By Dana Ford
ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
While no current residents claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it's just a matter of time before foreclosed families end up at tent city, local housing experts say.
"They don't hit the streets immediately," said activist Jane Mercer. Most families can find transitional housing in a motel or with friends before turning to charity or the streets. "They only hit tent city when they really bottom out."
Steve, 50, who declined to give his last name, moved to tent city four months ago. He gets social security payments, but cannot work and said rents are too high.
"House prices are going down, but the rentals are sky-high," said Steve. "If it wasn't for here, I wouldn't have a place to go."
'SQUATTING IN VACANT HOUSES'
Nationally, foreclosures are at an all-time high. Filings are up nearly 100 percent from a year ago, according to the data firm RealtyTrac. Officials say that as many as half a million people could lose their homes as adjustable mortgage rates rise over the next two years.
California ranks second in the nation for foreclosure filings -- one per 88 households last quarter. Within California, San Bernardino county in the Inland Empire is worse -- one filing for every 43 households, according to RealtyTrac.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
The pattern is cropping up in communities across the country, like Cleveland, Ohio, where Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention Program, said there are entire blocks of homes in Cleveland where 60 or 70 percent of houses are boarded up.
"I don't think there are enough police to go after criminals holed up in those houses, squatting or doing drug deals or whatever," Wiseman said.
"And it's not just a problem of a neighborhood filled with people squatting in the vacant houses, it's the people left behind, who have to worry about people taking siding off your home or breaking into your house while you're sleeping."
Health risks are also on the rise. All those empty swimming pools in California's Inland Empire have become breeding grounds for mosquitoes, which can transmit the sometimes deadly West Nile virus, Riverside County officials say.
'TRICKLE-DOWN EFFECT'
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
For cities, foreclosures can trigger a range of short-term costs, like added policing, inspection and code enforcement. These expenses can be significant, said Lt. Scott Patterson with the San Bernardino Police Department, but the larger concern is that vacant properties lower home values and in the long-run, decrease tax revenues.
And it all comes at a time when municipalities are ill-equipped to respond. High foreclosure rates and declining home values are sapping property tax revenues, a key source of local funding to tackle such problems.
Earlier this month, U.S. President George W. Bush rolled out a plan to slow foreclosures by freezing the interest rates on some loans. But for many in these parts, the intervention is too little and too late.
Ken Sawa, CEO of Catholic Charities in San Bernardino and Riverside counties, said his organization is overwhelmed and ill-equipped to handle the volume of people seeking help.
"We feel helpless," said Sawa. "Obviously, it's a local problem because it's in our backyard, but the solution is not local."
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One in 8 U.S. homeowners late paying or in foreclosure
By Lynn Adler Lynn Adler – 37 mins ago
* Bank to boost money supply Play Video Economy Video:Bank to boost money supply BBC
* A Ray of Hope Amid Recession Play Video Economy Video:A Ray of Hope Amid Recession CNBC
* Survey: 14% Small Business Apt to Shut Down Play Video Economy Video:Survey: 14% Small Business Apt to Shut Down FOXBusiness
NEW YORK (Reuters) – About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on their loan payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices, the Mortgage Bankers Association said on Thursday.
With unemployment at a 16-1/2-year high and expected to continue rising until mid- to late 2010, more borrowers will pay late or fall into foreclosure this year, said the group's chief economist.
"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession,"said Jay Brinkmann.
Duress is no longer isolated to borrowers with lower credit quality. As joblessness grew, so did late payments on prime fixed-rate loans that represent two-thirds of mortgages.
U.S. President Barack Obama's $275 billion housing stimulus program will standardize modifications for distressed loans and pave the way for more refinancing.
That should smooth differences caused by various moratoria by states and companies that temporarily curbed the surge in foreclosures in the fourth quarter, Brinkmann said.
"But keep in mind that there are three drivers to the housing problem, and this program of course addresses mostly the first one," he added, referring to loan structure, underwriting quality and fraud.
The two other problems -- an oversupply caused by overbuilding and foreclosures, and unemployment -- still loom large.
Having one in eight households late paying or in foreclosure is "unacceptable in a country like ours," said Nicholas Bratsofolis, senior managing director of structured refinance at mortgage bank LendAmerica in Melville, New York.
"Instead of wringing our hands, I think we should start utilizing the tools that the government has given to us to remedy the ills that are facing many of these homeowners," he said.
A record 11.18 percent of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 2008.
The delinquency rate jumped 2.06 percentage points from a year ago to a record 7.88 percent. The share of loans in the foreclosure process leaped 1.26 percentage points in the year to a record 3.30 percent.
MBA started tracking the data in 1972.
Housing has yanked down the U.S. economy after being a key driver of it earlier this decade. In a vicious cycle, a weakening economy is now further siphoning demand for homes.
"In a recession like this, housing is never just about housing," said Jed Kolko, associate research director at the Public Policy Institute of California, in San Francisco. "Unemployment leads to foreclosures, foreclosures contribute to lower tax revenues, less consumer spending -- it's all related."
MORE STATES WITH MORE PROBLEMS
As the economy sours, more states have joined the five that had been primary trouble spots for late payments and foreclosures.
"We see New York being influenced by the layoffs that we've been seeing on Wall Street and some of the rest of the industry associated with that," Brinkmann noted.
"Some of the Southern states that had construction-related unemployment, whether it was forest product or plywood manufacturing. Some of the tourism industry is now being hit, certainly in Mississippi with the casinos, and in Florida."
Subprime adjustable-rate loans and prime ARM loans still drive the late payments, but that is shifting.
"We will continue to see, however, a shift away from delinquencies tied to the structure and underwriting quality of loans to mortgage delinquencies caused by job and income losses," Brinkmann said.
Of particular concern, he said, is rising joblessness for people with college education or technical training. The rate nearly doubled in the last half of 2008 to just under 4 percent.
"We saw some sharp pickups in delinquency rates with prime loans and I think that's now going to continue as long as we see unemployment continue to climb among the people most likely to own homes," Brinkmann said.
How high unemployment in that segment of the population gets and how long it stays there will "determine ultimately how long the prime fixed loan delinquencies continue to climb," he said. "Some of these people do have adequate reserves to last maybe six months or a year without a job. But the longer this thing goes on, the quicker they then run through those reserves and their loans go delinquent."
(Editing by Dan Grebler)
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AP - Friday, March 06, 2009 10:38:51 AM
By JEANNINE AVERSA
Jobless rate bolts to 8.1 percent, 651K jobs lost
The nation's unemployment rate bolted to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs amid a deepening recession.
Both figures were worse than analysts expected and the Labor Department's report shows America's workers being clobbered by a wave of layoffs unlikely to ease in the coming months.
"There is no light at the end of the tunnel with these numbers," said Nigel Gault, economist at IHS Global Insight. "Job losses were everywhere and there's no hope for a turnaround any time soon."
February's net job loss came after even deeper payroll reductions in the prior two
months, according to revised figures released Friday. The economy lost 681,000 jobs in December and another 655,000 in January.
Employers are shrinking their work forces and turning to other ways to slash costs -- including trimming workers' hours, freezing wages or cutting pay -- because the recession has eaten into their sales and profits. Customers at home and abroad are cutting back as other countries cope with their own economic problems.
Since the recession began in December 2007, the economy has lost 4.4 million jobs, more than half of which occurred in the past four months.
With employers showing no appetite to hire, the unemployment jumped half a percentage point from 7.6 percent in January. That was the highest since December 1983, when the jobless rate was 8.3 percent.
All told, the number of unemployed people climbed to 12.5 million. In addition, the number of people forced to work part time for "economic reasons" rose by a sharp 787,000 to 8.6 million. That's people who would like to work full time but whose hours were cut back or were unable to find full-time work.
If part-time, discouraged workers and others are factored in, the unemployment rate would have been 14.8 percent in February, the highest on record.
The pain hit blue- and white-collar workers, those without a high-school diploma and those highly educated. The jobless rate for people with a bachelor's degree or higher jumped to 4.1 percent last month from 3.8 percent in January. That's the highest on records dating to 1992.
Meanwhile, the average work week in February stayed at 33.3 hours, matching the record low set in December.
On Wall Street, stocks regained some ground as many market participants had braced for even grimmer unemployment data. The Dow Jones industrial average added about 25 points in morning trading. Broader indexes were mixed with the Standard & Poor's 500 up slightly, while the tech-heavy Nasdaq composite slid a bit.
Construction companies eliminated 104,000 jobs. Factories axed 168,000. Retailers cut nearly 40,000. Professional and business services got rid of 180,000, with 78,000 jobs lost at temporary-help agencies. Financial companies reduced payrolls by 44,000. Leisure and hospitality firms chopped 33,000 positions.
The few areas spared: education and health services, as well as government, which boosted employment last month.
Disappearing jobs and evaporating wealth from tanking home values, 401(k)s and other investments have forced consumers to retrench, driving companies to lay off workers.
A new wave of layoffs hit this week.
General Dynamics Corp. said Thursday it will lay off 1,200 workers due partly to plummeting sales of business and personal jets that forced it to cut production. Defense contractor Northrop Grumman Corp., and Tyco Electronics Ltd., which makes electronic components, undersea telecommunications systems and wireless equipment, also are trimming payrolls.
The country is getting bloodied by fallout from the housing, credit and financial crises-- the worst since the 1930s. And there's no easy fix for a quick turnaround, economists said.
President Barack Obama is counting on a multipronged assault to lift the country out of recession: a $787 billion stimulus package of increased federal spending and tax cuts; a revamped, multibillion-dollar bailout program for the nation's troubled banks; and a $75 billion effort to stem home foreclosures.
Even in the best-case scenario that the relief efforts work and the recession ends later in 2009, the unemployment rate is expected to keep climbing, hitting 9 percent or higher this year. In fact, the Federal Reserve thinks the unemployment rate will stay elevated into 2011. Economists say the job market may not get back to normal -- meaning a 5 percent unemployment rate -- until 2013.
Businesses won't be inclined to ramp up hiring until they are sure any economic recovery has staying power.
The economy contracted at a staggering 6.2 percent in the final three months of 2008, the worst showing in a quarter-century, and it will probably continue to shrink during the first six months of this year.
Given Friday's grim figures, Gault predicted the economy would probably shrink in the first quarter at a pace of at least 6 percent.
Fed Chairman Ben Bernanke told Congress earlier this week that recent economic barometers "show little sign of improvement" and suggest that "labor market conditions may have worsened further in recent weeks."
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The US unemployment rate soared to 8.5 per cent in March, its highest for 26 years, government figures have shown.
Since the start of the recession in December 2007, the economy has shed 5.1 million jobs, with about two thirds of the losses occurring in the last five months, the US Labour Department said.
During March, employers slashed 663,000 jobs and cut workers' hours to the lowest on record.
The manufacturing sector shed 161,000 jobs after eliminating 169,000 positions the prior month. Construction industries lost 126,000 posts after 107,000 went in February.
Meanwhile, the service-providing industry axed 358,000 roles after getting rid of 366,000 the previous month.
Illustrating the severity of the situation, a measure of unemployed people working part-time for economic reasons and those who have given up looking for work, raced to a record 15.6 per cent from 14.8 per cent in February.
The Labour Department also revised its data for January to show job losses of 741,000 that month, the biggest decline since October 1949. In February, non-farm payrolls was unrevised at 651,000.
Pierre Ellis, senior analyst at Decision Economics in New York, said: "The report does not contradict the growing notion that the economy is finding a bottom.
"Employment will not turn on a dime and certainly there's no sign of strength, but at least it's not getting worse and worse and worse."
Rising unemployment is cutting into household incomes, which have already been decimated by the collapse in asset prices, restricting their spending ability.
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After the figures came out, Donald Kohn, vice chairman of the US Federal Reserve, said the Obama administration, which had pledged to create or save 3.5m jobs, and central bank must remain "flexible and open" to additional measures to end what is likely to become the longest recession since the Great Depression.
The non-farm payroll losses were slightly higher than the 654,000 that economists expected, but the rise in the unemployment rate matched expectations. Some had feared the numbers could be worse.
Job losses were widespread, with construction companies cutting 126,000 jobs and factories shedding a further 161,000. Retailers lost nearly 50,000 staff, professional and business services 133,000 and leisure and hospitality reduced employment by 40,000. Even the government cut jobs – 5,000 of them.
Since the recession began in December 2007, the US economy has lost a net total of 5.1m jobs, with almost two-thirds of the losses occurring in the last five months.
The number of unemployed people climbed to 13.2m in March.
In addition, the number of people forced to work part-time for "economic reasons" rose by 423,000 to 9m. Those are people who would like to work full-time but whose hours were cut back or were unable to find full-time work.
Looking forward, economists expect monthly job losses continuing for most — if not all of — this year.
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Former professor of Colorado University, Ward Churchill, labelled those Jews killed on 9/11 as little Eichmans. Despite the fact that the greed of Jewish financial mafia was in fact the cause of the current economic meltdown, Professor Churchill lost his job for stating the truth, which American politicians are too afraid to face. To many, the Jewish Eichmans are more dangerous than their German counterparts as they caused miseries for millions across the world. It seems that Bin Laden attack on the Jewish Financial Mafia HQ at WTC on 9/11 and the killing of thousands of little Eichmans did delay the onset of the US financial meltdown by at least five years. One hopes that the Americans will learn their lessons and gradually expose and punish the fraudulent shylocks.(A ruthless moneylender; a loan shark.)
Netanyahu will finish what Madoff has started!
There is a general consensus that the greed of the Jewish financial mafia (e.g. Reubens, Fuld, Bloomberg, Madoff …etc) had caused the current economic meltdown. Obama with his aggressive stimuli has been trying hard to kick start the economy and to save what can be saved. The situation right now is so critical that one major terrorist attack may cause serious and irreversible damage to US economy that can’t be helped with additional $trillions. Nothing is more ridiculous at this time than hearing the noise coming from Israeli extremists and fascists. Terrorist and corrupt Bibi Netanyahu promised to attack Iran which may trigger a wider war in the Middle East whose effects may be felt beyond the immediate war zone. There must be a reason why the Israelis are pushing for war while the stupid and Jewish-bankrupted Americans are gazing like fools. Hilary Clinton congratulates fascist Liberman for assuming the office of foreign minister which he inaugurated by cancelling all what has been done so far with regard to the Palestinian problem. All anti Israeli forces must rejoice seeing the Jews behaving like lemmings.
After robbing the Americans savings,investment and pensions the Jews may soon be chased from street to street in in America. In retrospect Hitler may be right in blaming the Jews for German economic troubles.
"What can you do to a person who thinks his mission is incomplete until he dies?", former President Reagan viewing the bodybags of 241 marines died in a single night in Beirut by one of Hezbullah suicide attacker. Bill Maher, the American Jewish commedian, labelled the 19 who remained on the planes knowing that they will die on 9/11 as very brave. In contrast he labelled the Americans who fire cruise missiles from 2000 miles away as cowards.
Adnan Darwash, Iraq Occupation Times
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Jobless claims ease, trade gap narrows sharply
Thu Apr 9, 2009 2:12pm EDT
By Lucia Mutikani
WASHINGTON (Reuters) - The number of U.S. workers filing new claims for unemployment benefits fell last week, government data showed on Thursday, but was still at levels indicating the labor market's contraction has yet to bottom.
However, a separate report from the Commerce Department showed the country's trade deficit shrank in February to its smallest since November 1999, backing the view that the drop in first-quarter gross domestic product was probably not as steep as the previous period's 6.3 percent annual pace of decline.
The Labor Department also said the ranks of unemployed who have claimed more than one week of aid vaulted to yet another record in the last week of March as laid-off workers battled to find jobs amid a recession that is now in its 16th month.
"The small amount of good news is that it appears as though the trend in claims over the last eight weeks has leveled off, but there is nothing here to suggest that the drop in employment is anywhere near the bottom," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
U.S. stocks rallied, with the major stock indexes climbing between 2 percent and 3 percent in afternoon trade, buoyed by surprisingly robust preliminary quarterly results from Well Fargo, which fueled hopes that stabilization might be returning to the fragile banking sector.
In contrast, U.S. government bond prices fell sharply.
Initial claims for state unemployment insurance benefits fell to a seasonally adjusted 654,000 last week, from 674,000 the week before, the Labor Department said.
But the number of people staying on benefit rolls after drawing an initial week of aid jumped to a record 5.84 million in the week ended March 28 from 5.75 million the prior week.
That lifted the insured unemployment rate, which measures the percentage of the insured labor force who are jobless, to 4.4 percent, the highest since a matching rate in April 1983, from 4.3 percent the previous week.
Continuing claims have hit record highs for 11 consecutive weeks now, underscoring the difficulties of getting new jobs in the recession.
RISING UNEMPLOYMENT A CHALLENGE
Initial claims are being closely watched for clues on when the downturn, which started in December 2007, might end.
Mounting unemployment is one of the challenges confronting the economy as it is eroding household incomes, which have already been decimated by the collapse in house and stock market prices, limiting their spending ability.
The economy lost 663,000 jobs last month, driving the unemployment rate to 8.5 percent, a fresh 25-year high.
While claims for unemployment benefits remain at lofty levels, recent data have shown some signs of green shoots sprouting on the battered economy's landscape.
White House economic adviser Lawrence Summers said on Thursday that although the economy was experiencing "substantial downdrafts" it would end a sense of "free fall" in the next couple of months as the government's stimulus package and various measures to halt the decline take hold.
"I think the sense of a ball falling off the table -- which is what the economy has felt like since the middle of last fall -- I think we can be reasonably confident that that's going to end within the next few months and you will no longer have that sense of free-fall," Summers said.
The government has put in place a $787 billion package of spending and tax cuts. In addition the Federal Reserve has pumped trillions of dollars into the economy.
U.S. TRADE GAP SHRINKS
A separate report from the Commerce Department showed the housing-led output contraction is curbing appetite for imports, helping the country's trade gap to shrink by 28.3 percent in February to its smallest since November 1999.
The monthly trade gap totaled $26 billion, down more than $10 billion from the $36.2 billion deficit in January and marking a record seven consecutive months of decline. The percentage drop was the steepest since in October 1996.
Economists said the narrowing trade deficit would add to growth in first-quarter gross domestic product, although the impact would be insufficient to overcome the drag on the economy from housing, inventories and business investment.
"The narrowing trade deficit is good news as it will add to growth during the first quarter," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
"With consumer spending holding up better than expected, first-quarter growth could be a lot less negative than initially feared."
The U.S. economy's contraction in the fourth quarter was the sharpest decline since 1982.
U.S. exports of goods and services in February rose 1.6 percent from January, while imports fell 5.1 percent to their lowest since September 2004.
The U.S. trade deficit with China in February shrank to $14.2 billion, a 3-year low, from $20.6 billion in January. The February trade gap with Japan narrowed to $2.2 billion, its lowest since December 1984, from $4.3 billion.
In another report, the Labor Department said U.S. import prices rose 0.5 percent in March, advancing for the first time in eight months, as petroleum costs increased 10.5 percent, their fastest pace since November 2007.
(Additional reporting by David Lawder; Editing by James Dalgleish)
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Job losses fuel foreclosure woes in Ind. county
Twice as many families in Elkhart expected to lose their homes as in 2006
Carissa Ray / msnbc.com
Gabriela and Alfredo Aguirre stand in front of a wall filled with the photos of the 3 generations that now share her father's small house after they lost their own home to foreclosure.
Losing a home
With fewer RV workers paying for work to be done around their homes, one Elkhart handyman and his family of 10 lose their home
Focus on Elkhart
A measure of the economic health of 381 metro areas and the 50 states, from Moody's Economy.com and msnbc.com.
Video: Elkhart Project
Troubled voices
The people of Elkhart, Ind. face a difficult economic future. Hear their problems and a few potential solutions.
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Elkhart’s living history
'People don't have any money'
Elkhart students write letters to Obama
By Mike Stuckey
Senior news editor
msnbc.com
updated 7:02 a.m. ET, Tues., April 14, 2009
Mike Stuckey
GOSHEN, Ind. - In a house as full of sorrow as it was empty of belongings, Gabriela Aguirre described how she and her husband, Alfredo, reached boldly for the American Dream, clutched it tightly for three years and then watched it slip from their grasp along with Alfredo’s job.
“I’m very sad,” she said softly in Spanish, tears welling in her dark eyes as she surveyed the cozy, two-bedroom tract home. Its walls, carpet and gleaming appliances were nearly as spotless as the day the family bought it, brand new, in 2005. The hardest thing, she said, is her three kids "asking how long before we come back home."
A few miles away in Elkhart, Terry Gonyon was knee-deep in piles of everything from clothing to tools, preparing to leave the imposing red brick house on South Main Street that he and his family had called home for three years.
“This was our dream house,” said Gonyon’s wife, Desiree. “It was a huge turning point for us, moving here.”
The Gonyons and the Aguirres are but two of hundreds of families in economically devastated Elkhart County who are losing their homes to foreclosure. And some local real estate experts say the trend — more closely tied to job losses here than plummeting prices and reckless lending associated with the crisis in California and Florida — could get worse before it gets better.
“It’s just outside of my experience,” said Barb Swartley, president-elect of the Elkhart County Board of Realtors.
Swartley, who has 30 years’ experience selling homes in the area, has observed a huge increase in the number of homeowners attempting to make “short sales,” or get their lenders to accept less than what they are owed on the mortgage. “If the short sales don’t sell, then that’s the next step,” Swartley said. “They’re headed for foreclosure.”
Twice as many foreclosures as '06?
Precise statistics on foreclosures are hard to nail down, but the numbers that are available show a dramatic increase in Elkhart County. Homes offered for sale at monthly sheriff’s auctions, which requires approval of the foreclosure by a judge, increased from 721 in 2006 to 928 in 2007 and 1,150 in 2008. They’re on a pace to surpass 1,500 this year, or more twice as many as in 2006.
First American CoreLogic, one of the nation’s largest providers of real estate data, estimated the Elkhart area’s foreclosure rate on outstanding mortgage loans at 2.7 percent for February. The rate was not nearly as high as foreclosure hotspots in Florida, California and Nevada, but it was well above the national average of 1.7 percent reported by CoreLogic.
Residents, business owners and local officials who have watched a meltdown in the recreational-vehicle and associated industries push Elkhart County’s unemployment rate from below 5 percent to 18 percent in a year wonder how high the foreclosure rate will climb.
“Often the job component is the first one to fall, and then it eventually equates to losing your home,” said Brian Gildea, Elkhart’s economic development director.
That’s just what happened to the Aguirres and the Gonyons. With one breadwinner an immigrant wage-earner and the other a self-employed local native, their paths to ownership were as different as the houses they wound up losing. But their stories illustrate that economic devastation in the region — and the nation — isn’t playing any favorites when it comes to foreclosure. In a growing number of cases, it’s all about the lack of jobs.
Alfredo Aguirre, 30, and Gabriela, 29, followed her father, stepmom and brother to the Elkhart area from Mexico in 2000. Jobs were plentiful in the region’s booming manufacturing sector and employers welcomed Alfredo with open arms despite his undocumented status. He was earning more than $40,000 a year — enough to easily afford the $880 payment on the family’s home —until he was laid off in July by a company that made utility trailers. In fact, overtime and bonuses had allowed him to pay down the principal on the loan, building about $30,000 equity. Gabriela stayed home with the couple’s children, Alfredo Jr., 10, Britany, 7, and Eduardo, 5.
Because of his immigration status, Aguirre could not collect unemployment. He could find nothing that paid anywhere close to his previous wages and settled for a half-time job washing dishes at an Elkhart restaurant for $8 an hour. Within six months, though, the family had run through its savings and was unable to make the mortgage payment.
Gabriela Aguirre tried without success to work out a deal with the lender. Again because of their immigration status, the family was not eligible for help from federally sponsored counseling agencies.
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Too late for a short sale
They made a last-ditch call for help to real estate agent Sergio Velasco, but it was too late to list their home as a short sale. “They want always the American Dream, to have their home and work for it,” Velasco said. “But at the end they have lost their home.”
The family’s pain is especially dear to Velasco, who emigrated from Mexico himself about 14 years ago. He worked at first in manufacturing, then learned English and built a successful real estate and mortgage business with his wife, specializing in serving the Hispanic community. Today, the couple are facing their own struggles as they try to liquidate their portfolio of a dozen rental homes and two commercial buildings.
After voluntarily surrendering their home to the lender to avoid eviction, the Aguirres moved into a rental in Elkhart with Gabriela’s father and his wife, and her brother and his wife, who have a 3-year-old son and are expecting a new baby in September. The six adults and four children share a single bathroom in a small, almost impossibly neat three-bedroom home crowded with religious icons and family photos.
Gabriela’s father, Andres Garcia, 59, and her brother, Juan Garcia, 22, also both lost jobs in the manufacturing industry last summer. Andres earns what he can as a mechanic, but jobs have fallen way off, and Juan has found part-time work at a fast-food joint. By pooling meager resources, the family hopes to make the monthly rent and keep this home, owned by a friend, from foreclosure, although they are currently behind on payments.
John Brecher / MSNBC.com
The Goshen, Ind., home that Gabriela and Alfredo Aguirre are losing to foreclosure.
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If they can’t make it, they’ll move back to Mexico, a prospect that patriarch Andres Garcia said grows more likely in direct proportion to the area’s jobless rate. “There’s no work,” he said. “That’s the main thing. If you have work, you have everything.”
A different tale
Terry Gonyon, 37, was born in Elkhart and graduated from high school there. He had four kids from two previous marriages when he met Desiree, 28, who had a daughter of her own. The couple, together for nine years, have since added four more kids to their blended family, which now comprises nine children ages 22 months through 18.
In 2005, after years of living in “a little tiny two-bedroom house,” so cramped that their marriage was threatened, Desiree said, they spotted the big brick house that became theirs. “We were in awe at how much space there was.”
At $124,355, “it was a fairly good deal,” Terry said. However, as they closed on the house, they were switched into a much higher interest rate than they had been told they could get, he said. And after they moved in, they found they had been misled about the condition of the building, which needed a new roof, foundation work and many other costly repairs, he said.
Their insurance company refused to cover the house and the lender added $400 a month in “forced-placed” insurance premiums to their mortgage payment, driving it from $800 to $1,200 a month.
Since Terry was getting plenty of small construction jobs as a jack-of-all-trades, often bringing home $2,000 a week, the family made the payments and moved ahead. “We paid it for a long time,” Terry Gonyon said.
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A sign of anger
Terry is angry that the federal government spent hundreds of billions bailing out lenders who so far have done very little to modify mortgages for troubled borrowers like himself. So he put a big sign in the front yard of his foreclosed home as the family was in the process of moving out: "Government bailouts don't work – Foreclosed — We lost this home — Family with 9 children put out."
Although Terry sometimes follows Desiree’s more optimistic lead, saying that “life is what you make it and we’ve just got to do whatever we can to make it happy and healthy,” he does not believe the foreclosure pace will slow any time soon. “I can’t see any way it’s going to get better,” he said.
His opinion is echoed by those who are trying to help troubled borrowers in the area save their homes.
“It seems like it’s going to keep working its way down,” said Joseph Zielinski, an attorney with Indiana Legal Services of South Bend who is representing a dozen Elkhart homeowners in foreclosure proceedings. Although his office was already seeing a spike in foreclosures due to poor lending and borrowing practices, it has been exacerbated by the spike in unemployment, he said.
“First you have the RV people gone,” he said. “Now you’ll see the support people gone. That’s going to trickle into restaurants and general things. It’s just going to go and spread its way out from the top to the bottom.”
Larry Gautsche, president of LaCasa of Goshen, a nonprofit housing agency that is federally certified to counsel troubled borrowers, said his agency also saw plenty of foreclosures due to subprime loans before the jobless rate surged. Now, “We’ve got both. We still have these adjustable rate mortgages that are maturing and coming up for resetting, but on top of that with our 20 percent unemployment, we’ve got people that are just unable to make the payments.”
Foreclosures push values down
It’s a vicious cycle for the real estate industry, Gautsche said: “When you have a lot of foreclosures in an area and the properties do start selling, you lower the values of everything around it because the only comparables out there are foreclosures.” At the same time, buyers disappear.
Statistics provided by Swartley of the Realtors’ board show that sales fell by 31 percent in numbers of homes sold, from 2,292 in 2006 to 1,579 in 2008, and by 36 percent in dollar volume, from $287.9 million to $184.3 million. Over that period, the median price of a home in the county has fallen from $117,350 to $107,000, a 9 percent decline.
Velasco, the mortgage broker and real estate agent who with his wife once sold 20 homes or more a month, hasn’t sold a single one since last May. For now, he has turned to a new business: making long-haul vehicle deliveries.
But some agents are seeing glimmers of hope. Among them is Cory White of Elkhart, who specializes in the distressed property market. Lately, he said, lenders are much more willing to agree to short sales, which could help stem the foreclosure tide.
“It’ll rebound,” he said. “It’s very, very cyclical. (Prices) will only come down so far until it’s such a good deal someone will buy it. The thing to remember is the banks do not want to own the homes. That’s not the business they’re in.”
$2.3 million to clean up foreclosure mess
In the meantime, the City of Elkhart has awarded Gautsche’s agency a $20,000 contract to provide counseling services to homeowners facing foreclosure. But that’s a tiny fraction of a $2.3 million federal grant the city recently secured to clean up after people have already lost their homes by buying foreclosed and abandoned properties for redevelopment.
A long-term solution will only be found by addressing the root cause — unemployment, said Gildea, the city’s economic development director. “We need to focus on jobs There may be people who can stay in their homes while they get unemployment, but what happens when that runs out?”
John Brecher / MSNBC.com
A lack of work has cost Terry Gonyon and his family their Elkhart home.
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Although Terry Gonyon was not eligible for jobless benefits because he was self-employed, he got the most painful answer to the question of what happens when the money runs out on March 31, when deputies from the Elkhart County Sheriff’s Department showed up to order him out. On a chilly, overcast morning, a uniformed officer circled the brick house banging on the doors until he and Don Poore, a contractor from Valparaiso hired by the bank to clean up the house for sale, found an open door.
The Gonyons, busy taking a final load to their new place, arrived after the house had been reclaimed and Poore was about to set his crew to work. Terry Gonyon briefly questioned the process. Neither Poore nor the officer could produce any documents that authorized the eviction, but Gonyon, who had seen this coming for months, accepted his fate.
“It’s yours,” he said, “you can have it.”
Poore, a Vietnam veteran with a graying ponytail, commiserated for a time with Gonyon over the lack of government help for foreclosed homeowners. “I understand their plight,” he said, “I understand their anger.”
Even though foreclosure-related business pushed his revenue to record levels last year, Poore said he is as disturbed as anyone about what is happening in northern Indiana and across the nation.
“It’s a plague,” he said as he prepared to change the locks on the Gonyons’ house. “It’s a plague.”
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Home prices rise for first time in 8 months: Corelogic
Tue, May 08 09:31 AM EDT
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NEW YORK (Reuters) - Home prices rose in March for the first time since last July, helped by tighter housing inventory, data analysis firm CoreLogic said on Tuesday.
CoreLogic's home price index gained 0.6 percent from February, but was still down 0.6 percent compared with March a year ago.
Excluding sales of distressed properties, prices climbed 0.9 percent on a yearly basis. Homeowners in danger of foreclosure, or in "distress", often sell their homes at significantly reduced prices.
"This spring, the housing market is responding to an improving balance between real estate supply and demand, which is causing stabilization in house prices", Mark Fleming, chief economist at CoreLogic, said in a statement.
Of the top 100 statistical areas measured by population, 57 showed year-over-year declines, down from 65.
The closely watched S&P/Case Shiller index released in late April showed a rise in U.S. single-family home prices in February for the first time in 10 months, with a gain of 0.2 percent on a seasonally adjusted basis.
(Reporting By Leah Schnurr; Editing by Leslie Adler)
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