When Brenda and Mike Bailey moved into their 1930s Victorian house in Corsicana, they expected it to be their last move. The seven-bedroom house was chosen to accommodate their big, mostly adopted family of six special-needs kids and themselves.

A first-time buyer, Brenda admitted she didn’t fully read the mortgage agreement, and didn’t realize she was signing up for a mortgage payment that would go up or down according to the market.

When her payments more than doubled, her family’s financial situation had worsened, and she couldn’t make the bill. They lost the house two months ago to foreclosure.

“I’d never purchased a house on my own,” Bailey explained. “We just signed what they told us to sign, which was ignorance on our part. I didn’t know what I was supposed to ask for.”

In the first four months of 2008, 142 houses in Navarro County were posted for foreclosure, and another 345 homes were posted in 2007, according to figures tracked by Lance Waggoner of Micro Title Navarro County.

Nationally, the foreclosure numbers are staggering. Foreclosures surged in April, up 65 percent from April 2007 to 243,353 homes in the United States, and up 4 percent from March.

The rate of local foreclosures is up in 2008, but it’s not the epidemic numbers in other cities and states. Still, as the Baileys can attest, any foreclosure is a personal and financial crisis.

Mike Bailey’s health deteriorated, even as the house payments skyrocketed. He has had multiple heart attacks, and is on dialysis three times a week. Brenda, who had a good job as a program director providing services to the mentally handicapped, couldn’t keep up with six needy kids, an ill husband, the stress of her job, and a worsening rheumatoid arthritis condition. She lost her job and went on disability support. When she tried to refinance, their income wasn’t enough to qualify.

“Initially, when I tried to refinance, they said ‘your income is not what it needs to be,’” she related. “I said ‘Well, duh, if my income were still up, I wouldn’t need to refinance.’”

Unable to keep their dream home, they sold most of their furniture and moved into a trailer house.

Waggoner has seen it all too many times in the last few years, and he puts a lot of blame on out-of-county, out-of-state lenders who were just trying to sell a mortgage without regard to the consequences.

Adjustable rate mortgages allow people with less-than-perfect credit, or with less income, to qualify for loans at a low introductory rate on the understanding that it would go up or down as the market went up or down.

When the interest rates went up, some borrowers were able to refinance with fixed-rate mortgages. Other people, like the Baileys, couldn’t, and as their house payments went higher, they were no longer able to meet the debt. In order to try to recover the loans, the lenders seized the houses.

“The whole dilemma was partly on the consumer, and partly on the mortgage companies pushing these (adjustable rate mortgages),” Waggoner said.

Hardest hit were the inexperienced borrowers and first-time homeowners, who had poor credit and little money, he said.

“I think a lot of first-time buyers were led down a road where there was no return,” Waggoner said. “It’s same story over and over and over. Poor folks just overextended themselves. If you’re maxed out, and the interest rate just goes up a little bit, you’re out of the house.”



Different perspectives

Nationally, the crisis is attributed to a combination of factors: a worsening U.S. economy, the adjustable rate mortgage crisis, and tighter credit rules, among others. And while thousands in Texas have lost their homes, the numbers are in the hundreds of thousands in other states. Nevada, Arizona, California and Florida were among the hardest hit states, with metropolitan areas in California and Florida accounting for nine of the top 10 areas with the highest rate of foreclosure, according to figures from Irvine, Calif.-based RealtyTrac, which monitors default notices, auction sale notices and bank repossessions..

One interesting trend that Waggoner noticed in his research was that local lenders in Corsicana and neighboring towns seldom foreclosed on houses. Some local banks had no foreclosures in 2007, while others had one or two all year. Most of the seizures came from lenders outside the county, he said.

“Of course, people go onto the Internet and find a loan,” Waggoner said. “The big lenders, Countrywide, for example, are really penetrating this market, and they have more foreclosures.”

Of the 1,667 deeds filed in the Navarro County courthouse in 2007, the funding was 25 percent local, and 75 percent from outside the county, he said.

Waggoner has different theories as to why the local banks don’t have as many foreclosures.

“They didn’t push those kinds of products, they know the people, and they didn’t loan the money to people who couldn’t pay it back,” he said.

Debbie Wilson, a loan officer with City National Bank, said the personal aspect is a huge part of it.

“We visit with customers,” she said. “Internet bankers just want to make a commission for themselves.”

That relationship banking works both ways, since the bankers and their customers have a greater sense of obligation to one another.

“It’s knowing our customers, but it reflects on the quality of the people borrowing, too. They feel a responsibility,” said Pat Fain with Corsicana National. “I think that’s a key factor.”



Real estate realities

On the ground in Navarro County, where real estate agents see the empty houses and meet with potential buyers, the last few years have been rough, but nothing compared with other areas.

“We’re not experiencing the major slow-downs and crashes that big cities are,” said Lynn Gatlin, an independent agent with Keller Williams. “You know, they were doing all those tricky loans to get people into those new builds. We don’t have that set-up in this community. We’re not experiencing that kind of the new-home foreclosures. Foreclosures (here) are mostly in our lower-end houses. I think it’s because these are younger families with small children still trying to establish their financial security.”

Typically, a seized house will sit empty for a period of time while the mortgage company tries to recoup all its costs. Eventually, the company will lower the price just to get rid of the property.

“It’s a buyer’s market,” Gatlin explained. “So, to be competitive, we have clients reducing and reducing and reducing. So a buyer can get a house for less that has all the extras, and some of these houses are even vacant. People are getting houses for less with greater square footage, and it’s just because the market is so saturated.”

The foreclosure crisis hasn’t affected the properties by the lake, which typically attract higher-end, older, and more financially secure buyers, Gatlin said.

“They’re still buying retirement homes and second homes on the lake,” she said.

Although sales were slow last year, Gatlin is optimistic about this year.

“If people are thinking about moving, buying or selling property, don’t think it’s the same as it is in the bigger cities,” she advised. “Talk to a lender here and get the facts for our area. It’s not that bad here.”

The Baileys, meanwhile, aren’t in the market anymore. Living in a trailer is challenging, but Brenda has put a positive spin on it in order to preserve her sanity, she said.

“In the big house, everybody could go to their own bedroom. In this teeny, tiny mobile home, we have to deal with each other,” she said. “It’s made us more of a family, if that makes sense.”

—————

Janet Jacobs may be reached via e-mail at jacobs@corsicanadailysun.com. Associated Press Business Writer Alex Veiga contributed to this report.