Homeowners Face Some Tough Choices : Landslide: Anaheim Hills houses can’t be lived in or sold. Some victims’ lenders have helped them out, but others aren’t so lucky.

Jeff and Gail Turner’s financial problems are growing faster than the cracks in the walls of their Anaheim Hills home.

“I don’t know how long I will be able to make two house payments, one on our real house and another on the place we’re staying now,” said Jeff Turner, 37, a Downey fireman. “We just don’t have that kind of money.”

For the Turners and many other evacuees, the 25-acre landslide that is continuing in this upscale community is raising some tough financial questions. Should they continue making mortgage payments on houses that may soon be worthless? Can they afford to repair their homes? Should they hire attorneys and sue somebody?

“My biggest fear is that I’ll have to walk away from my house and have to start over somewhere else,” he said.

What Turner says he fears, however, is already being contemplated as an acceptable option by some of his neighbors. They would rather suffer foreclosure and bad credit than pour good money after bad by continuing to make mortgage payments on uninhabitable and possibly irreparable property.

Under state law, a homeowner can walk away from a mortgage and leave the lender holding the bag, so to speak. The financial institution can either foreclose and settle for the mortgaged property, or it can sue the borrower for the mortgage’s unpaid balances; the financial institution cannot do both. Borrowers who walk away from their mortgages will certainly suffer damage to their credit standings, even if they have in effect erased their mortgage indebtedness. (In practice, financial institutions seldom sue the borrowers, since the borrowers could avoid paying any judgment by filing for bankruptcy.)

Gerald M. Steiner, another evacuee who has been forced to relocate his family in his Fullerton video-dubbing office, won’t discuss his plans for the future, but said he knows of several “homeowners who are looking to buy another home while their credit is still good, before they walk away from (their mortgages at) the hills.”

Steiner said residents are afraid to talk about their situation publicly out of fear that banks will discover their plans and deny them home loans.

Most lending experts say homeowners should be careful about pursuing such a strategy. They say homeowners should first contact the mortgage company and attempt to work out a solution to their financial woes.

In addition, experts say, homeowners may be eligible for federal assistance programs that might cover repairs and mortgage payments during a crisis.

“It’s a no-win situation if the homeowner walks away,” said Albert LeQuang, a national policy administrator for the Federal Home Mortgage Corp., also known as Freddie Mac. “The lender doesn’t want to be left with a property they can’t sell, and the homeowner will ruin his credit.”

LeQuang said that in most cases, the lender will make adjustments in mortgage payments to help the homeowner. “We advocate maximum flexibility on the part of the lender,” he said.

Gail Richards, an evacuee who lives on Georgetown Circle, said her lending company has been willing to work with her and her husband on the finances--at least temporarily.

“They’re letting us defer payments for two months,” said Richards, who is principal of a local high school. “It gives us some time to sort things out.”

Despite the lender’s willingness to help, Richards said she is uncertain whether it’s worth it to keep making payments on her $300,000 home, which is now virtually unsalable.

“I feel like I lost any equity I had in the house. How can I sell it? I will always have to disclose that it is on an active landslide. Who would buy it?

“We love that home, but we may have to cut our losses. . . . I’m devastated. I feel like I may never again be able to be a homeowner. It isn’t fair.”

Other homeowners such as the Turners are running into uncompromising, and seemingly unsympathetic, mortgage companies.

“I called (my lender), and they said they wouldn’t do anything for me,” Jeff Turner said. “I asked if I could just pay the interest now and make up the principal later, and they said, ‘No.’ ”

Turner, like many other Anaheim Hills residents, said he is now looking for legal and financial advice on his situation.

“I’m not the kind of guy who wants to sue, but it seems you have get some legal advice,” he said. “You have to look out for your financial interests.”

Although many of the homeowners evacuated from the area Jan. 19 are affluent and live in million-dollar homes, there are others, the Turners among them, who live on more modest means in less pricey homes. For them, the financial impact has been severe.

“I don’t make $100,000 a year,” said Jeff Turner, whose home on Rimwood Drive was appraised at $320,000. “Our budget was pretty tight; there wasn’t a whole lot left for frills.”

He said he has worked 20 years to be able to afford the house his family moved into 3 1/2 years ago. If he can, Turner said, he would like stay in the neighborhood and salvage his home, which he practically built himself.

“I added a dinette, put in the windows and the roof. It’s a lot of money, time, sweat and tears in the home,” Turner said. “We’d like to stay there.”

In the meantime, Turner, his wife and two young daughters are staying in a friend’s condominium down the hill in Anaheim. Although the friend has not asked for any rent, Turner said he is hoping to pay him monthly for as long as the place is available.

“We can’t make any plans,” he said. “Our lives are on hold.”

As the crisis drags on and the prospects of making two housing payments continues, Turner says he knows his chances of being able to keep his dream house dwindle.

“At some time,” he said, “I may have to walk away. . . . May have to fish or cut bait.”

TOURING THE AREA

Politicians and the media take a look at damaged houses. B5