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Down and out

Even as home prices show signs of stabilizing, home foreclosure rates in California remain alarmingly high. In the second quarter of 2009, foreclosures in Los Angeles were up significantly from the first quarter of the year, to 9,263, according to PropertyShark.com, a real estate data site that tracks first-time residential foreclosures.

The problem is especially acute in Los Angeles, a University of Virginia study found, in part because “more than 20% of mortgage holders ... were paying at least 50% of their income in housing-related costs.”

Losing a home rarely stems from a single cause. It may begin with the purchase of a property that is too expensive, or a decision to borrow for a remodeling project or to help a family member in need. And once homeowners become overextended, they are vulnerable. Job loss, illness or death can quickly lead to foreclosure.

Legal Aid of Los Angeles put The Times in touch with five homeowners who had walked through its doors in recent weeks seeking help. They shared their stories with Op-Ed contributing editor Sara Catania. These are the edited transcripts of her interviews.

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James Byas: Constant scramble

My house, which is on Virginia Road in Wellington Square, was purchased by my parents in 1955 for $18,000. It was built in 1921, a two-story Tudor-style home with big picture windows, a fireplace and hardwood floors. I grew up there with my three older sisters and my parents, who were married for 63 years.

When my mother became ill, I moved back in to take care of her, and when she died in 2005, the house became mine. Herein lies the problem. Over the years, my mother had borrowed against the house several times. The last was in 1995 when she borrowed $145,000 to help my sister buy a house.

I’m a musician, and my income is unpredictable. I took in boarders to help pay the mortgage, which was $1,032. I kept up with it until early 2008, when I had to deal with some major plumbing repairs. That threw me for a loop, and I got two months behind on the mortgage. After that, I picked up the payments and continued paying each month. But the bank stopped cashing my checks. In September of 2008, the bank sent me back all the checks I’d written since I missed those payments. By then, I was getting default notices and foreclosure threats.

I tried contacting them, but they refused to talk to me because it was my mother’s name on the note, not mine. An auction date was set for Dec. 21, 2008.

At that point, I realized that if I wanted to keep the house, I was going to have to take out a second mortgage. As a musician, I do contract work, which made it hard for me to get a loan. Five days before the auction, the loan went through -- $25,000 at 16.9%. The terms were terrible, but it was either that or the house was gone.

My monthly payment on the second was $333, and the bank raised my monthly payment on the regular note to $1,500.

In March of this year, I woke up one day and my left leg would not move. I’m still having trouble with it, which makes it hard to work. I missed two payments on the first note, though I did keep up with the second. Once again they’re threatening to foreclose, and once again they’re refusing to talk to me.

One way or another, this will work out. I’ll come up with something. At the peak of the market, the house might have been worth close to $800,000. Now I guess it’s at about half that. I’m not going to lose $400,000. But I won’t take out another loan. I learned my lesson. It’s just creating another bill I can’t afford to pay.

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Michael Zavaleta: On the edge

I live in Alhambra. I bought my house in 1999, and I’m on the verge of losing it. It’s a three-bedroom, two-bathroom house with a garage and a small side yard next to a freeway interchange.

I was working as a systems analyst for Toyota Motor Sales when I bought the house, but I suffered a work-related injury and severely injured my right foot. I was in a cast up to my knee, and I had to have several surgeries. I missed quite a lot of work, to the point where I was terminated.

I applied for state disability insurance, but it took a long time for the application to go through and the payments to begin. I went without income for more than a year. In 2004, I filed for Chapter 13 bankruptcy and was able to get a new loan. Then my disability payments kicked in, which helped me keep up with my mortgage.

When the disability payments ended in 2007, I had to take out a second mortgage. The terms were bad -- the interest rate was 12% -- but I was able to save my house.

In 2008, I ran out of money. In April of 2008, I stopped making payments on the first mortgage. I got a loan modification in November that brought everything current but increased my monthly payment by more than 25%. It was too much, so I didn’t make any payments. In December, I started another loan modification for the first mortgage, which required me to stop paying on the second. Under the new modification, I’m only making payments on a portion of the loan. Then in 25 years I have a balloon payment to cover the rest.

In April, the lien holders of my second mortgage tried to foreclose on me. I attempted to work directly with them, to no avail. I filed for Chapter 13 bankruptcy again, and I finally spoke with the second lender in late June, and now I’m trying to get a loan modification. I’m waiting to see what happens. You get into a hole and instead of getting out, you get buried.

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Jose Rojas: Struggling to pay the bills

My wife and I bought our house in Covina 10 years ago. We have two daughters. It’s a good family house -- three bedrooms, two bathrooms, lots of outdoor space and a two-car garage. We paid $154,000, and our monthly payment was $900.

I’m a newspaper and magazine distributor with my own business, and a few years after we moved in I was expanding the business. I borrowed $20,000 at about 7%. Our monthly payment went up to $1,700. Then, in 2007, we refinanced again to pay for home improvements. By then our house was worth $600,000, and we figured it would keep going up. We borrowed $40,000 at 12.5% and updated everything. New kitchen, new bathrooms, new windows, new floors.

We were paying $2,400 a month. It was no problem until last fall, when my work of 20 years came to an end. In October, my biggest account canceled their service. It was a newspaper in the San Gabriel Valley that was cutting costs.

I scrambled to find some other accounts to fill the hole, but the situation with the economy was bad for everyone. I had to lay off all 10 of my employees. For three months, I was able to keep up with all my bills by dipping into my savings while I looked for work. I tried everything I could think of, but there was no work at all. By January, my savings were gone. I missed a payment. Then I got a letter warning me that I could lose my house.

I called the bank and explained my situation. I pointed out that I had never missed a payment before, and I asked them if they could help me out, if I could get a few months’ grace period. They said they didn’t have any help for me.

My wife found part-time work. That enabled us to eat and pay our utilities. I finally managed to scrape together a few part-time jobs delivering newspapers and driving a shuttle. We were able to pay most of our bills, but we still could not afford the mortgage. March, April, May, June, we made no payments, and the bank refused to consider a loan modification. Finally, once I got in touch with Legal Aid and some new government programs kicked in, the bank was willing to talk. They modified my loan, lowering the monthly payment to $2,000 and extending it from 30 to 40 years.

I just mailed the first payment. Things are getting better. I work 12 to 15 hours a day, sometimes seven days a week. I do nothing but work, but this is the only option I have at this moment. I have no choice.

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Richetta “Rich” Osborn: “Didn’t seem real”

I owned a two-story, three-bedroom hillside house in Mount Washington for 10 years. I’ve been a real estate agent for 23 years, and I knew this house was something special.

Nine years ago, I had a stroke that left me tired all the time. It was very hard for me to wake up, and then to stay awake. I could barely walk around the corner.

By the time I fully recovered, my work had spiraled down and it was too late. I couldn’t come back up. The lender refused a loan modification on the $500,000 I owed. Then they turned around and sold my home to a bank for $300,000.

The house was sold on Feb. 2. Four days later, on a dark, cold, rainy day, I found a note on my door that said I had three days to vacate. I knew I was in foreclosure, but it didn’t seem real. All of a sudden I realized this wasn’t my house anymore. You can see yourself maybe starting to decline, but when it hits, it’s horrible.

I freaked out. I was in tears. I had a list of agencies, and I called them all. I said I’m a senior citizen and I’ve never been in this situation. It was awful.

Foreclosure victims need to understand that they are on their own. There aren’t many people who will help you. People are just not aware of how difficult their life is going to be once this happens. Many days I went without medicine and food. And I didn’t have anywhere to live.

Finally, I found an apartment in a senior community in the Inland Empire. I didn’t even know where that was. But once I saw it, I liked it. More than half my monthly income goes to rent. After utilities and food, I don’t have much left. My mom is in a convalescent home in L.A., and to get from here to there round-trip is $20 in gas. I don’t have much, but thank goodness I wound up in a good place.

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Karina Santillan: Shaken to the core

My husband and I bought our house -- a fixer-upper in West Covina -- at the end of 1999. It was built in 1957, one of many homes originally intended for war veterans. It was on a big lot with four bedrooms and two bathrooms. When we moved in, our four children ranged in age from 1 to 8. The house needed some TLC, and we spent about $180,000 on renovations and repairs, transforming it from top to bottom.

To help pay for the work, we refinanced several times, borrowing a total of about $120,000. In hindsight, we know we borrowed too much, but it’s like when you go to buy a car and you’re looking for something within your budget, but the salesperson eggs you on and you get sucked in.

I was a self-employed insurance agent, and my husband is a laborer in an ink manufacturing plant. We were keeping up with our payments, which were about $2,000 a month. But in 2007, my income went south and we fell behind.

My husband and I went to the bank, and they offered us something called a forbearance agreement. In exchange for them “helping” us, we were actually increasing our monthly payment and the amount that we would eventually owe.

What we had hoped would be a short-term financial crisis for us turned out to be much worse. I was still not getting any work, and my husband’s income was not enough to feed the kids and pay the bills. We missed more payments and ended up getting two more forbearance agreements. Each time the terms were a little stricter and the payments a little higher. The fourth time we went back to make a new agreement they were going to charge us $7,000 plus the mortgage payment. We had to decline because we did not have the funds.

Ultimately, the bank notified us that our house was in foreclosure.

We paid an attorney about $800, and he advised us to file for Chapter 13 bankruptcy, which we did. The bankruptcy helped stave off foreclosure, but we couldn’t afford the fee to renegotiate the loan. In early February, the bank posted a foreclosure notice on our front door. We found another attorney who charged us $3,500 up front. To pay the fee, my husband took the last savings out of his 401(k). Weeks went by and nothing happened.

On Feb. 17, the house was sold out from under us. The real estate office representing the attorney confirmed that the bank had taken the house, but they assured us that we were in a good position to get it back.

Then, at the end of March, there was a knock at the door. A woman from the bank was there, and she said we were being evicted. She gave us a form that showed the house belonged to the bank. My attorney told us not to worry, that this was a normal part of the process.

A few weeks later, the woman from the bank came back and said we had to leave or the sheriff would come and kick us out. I called my attorney’s office and left several panicked messages. Early on, the owner of the real estate office promised me we would not be evicted, but now he would not call me back.

I demanded a full refund of my attorney fees, and I sent letters of complaint to the state Department of Insurance, to the attorney general and to the district attorney.

We made so many mistakes and bad decisions. We were trusting and naive. We were desperate, and we didn’t see the red flags.

Now we are bouncing back and forth between hotels, family, friends and more hotels. We’re still looking for a place to live.

This ordeal has shaken us to the core, and the displacement of our children has been heartbreaking. But we trust in our Lord that justice will be served and we will share, in the future, a better-ending story.


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