A Happy Foreclosure Story

"There is nothing to fear but fear itself and the bogeyman." - Pat Paulsen comedian and US Presidential Candidate.

By Alberto Marrero Salas
Published on LatinoLA: April 28, 2009

A Happy Foreclosure Story

The real estate market has been bad, really really bad. Here in LatinoLA I wrote two articles. Real Estate Armageddon in 2007 and Real Estate Armageddon the Sequel also in 2007.

Diana Olick on and on CNBC television is probably the best reporter commentator on the US real estate market.

In the last few days she has written about California foreclosures coming back with a vengeance. Mortgage default notices in the first quarter of this year according to Dataquick surged to 135, 431 compared to 75,320 a new all time high since Dataquick started keeping statistics in 1992 and a 19% increase over first quarter 2008.

She also reported that job losses and reduced income to those of us who are self employed has also resulted in more foreclosures and lower real estate prices the reasons she listed are as follows:

1. Curtailment of income (34.1 percent) ...this can be salary reduction or self-employed losing clients
2. Excessive obligations (19.8 percent)...i.e. too much personal debt
3. Unemployment (8.1 percent)
4. Illness (6.5 percent)
5. Marital difficulties (3.5 percent)

So whereas divorce and illness used to be the top reasons historically for foreclosure, now it's all about job losses and excessive debt. And neither of those are getting any better.

With all of this doom and gloom it was refreshing to find perhaps a light at the end of the tunnel.

I ran into a happy ending in the never ending foreclosures here in California.

I will use the names of Juan and Maria to protect the identity of the real participants in this real estate drama.

About two years ago Juan and Maria bought a 3 bedroom home in Bakersfield California for $229,000 dollars.

Juan is a gardener and Maria works at a local carrot factory in quality control and packaging. Maria from El Salvador was a legal permanent resident but Juan a Guatemalan had an outstanding order of deportation due to an asylum denial.

Their friendly local REALTOR told them to buy a home. After all homes always go up in price. Don't they? Of course they do!

They doubted that they could qualify but magically Juan became an executive at a computer company and Maria became a legal researcher.

Somehow their combined income of $34,000 increased to $145,000 and 'voila!', they both became citizens.

Since real estate always goes up they signed an adjustable loan. Their initial payment was $1800 per month. They were assured by their REALTOR that a year or two after their home had increased in value they would refinance and everything would be hunky dory.

Well their home did not increase in value. Their adjustable mortgage went from $1800 per month to $3200 per month. They made the first few payments and then stopped.

They went to their local hermano Latino who charged them $3000 to do a modification and who three months later disappeared.

They received the usual foreclosure notices. Later on the bank asked them to stay due to the large number of empty homes being vandalized.

After about six months the bank sold the home at an auction. The home that Juan and Maria had bought in 2007 for $229,000 was sold last month for $74,000.

They were getting ready to move to an apartment with their three kids. They were broken-hearted due to having to give up their puppy and their pet cat.

Suddenly out of nowhere the new owner called. The owner asked them if they were interested in staying. They said yes. The new owner called them a week later and asked them if they were willing to pay $800 a month for rent.

They of course said yes. A happy ending. Capitalism at it's best.

About Alberto Marrero Salas:
Partner Nacara 2000 Immigration Law. Worked during the go go 70's and 80's on Wall Street., Merrill Lynch, Prudential Bache.
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