Written by Dana Howard                              We Buy Houses

Roughly 10,000 homes in the Sacramento region are in some stage of foreclosure. That means thousands of homeowners, often with their children, are in a fix to find some place to live.
Shelters in the area are showing the first signs that some in search of a new roof over their heads will be luckier than others. Michelle Steeb, the director of St. John’s Shelter for women and children recently checked in a family after their home wound up in foreclosure. “The bank showed up on their doorstep — this was about four or five weeks ago — on a Monday morning and told them they needed to leave, and they lost everything,” Steeb said.

Steeb says finding the families on the rebound from foreclosure a new permanent home won’t be easy.

“Their credit is affected. Their families aren’t going to be able to take care of them forever,” said Steeb.

St. John’s is limited in what it can handle. It’s already at capacity, and the shelter is now turning away 55 women and children each day. That’s more than twice the 25 a day it had been turning away during the first half of the year.

“Though you can’t tie anything directly to the economy and the foreclosure rate, something has to be there because we’ve never seen an increase like this so rapidly and so dramatically,” said Steeb, who adds a third of the women have jobs.

Her big fear is if there is an onslaught of families who need shelter, there are only a handful of agencies. St. John is not one of the facilities that will accept men into facilities where there are women and children. Many families will not be able to stay together.

www.TheHomeBuyingCenter.com
 

QUEEN CREEK, Arizona: Out on Phoenix’s suburban fringes, where cement mixers are fast colonizing hay and cotton fields, the day is winding to a close. The home hour has arrived.

But sundown gives away a troubling secret: Behind dark windows and unanswered doors, it’s clear nobody is coming home.

The ranch home on Via del Palo where the newspaper in the driveway has been sitting unclaimed since April. The house at the corner of 223rd Court with faded fliers stuck in the door.

They’re empty, left behind by a rising tide of foreclosures.

This neighborhood has a still-unfolding story to tell. It’s not always a comfortable one to hear.

Not long ago, builders were raising home prices here thousands of dollars week after week. Families camped out for lotteries to win the right to buy. Buyers gambled with loans whose risks were obscured by euphoria.

This is the tale of how America’s real estate boom came to a seemingly ordinary subdivision called the Villages at Queen Creek, where the whipsaw of easy credit has led to some extraordinary times. They were the best of times, for a while. The empty homes, though, raise serious doubts about what comes next.

As the nation confronts skyrocketing foreclosures, what is happening here and in scores of similar neighborhoods is worth considering.

Because while the pressures at work in Queen Creek were extreme, the choices people made — and the consequences — are not so different from those faced by thousands of other homeowners and their neighbors.

“Honestly,” says Joy Kessler, standing on the doorstep of the house she and her husband are surrendering to foreclosure, “if you were in this situation, what would you do?”

___

In 2004, Dave Gustafson and his family headed to Arizona to visit relatives. The buzz of construction convinced them to have a look around.

Back in California, they had less than 1,100 square feet (102 square meters). But salesmen here offered 2 1/2 times the space for half the price.

The place they liked the best was the Villages, a warren of streets cradling a golf course, quickly filling with sand-colored, stucco homes.

“The sales person was saying that they (homes) were going up $1,000 a week,” Dave Gustafson recalls. “So … we signed right away.”

Builders made it easy. A downpayment of $2,000 to $5,000 (€1,400 to €3,500) was all it took. Buyers could borrow at low teaser rates, requiring payments of nothing more than interest.

As promised, prices were going up faster than the houses themselves.

By the time the family’s new home was completed, the $179,000 (€126,870) base price had climbed to $220,000 (€156,000).

The Gustafsons opted for Corian counters, a pool and whirlpool, adding more than $50,000 (€35,000) to their loan. Payments were fixed for only two years, but they didn’t worry. With prices rising, they’d refinance. In five or six years, the Gustafsons figured, they’d sell for $500,000 (€354,000).

They were hardly the only ones feeling optimistic.

Kris Rowberry, ecstatic when the value of his home in nearby Gilbert took off, bought a second one in the Villages as an investment.

“I was thinking, man, if I could have 10 properties, I could just kind of retire … and kick back and live off the income,” he says.

But the speculative mind-set confounded retiree David Pickering, who’d never even heard of interest-only loans. The Pickerings were simply buying a place to live.

Around them, though, such notions began to look very old-fashioned.

___

The American Dream is overdue for revision.

“There’s been a huge shift in the way people view their houses,” says John Karevoll of DataQuick Information Systems. “Your house now can basically be used as an ATM.”

A generation ago, families celebrated getting a mortgage and again when they retired the loan. A home meant security. Financial commitment promoted pride and neighborhood roots.

But Americans have become much more mobile, and looser lending has made it easier to buy a home and borrow against its value.

Now a home is not just a place to live. It is an investment — a way to make money and finance a lifestyle, says Robert Manning, an expert in consumer credit at the Rochester Institute of Technology.

The lending industry encouraged that transformation, promoting not just subprime loans but mortgages requiring little or no documentation of income, no money down, and interest-only payments.

When easy borrowing combined with a run-up in prices, speculators joined the fray.

But rising interest rates and falling home prices put particular pressure on people who live in the homes they own.

When people who bought almost entirely with borrowed money see appreciated worth disappear, there’s little incentive to hold on. Few players, though, seemed to appreciate the chance they might get caught.

“Lenders never said no,” says Jay Butler, director of realty studies at Arizona State University. “Nobody expected this to continue, but they hoped it would just long enough to get out of it — and they were caught up in the whirlpool.”

___

By late 2004, the Phoenix real estate market was roaring.

The euphoria reached Queen Creek, though the freeway hadn’t arrived yet. “Drive until you qualify,” agents told buyers.

Buyers lined up to make a downpayment in the new subdivisions. Rowberry joined 200 people one Saturday morning for a chance at 15 lots.

Meanwhile, California and Nevada investors came to greater Phoenix looking for the next great deal.

“I’m just one guy and it wasn’t unusual to get three (calls) a day” from speculators, says John Wake, a real estate agent. “A lot of them weren’t sophisticated. They’d never invested before.”

The Villages, already half completed, looked too good to pass up. One Southern California investor, Alan Jullien, bought three homes.

The market spike turned the Gustafsons’ $235,000 (€167,000) home into one worth $380,000 (€269,000).

Across the Valley, homeowners watching values shoot up, borrowed against those gains.

“Everyone was doing the same thing — taking out lines of credit, milking it for all it’s worth,” says Matthew Berends of Surprise, another Phoenix suburb where prices soared. His home is in foreclosure. “In one year for a house to go up $80,000, it’s like too easy.”

But some relatively modest purchases would prove to be risky gambles.

Greg Giniel and his wife moved into a home on East Sanoque Drive bought by a friend, with Giniel as a silent partner. What Giniel hadn’t counted on was that the friend had bought three other homes with adjustable rate loans that were bound to rise.

One street over, the Kesslers paid $279,000 (€198,000) for a house in the fall of 2005.

With $25,000 (€18,000) down and an interest-only loan, it seemed wiser than their old rental.

There was a problem, though, obvious only in hindsight. A market that had skyrocketed was about to plunge.

___

It takes time for a homeowner to get into trouble, but sometimes not that long.

Last year, the Gustafsons fell behind on their mortgage. In August, their lender started foreclosure.

Problems began to snowball. High gas prices prompted people to rethink living on the outskirts. Investors rushed to sell.

In 2005 — a record-best year for Phoenix real estate — just five homes in the ZIP code containing the Villages were lost to foreclosure, according to Information Market, a Phoenix research firm.

So far this year, 75 homes have been claimed by lenders. It could be just the beginning.

In the Villages, many homes where foreclosure is pending are already empty, a sign owners have given up.

The problems aren’t always obvious. The golf course remains carefully watered, playgrounds neatly swept. Many streets, particularly in areas built before prices spiked, are filled with families who grill burgers in their backyards and take evening strolls.

But on other streets, homes without curtains in the windows, with dirt and cobwebs collecting in doorways, are eerie.

Even when the market was good, some Villagers were troubled by investor-owned homes, empty or filled with renters. Then moving vans began pulling up to some homes at odd hours. Auction notices were posted on front doors.

In May, the house to the left of the Pickerings’ went to foreclosure. The one on the right followed. It made David Pickering uneasy.

“The weeds in the back are getting so tall now that they are growing over the separating wall into my yard,” he e-mailed, alerting the homeowners association. “Something must be done about this.”

On Via del Rancho, Christelle Palmire saw the home next door abandoned to foreclosure.

This Halloween, Palmire plans to take her son trick-or-treating in a friend’s subdivision where she knows doors will be answered.

“You drive around this subdivision and there are ‘For Sale’ signs everywhere,” she says.

Researchers say foreclosures chip away at neighbors’ property values. Here they compound a larger problem.

Builders continue adding homes at reduced prices. Investors are trying to sell. Lenders are seeking buyers for foreclosures. Homeowners whose financial troubles might be solved by selling can’t compete.

In many ways, the Villages is lucky because much was built before the market soared, says Amanda Shaw, president of Associated Asset Management, which administers it and 300 other Arizona subdivisions.

But it can be difficult to know when homeowners are in trouble.

“There are people who think they don’t have an alternative … other than to turn the lights off at 1 in the morning, hop in the U-Haul and just leave,” Shaw says.

___

It’s worth less than it used to be, but it’s home, Dave and Maryann Gustafson decided.

In May, their lender agreed, temporarily trimming the $1,000 (€700) a month increase in their payment to $400 (€300). It should keep the Gustafsons in their home.

Greg Giniel is not so sure. His home is scheduled for auction in November.

“I’ve got to figure out how to buy my own home back,” Giniel says. “If God doesn’t pull me out of this one, I don’t know where else I’m going to go.”

Things looked just as uncertain to Joy and Paul Kessler, until they did the math.

They could fight for their house. But why? It’s worth at least $40,000 (€28,000) less than they paid.

“It’s sad to say but honestly, we don’t feel like there’s anything worth saving in this house,” Joy says.

So the couple decided to let the place go. Everyone said it was the right thing to do.

Still, it doesn’t sit right with her husband. When times were good they made a commitment, Paul tells Joy. Somehow, it doesn’t feel right to walk away.

We Buy Houses

(CBS) In the Central Valley community of Manteca, police have a new job: patrolling hundreds of foreclosed houses left empty and abandoned. They are half million dollar houses, often bought with nothing down, turned into suburban blight.

To get a firsthand look, CBS News correspondent John Blackstone rode along on patrol with Manteca Police officer Rex Osborn, who explained, “you make one right-hand turn and immediately this is what we see - dead grass, bushes are dying, trees are dying. The next thing you know you have squatters in the house…”

As California house prices soared, cities in San Joaquin County attracted buyers priced out of the San Francisco Bay Area. Developers built more than 30,000 new homes in the last six years. But with the spike in adjustable mortgage rates the flood of buyers turned into a flood of defaults - 11,000 in the county in the past 18 months.

Not long ago an overgrown area with a murky pool that Blackstone toured was someone’s backyard paradise, but now foreclosure has taken it all away. There and at hundreds of other properties across the county, even the swimming pool has become a hazard - a source of mosquitoes and West Nile Virus.

County workers who used to patrol swamps and streams now do their work in neglected back yards.

But for neighbors the problem that really bites is fast-falling house prices.

Just-retired Corky Hine retired wanted to sell for $400,000. Now his home is worth $339,000 and his real-estate agent still can’t get anybody to look.

“I already dropped it $60,000 (from the original appraisal price,)” Hine said. “She said ‘There’s like 500 homes for sale within a two-mile radius of mine, and 150 of them are in foreclosure within a mile or something.’”

In one subdivision, in a single block there are three houses with the tell-tale brown grass.

The sad story of one home is in the papers taped to the door. One notice of foreclosure reads: “$7,400 behind in payments.” The house will be sold at auction at the county courthouse.

It opened for $464,885.15.

That’s way below the $620,000 the house sold for two years ago. Still the auctioneer has a lonely job.

“There’s nobody here,” Blackstone said.

The auctioneer, Ted Longley, chuckled: “Must not be any money involved in the equity area. I don’t know.”

“You can’t give these houses away,” Osborn said.

And neighborhoods are left with the wounds of a mortgage meltdown: the houses nobody wants.

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New foreclosure filings in August doubled across the country, with California showing the highest number, according to a report released Tuesday.

Data provider RealtyTrac Inc. in Irvine said lenders sent a record 108,716 notices of default to homeowners last month, compared to 42,144 a year earlier.

California’s 41,714 new foreclosures led the country, with Florida’s 26,203 second.

There were a total of 243,947 U.S. foreclosure filings last month, counting defaults, scheduled auctions and bank repossessions. That is up 115 percent from last year and up 36 percent from July.

California cities accounted for six of the top 10 metro foreclosure rates in August, including the top three spots. Modesto posted the nation’s highest metro foreclosure rate, one foreclosure filing for every 79 households, followed by Stockton and Merced. Other California cities in the top 10 included Vallejo-Fairfield at No. 5, Riverside-San Bernardino at No. 6 and Sacramento at No. 7.

“The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now,” said James J. Saccacio, chief executive officer of RealtyTrac. “Another significant factor in the increased level of foreclosure activity is that the number of REO filings (bank repossessions) is increasing dramatically, which means that a greater percentage of homes entering foreclosure are going back to the banks.”

We Buy Houses

When someone is in the downward slide of the foreclosure process, it can be a frightening time in life. Having little or no understanding of the process, they frequently do not know they have alternatives available. This lack of knowledge can lead to costly mistakes in the long term, and can leave one with seriously damaged credit.

If homeowners know they are struggling, and have yet to be late on a payment, the best alternatives are to sell and then buy something they can better afford, or refinance it at a lower interest rate to ease the burden. Sometimes their own mortgage company can offer refinancing or a loan modification program to avoid foreclosure. One can also shop around and compare programs available at credit unions, banks and other mortgage brokers.

In the case where someone is a payment or two behind, but has resolved their financial crisis, lenders will offer a “forbearance” plan. Forbearance allows borrowers to pay additional sums added to their current payments, catching up back payments over a period of usually three to six months. To find out if this program is available, one should contact their lender.

Another alternative if people are recovering from a rough financial period, but have resolved their future income issues, is to catch up the delinquent payments and bring them current through either a private loan from a friend or family member, or other resource. There are resources called “hard money lenders” that can be found by searching the Internet. They offer small loans at high interest rates. This alternative should only be used if one really knows for sure they can pay back the small loan in addition to keeping the mortgage current from then on.

Bankruptcy is another alternative, but is only an option if executed before the foreclosure sale. Bankruptcies stay on one’s credit report for 10 years, and may not be the best alternative for everyone. Consult with an experienced bankruptcy attorney for more details.

Lenders will sometimes offer a “deed in lieu of foreclosure.” This is sometimes called “cash for keys.” Essentially the homeowner agrees to sign over the deed to the lender (usually in exchange for a small fee) to avoid the costly foreclosure process, and in turn the lender will agree to not report it as a foreclosure on the credit report. Not all lenders offer this.

Another option is selling the property before foreclosure sale. This can minimize damage to one’s credit by settling the debt before it is taken back by the lender. In Michigan, when a home is sold by foreclosure sale (aka “sheriff’s sale”) the homeowner has a six-month period following the sale called the “redemption period” where they can buy back their home for the sale price plus fees. If the property is over three acres, the redemption period is 12 months. If one sells the home during the redemption period, the lender will usually report it as a “foreclosure and settlement” to the credit bureau, which is less damaging than just a “foreclosure.” Selling a home during the foreclosure process limits one to a time window of approximately three to nine months. It is important to note that if one abandons the property during the redemption period, the period can be shortened to 30 days should the lender prove abandonment. Key factors that will have an effect on selling any home are: price, condition, location, “seller willingness” and marketing.

In a case where someone owes more on the property than it is worth for market value in the area, one can sometimes succeed with a “short sale” on the mortgage. A short sale is where the seller requests the lender except a shorter payoff than what is currently owed to settle the debt due to declining market value and financial hardship. Not all lenders will consider a short sale, but with the increase in foreclosures nationally, more and more are changing their policies on this. Navigating one’s way through the lender departments via phone lines can be quite a frustrating experience. Lenders will often have a “loss mitigation” or “loan work-out” department, although each company may refer to it differently. An experienced Realtor in short sales can help you with this, as there is an exact procedure to request such a settlement. Knowing how to properly present such a request to achieve results on this line is crucial to its success.

Although foreclosure can be a very dark time on one’s life, it does not have to mark the end of one’s borrowing history. Applying some of the methods listed here could offer a ray of hope, and perhaps a brighter future.

We Buy Houses

By Robert Gavin, Globe Staff  

LAWRENCE — Mario DeJesus struggled under crushing mortgage payments for two years. Now, about to lose his home to foreclosure, he has no money left to move his family into an apartment.

Altagracia Portorreal sleeps uneasily since teenagers broke into the vacant home next door, abandoned by a neighbor who couldn’t keep up with the mortgage. Bienvenido Chalas is cutting the hours of employees who clean carpets and refinish floors as foreclosures drag down the housing market that supports his business.

DeJesus, Portorreal, and Chalas are three faces of the foreclosure crisis sweeping the north side of Lawrence, a crisis that is uprooting families, destabilizing neighborhoods and shaking a local economy only beginning to recover from the real estate crash of the 1990s, when so many abandoned buildings burned that Lawrence became known as New England’s ‘‘arson capital.’’

‘‘I thought nothing could be as bad as the ’90s,’’ said Mary Marra, executive director of Bread & Roses Housing, a nonprofit developer of affordable housing. ‘‘But I’m beginning to question that.’’

What’s happening here in this poor section of one of the state’s poorest cities shows the consequences of the frenzied, indiscriminate, and sometimes predatory lending that accompanied the recent housing boom. Lawrence’s north side is one of many communities, often poor and minority, that were flooded in the late stages of the boom with subprime mortgages, typically high cost adjustable rate loans for borrowers with credit problems.

Many succumbed to the lure of easy money, and bought homes beyond their modest incomes. Now, pick any street in the 2 miles between DeJesus’s and Portorreal’s homes, and chances are you’ll find homeowners in foreclosure, or desperately trying to sell before it’s too late.

At Ebenezer Christian Church, Pastor Victor Jarvis said, church members approach him and whisper, ‘‘I’m losing my house. Please pray for me so I’m able to sell it.’’

Caught in downward spiral

Lawrence’s north side stretches between two hills, Tower, to the west, and Prospect, to the east. It descends from either side to the Spicket River, becoming poorer and more crowded as it loses elevation. For generations, Lawrence’s immigrant workers climbed the socioeconomic ladder by moving up these hills.

The section, the 01841 zip code, encompasses 3 square miles of tightly packed two- and three-family homes. One in four people live in poverty in the section, and median family income, just under $30,000 a year, is half the state’s. Over less than two years, according to The Warren Group, a Boston real estate data firm, lenders launched nearly 600 foreclosures, roughly one for every 10 owner-occupied homes in the neighborhood. Dozens of buildings, some with boarded doors and windows, stand vacant.

The impact is felt beyond distressed homeowners and their families. Many of these properties are two- and three-family homes with tenants who often must move once the owner loses the building to foreclosure.

Each week at housing court in Lawrence, at least two or three cases involve tenants being evicted by lenders, who, after completing a foreclosure, don’t want to act as landlords, according to Neighborhood Legal Services, which provides legal advice at the court sessions. Among them: Antonio Damiron, his wife, Santa Guerrero, and their 2-year-old son, Michael.

‘‘My head is spinning,’’ said Damiron, 45, who is being evicted from the two-bedroom apartment on Trenton Street where his family has lived for about two years. ‘‘Where am I going to go with a wife and kid? I could end up in a shelter. It’s just unreal.’’

At the Lawrence Housing Authority, requests for housing are up by at least 10 percent because of foreclosures, said Deputy Director Efrain Rolon. Once a day, on average, someone comes in and tells employees: ‘‘The bank is taking my house. I can’t refinance. I can’t sell. I need housing.’’

There is little Rolon can do. Waiting lists are so long that they are closed to new applicants. Emergency assistance is possible, he explained, but not until people are actually homeless. ‘‘Who wants to hear that?’’ Rolon said.

Ana Luna is executive director of Arlington Community Trabajando, a north Lawrence neighborhood group. She shook her head as she recently drove past empty homes, slapped with tags that indicate lenders, unable to sell foreclosed properties, have sealed them up and shut off utilities. ‘‘Winterized,’’ the tags say.

‘‘You think of all the people who need a place to live, and these buildings are just sitting there,’’ she said. ‘‘It makes me want to cry.’’

In the shadow of vacancies

Altagracia Portorreal remembers her next-door neighbor sobbing at the front door. After a year of working 12-hour days to pay her mortgage, the neighbor was giving up. She sent the keys to the bank, packed up, and abandoned the three-decker on Walnut Street.

Soon after, a group of teenagers broke into the vacant home and smoked marijuana, said Portorreal, a divorced mother of an 8-year-old. Other neighbors, she said, have spotted drug users and prostitutes breaking into vacant properties in the neighborhood.

‘‘These empty houses worry me a lot,’’ said Portorreal, 42, who bought her home, half of a duplex, four years ago. ‘‘This area had really been progressing, and it worries me a lot.’’

Lawrence police say they, too, worry about foreclosed homes. So far this year, thieves have broken into a dozen vacant properties, stripping them of thousands of dollars in copper and other valuable metals. Police Chief John Romero said his department is tracking published foreclosure and auction notices to keep a close eye on these properties.

But the thieves use the same notices to pick their targets.

It all brings back bad memories for Cristina Tavares, who lives about two blocks from Portorreal. Tavares and her husband, Hector, bought their home in 1990, when the neighborhood was ravaged by foreclosures from the last real estate bust. Each morning, Cristina Tavares recalled, she swept up needles and condoms from the sidewalk in front of her home, a neatly kept duplex. ‘‘The worst nightmare you can imagine,’’ she said.

Back then, buildings burned in suspicious fires so often — at least 120 in 1992 alone — that Lawrence was dubbed the ‘‘arson capital’’ of New England. Vacant lots of rubble and weeds spread for blocks. Property values plunged by half.

‘‘We got used to the idea hearing fire alarms all the time and seeing smoke billowing,’’ said Len Raymond, a longtime Tower Hill resident, former city planner, and cofounder of two Lawrence community groups. ‘‘The smell of smoke just hung in the air.’’

Only in recent years did these neighborhoods begin to rebound. Nonprofit developers, such as Bread & Roses Housing, reclaimed vacant lots for affordable homes. For-profit developers followed with market-rate housing.

Meanwhile, an estimated $1 billion in subprime mortgages flooded this one section of Lawrence from 2003 to 2006, according to First American LoanPerformance, a San Francisco firm that collects mortgage data. The amount of subprime loans nearly quadrupled during the peak of the housing market in 2005, to an estimated $300 million from less than $80 million in 2002.

As a result, homeownership increased, to 36 percent citywide in 2006 from 32 percent in 2000, according to Census figures. The median price of a three-family home nearly doubled to $350,000 in 2005 from $159,000 in 2001 in north Lawrence, according to Warren Group. Median family income, however, remained flat in Lawrence at about $30,000.

‘‘It was so exciting for the city to see people buying homes and investing, and neighborhoods becoming economically stable,’’ said Andrea Ryan, housing manager in Lawrence’s Community Development Department. ‘‘Now we know it wasn’t all real.’’

‘‘For Sale’’ signs now sprout everywhere, often several to a street. Properties frequently are being sold for less than what the delinquent homeowner owes on the mortgage, a so-called short sale. Bob Ciccarelli, a real estate broker, said he has 19 listings in Lawrence. Eighteen are short sales. One of these properties, bought last year for more than $300,000, is now listed at $180,000.

‘‘Even decreasing the prices,’’ Ciccarelli said, ‘‘they’re still not selling.’’

The loss of wealth is rippling through the economy. Nazario Esquea, the owner of Naztel Communications, a downtown cellphone store, said he used to order phones, accessories, and other merchandise at least once a week to keep up with shoppers. He glanced at an inventory sheet. The last time he placed an order: three weeks earlier.

‘‘A lot of people were refinancing,’’ he said. ‘‘Now that part of the economy is gone.’’

Two years ago, Bienvenido Chalas, owner of Joel’s Cleaning Services, said he and his three employees worked 12 hours a day and well into evening to keep up with floor refinishing and carpet cleaning jobs for new homeowners or those who refinanced. Today, they typically finish at 3 p.m. —if they work at all.

‘‘People don’t want to spend money on their house,’’ Chalas said through an interpreter. ‘‘They don’t know if they’re going to lose it.’’

‘Now it’s a bad dream’

Mario DeJesus had long dreamed of owning a home, and two mortgages covering the $375,000 purchase of a three-family Victorian on Tower Hill let him live it. DeJesus, however, earns about $23,000 a year. It didn’t take long for the math to catch up with him.

DeJesus, 46, bought the home in the spring of 2005. He figured rental income from two apartments would cover all but $400 of the $2,600-a-month mortgage, an amount he could cover with his monthly take-home pay of about $1,500.

But tenants proved hard to find, and the third floor remained vacant most of the time. The other apartment rented for $1,000 a month, meaning rental income was less than half of what he planned.

DeJesus soon was late on his payments, scrambling to find money. He drove a cab when he could, to supplement his earnings as a delivery truck driver for the Eagle-Tribune newspaper. His wife, Ruth, picked up a paper route. By the spring of 2006, however, DeJesus knew it wouldn’t work. He put the home up for sale.

By then, though, DeJesus was caught in housing’s downward spiral. Sales stalled and prices slid as other distressed borrowers flooded the market with homes. Sinking home values made it impossible to refinance into lower cost loans. Foreclosures followed, putting more homes on the market and more pressure on prices.

Only one prospective buyer looked DeJesus’s home over the next year, even as he slashed the listing price, which is now $85,000 less than he paid. Meanwhile, his mortgage had an adjustable rate that reset to a higher level, increasing his payments to $3,200 a month. He couldn’t refinance and he couldn’t sell. And he couldn’t pay the mortgage.

DeJesus will lose his home to foreclosure at the end of this month. The sheriff ’s letter came last week. With three children at home, he needs at least a three-bedroom apartment. He’s not sure where he’ll find the money for moving expenses.

‘‘In the beginning it was a dream for us, and now it’s a bad dream,’’ he said. ‘‘I lost the house.’’

We Buy Houses

Foreclosures in California increased 300 percent in August, and many more homeowners are concerned about their future. In the past few years lenders have written loans to borrowers who had subprime credit scores with payments that adjusted upward at a specified date.

To complicate matters, home prices have fallen leaving some homeowners owing more on than their house is worth. But there options available to these homeowners. One option is to sell their home “short”. This means, working out an agreement with your lender to sell the house for less than it is worth before foreclosure.

There can be some negative consequences, according to Tamara E. Holmes with Bankrate.com. The director of counseling for Consumer Credit Counseling Service of Orange County in Santa Ana, Natalie Lohrenz, told Tamara that more and more properties are being advertised this way. There is a glut on the market.

With the adjustable rate mortgages adjusting upwards, many homeowners find themselves stretched thin, according to Lohrenz. But both parties can actually benefit from a short sale.

Stuart Wilson, a real estate agent with the Paragon Real Estate Group in San Francisco, explains why this could be preferable. “The lender benefits by not having to go through the protracted process of foreclosing on the borrower and then having to put the property on the market and go through the whole marketing process,” Wilson said.

Lenders pay a fortune to foreclose on a property. Not only do they lose money if the house is worth less than the loan, but they also have to pay legal fees and take the property back as a Real Estate Owned (REO) property. This is something they don’t want to do. A study released this year says that lenders can pay as much as $50,000 per foreclosure.

The borrower may also benefit. Some lenders will allow the borrower to be forgiven on the balance owed. In other words, if the house sells for less than you owe, you may not be liable to the difference. You might want to check to see how this will affect your credit, but a foreclosure will also negatively affect that history.

We handle short sales and We Buy Houses

Pat Schantz has worked as a real estate agent for nine years, and she wants to tell homeowners facing foreclosure that help is possible. She specializes in “short sales” of property, where banks and mortgage companies are willing to accept less money for the property than the customer owes on it.

In today’s real estate market, it is not unusual for buyers to purchase a house with 100 percent financing and even roll their closing costs into their loan. People who don’t make even a small down payment can end up owing more on their houses than they can sell them for on the open market from the minute they move in. Add falling house prices to the formula, and a number of buyers end up in an untenable situation, especially if they experience a downturn in their luck, such as losing their jobs, illness in the family that leads to high medical bills, divorce or needing to relocate.

“There are crooks out there,” Schantz said. “People have to be careful and ask questions. Fear can cause people to make bad decisions.”

We handle short sales and we buy houses