Tobias said. Some people can salvage their credit record if the lender agrees to take back the house before foreclosure proceedings are initiated. But filing for bankruptcy, she said, “does not eliminate the problem . . . it just buys you some more time.

Welch could not sell his house near Palmdale or raise the back mortgage payments. That is why two deputy marshals were in his living room, waiting for the lender’s representative to show up to sign the final foreclosure paperwork.

But the deputies had so many evictions scheduled for the day that they could only wait 10 minutes. When the representative didn’t show up, Welch had a brief reprieve. But that was little comfort to him. He knew that the marshals would be back in a few days to throw him out.

“I’ll be out of here anyway because I got a friend coming by with a truck to help me move the rest of my stuff. But, you know, it never really hit me until I saw those guys at my door,” he said, pointing to the two marshals, “that the house is no longer mine.”

On the Rise

F oreclosures are at record levels throughout Southern California. Below are the number of foreclosures in five Southern California counties in 1990 and 1991: LOS ANGELES COUNTY 1990: 2,385 1991: 6,517 Increase: 173%

ORANGE COUNTY 1990: 596 1991: 1,584 Increase: 166%

RIVERSIDE COUNTY 1990: 1,054 1991: 2,187 Increase: 107%

SAN BERNARDINO COUNTY 1990: 1,392 1991: 2,480 Increase: 78%

SAN DIEGO COUNTY 1990: 1,016 1991: 1,928 Increase: 90%

VENTURA COUNTY 1990: 215 1991: 585 Increase: 172% SOURCE: TRW Redi, a Riverside real estate information service.

Losing Your House

There were more than 15,000 foreclosures last year in Southern California, a record. But lenders cannot foreclose simply because a homeowner misses a mortgage payment or two. Even after the process is initiated, homeowners can rescue their properties. Here’s how the process works: A) After a homeowner is from three to five months late on a mortgage payment the lender usually files a notice of default. A homeowner then has three months to make up the back payments. B) Three months after the filing of the default notice, the lender can file a notice of trustee sale. This schedules an auction of the property that can take place as soon as 21 days after that filing. C) Up to five business days before the auction, the owner can make up just the back payments to the lender, in order to stop the auction. D) But once within five business days of the scheduled auction, the lender may require that the loan be paid off in its entirety to stop the foreclosure. E) If that doesn’t occur, the owner loses the home.

Last Chance: Some lenders, when approached by past-due homeowners, may set up a schedule for repayment. Others may agree to rewrite the loan.

Source: Redloc Infosystems, Placentia; Consumer Credit Counseling Service, Los Angeles.