THE NORTHRIDGE QUAKE: The road to recovery 18 months out : Northridge Quake Is Still Causing Pain : Real estate: Foreclosures in Valley are up 19% this year. And prices continue a downward spiral.

Robin Kay used her life savings to buy a two-bedroom condominium in Tarzana in 1990. When the Northridge earthquake struck, she lost it all.

But the single mother is not the only homeowner who has been forced to walk away from a quake-damaged property.

Eighteen months after it hit, the Northridge earthquake continues to hammer the residential housing market in the San Fernando Valley. In the first five months of this year, home foreclosures in the Valley are up 19%, compared to a 5% rise in foreclosures in Los Angeles County overall, according to TRW Redi Property Data. Some realtors say half of the foreclosures in the Valley this year involve quake-damaged homes.

Meanwhile, the quake has continued to drive down the price per square foot of single-family houses in the Valley--an average of 34% since 1990, TRW Redi says--eclipsing the slide in real estate values elsewhere in Southern California.

One who felt the sting was Kay, who made a $33,000 down payment to buy her condo. The $160,000 residence was near a good school for her daughter and within walking distance of shopping.

Kay, a 43-year-old hairdresser, owed $128,000 on the mortgage when the quake struck Jan. 17, 1994. Her condo was not officially declared uninhabitable, but the deteriorating walls of adjoining units and the sinking toilets left her too frightened to live there.

She still had her job, but business had slowed. She speculates that women dealing with the catastrophe were not inclined to have their hair done. Her bank granted her a moratorium on mortgage payments for a few months, but lump-sum payments were soon due.

“I don’t think anyone believed me,” she said. “I was really trying.”

She tried to fight, she said, but soon realized it was useless. “I had to walk away. There was nothing to save.”

Like many homeowners who bought when the real estate market was at its peak, Kay owed more money on the condo than it was worth. Her home thus became one more foreclosure statistic.

Many homeowners, faced with expensive quake repairs and the inability to sell at prices high enough to pay off their loans, decided to walk away, said Ron Prechtl, a real estate agent with Century 21 Lamb Realtors in Northridge who specializes in selling foreclosed homes.

“As soon as [the earthquake] hit, they lost all hope,” Prechtl said. “That sort of left them with no way out.”

Keith Hassinger was among those who tried to find a way. The one-time Canoga Park minister bought a four-bedroom home in Northridge in 1989, just after assuming a church post.

But property values on Key West Avenue in Northridge began declining almost immediately after Hassinger bought the house for $350,000. Then came the quake.

He received an insurance settlement, using the money to fix a sewer pipe damaged in the temblor. “I wish I could have taken the earthquake money and walked away,” Hassinger said. “But that wouldn’t be fair.”

His realtor, Carol Haddad, was able to negotiate a deal with his bank to reduce the amount he owed on the mortgage when the house sold, a procedure known as a “short pay.”

But the experience, in which a borrower usually must prove financial hardship, was tough to bear. The bitterness is still evident in Hassinger’s voice. His home sold for $218,000.

“All they would have had to do is renegotiate with me,” he said, “and I’d still have a house today.”

Haddad, an agent with James R. Gary & Co. in Woodland Hills, said Hassinger’s misfortune ended up being a boon to the family that moved in. The low housing prices, she said, mean “that the seller’s hardship [is] the buyer’s gain.”

For instance, a Prechtl listing at Porter Ranch is a four-bedroom Mediterranean-style home at the end of a cul-de-sac with brick oven, swimming pool, beige carpets and a three-car garage. It was worth $575,000 at the market peak.

But the quake proved disastrous to the previous owners, who tried to fix the damage themselves. Unprofessionally installed drywall left the foyer covered with dust. The outer wall of the fireplace remains exposed to the back yard. The owners couldn’t keep up the payments, Prechtl said, and the bank foreclosed.

The house was recently sold for $250,000.

“You’ve got hardship all over,” he said. “Some of the most expensive areas have hardship.”

Bank officers say they tried to do what they could to help homeowners in the aftermath of the earthquake through payment moratoriums and short pays, said W.C. Taylor III, executive vice president and chief lending officer of Fidelity Federal Bank in Glendale.

Bankers say they also have suffered losses because of the earthquake, though their stories may not seem as poignant as those of individuals. Bankers say they have responsibilities to shareholders and depositors, and an obligation to cut off a borrower who shows no prospect of being able to pay.

“We’ve taken a lot of lumps. We’ve worked out [solutions] and modified loans,” Taylor said. “We did what we could to keep this bank adequately capitalized in this plague.”

Taylor said bankers have also been hurt by new federal regulations requiring more funds to be held in reserve. That change followed the savings and loan crisis of the late 1980s.

Buyers aren’t the only ones responding to the altered market. Banks have designated loan officers to deal solely with foreclosures. A mini-industry has sprung up for realtors who specialize in short pays and foreclosures.

Prechtl said he’ll sell as many as 70 foreclosure homes this year, a third of them earthquake related. In 1985 he sold only six foreclosed properties.

Other realtors say they do little else these days. Stephen Kaseno of Jon Douglas Co. in Woodland Hills said foreclosures make up 80% of his business.

Ultimately, the earthquake will become a force for renewal, said Pat A. Zicarelli, president of the San Fernando Valley Assn. of Realtors.

Government funds that poured in after the quake have improved infrastructure and beautified some neighborhoods, he said.

“Earthquake-damaged properties have really become the fixer-uppers of the ‘90s, particularly for first-time buyers and the handy investor because of the potential long-term profits,” Zicarelli said.

What no one can predict is how long the foreclosure trend will last. Several agents say there is no slowdown in the number of such homes coming on the market. But some bankers say the trend is leveling off.

“I think we’ve certainly hit bottom,” Taylor said, “not withstanding another act of God.”