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Trapped by debt: More in Midlands can't find way out

Ayanna White got caught up in the home-buying fever that swept the country.

Now, only two years after buying her first home for $103,500 with no money down, the 29-year-old, single mother and student is facing foreclosure.

She is hoping her lender will accept less than she owes as she tries to sell the Irmo house, a move that would avoid foreclosure.

Last month, she moved out while waiting to sell, after she stopped paying her mortgage earlier this year.

White is among a rising number of people in the Midlands struggling to make payments on their homes. Some homeowners are pleading with lenders to drop their payments so they can stay in the homes; others already have seen theirs slip away. And some are simply walking away because their homes are worth less than they owe.

The number of homeowners in Richland and Lexington counties who enter foreclosure proceedings - meaning they are at least 90 days late on their mortgage payments - has spiked 36 percent this year compared with 2005, the year the housing boom began in earnest, according to an analysis by The State newspaper of county court filings.

In Lexington County, the numbers stayed relatively steady until a 10 percent jump last year. And through the first nine months of this year, the county saw a 20 percent rise compared with the same period in 2008.

In Richland County, the problem started sooner but has eased a bit this year. In 2007, the county saw a 9 percent rise in the number of initial foreclosure filings. Last year, the number went up 17 percent from the year before. So far this year, filings are down 5 percent.

Still, South Carolina is faring better than much of the nation.

The national foreclosure rate in August, the latest numbers available, was about 2.9 percent, according to First American CoreLogic, a data collection company. The rate includes all loans in some stages of foreclosure. In South Carolina, the rate was about 2.2 percent.

While the percentage of homeowners facing foreclosure is small, it affects whole neighborhoods as homes remain vacant, fall into disrepair and bring down property values.

'THOUSANDS JUMPED'

Today's foreclosures have their roots in the early part of the decade, said Doug Bridges, a real estate agent for more than 35 years in Northeast Richland.

The economy tanked after the Sept. 11, 2001, attacks. To stimulate the building industry, interest rates were lowered and lending standards loosened.

"They let it get too loose, and that's where the greed came in," Bridges said. "Some people made outlandish amounts of money."

He said lenders in the Midlands were throwing deals at buyers too hard to turn down.

"Thousands of people just jumped for the dangling carrot," Bridges said. "I sympathize with those people because that's what the rules were, and they just followed the rules and fell into the trap."

Lenders aren't the only ones to blame, said Rhonda Marcum, executive director of the Mortgage Bankers Association of the Carolinas.

"They were fed by the consumer wanting immediate gratification," she said.

If a lender would not put them into a risky loan, many prospective buyers kept looking until they got the loan they wanted, she said.

"There were many consumers who forced that issue," she said. "The fault's on all sides."

Many risky loans came with adjustable interest rates, which meant the homeowners got a low rate to start but it jumped years later, making monthly payments more than they could afford.

"The lenders were saying, 'Just refinance,'" said Larry Jordan, a West Columbia real estate investor for two decades, whose company is "We Buy Houses." But, by 2008, the economy had taken a nose dive and banks had tightened lending standards, making refinancing less likely for many homeowners.

He and his son, Chad, buy houses, fix them up and sell them for a profit. Right now, much of their business is focused on "short sales," getting a lender to accept less money than is owed on the house and keeping the homeowner out of foreclosure.

The Jordans used to work one short sale every three or four months. Right now, they are working 16.

"People walk in the door. You can't buy their houses because they owe too much," Chad Jordan said.

The problem is affecting people of all income levels as homeowners struggle with unemployment or reduced income.

The Jordans recently facilitated the sale of a home for $540,000 that had been on the market for two years, starting at $750,000.

"There are people in trouble," Bridges said. "It was false prosperity."

'A HEAVY BURDEN'

White, the single mother in Irmo, bought her three-bedroom, two-bath home in 2007 just before the real estate market started a downward spiral.

She received 100 percent financing through the S.C. State Housing Finance and Development Authority for the home.

White was looking for payments close to the $650 she was paying in rent at the time. She said she didn't know about extra costs, such as taxes and insurance, until she was so far along in the process she didn't feel like she could turn back. Her payment for the 1,300-square-foot home ended up at $865 a month.

White, who is in school to become a human resources specialist, held on for 1 1/2 years before she started missing payments.

"Trying to make ends meet, it just came to be a heavy burden," she said.

She started working with Larry and Chad Jordan earlier this year to sell the house for less than what she owes on it. It is now listed for $96,900.

Papers from her lender were filed in August informing her that the foreclosure proceedings were beginning. The process could take months, but White already has given up on the house. She moved out last month and into a rental $200 a month cheaper.

She said she is still hoping for a short sale to keep a foreclosure off her credit so that, one day, when she is truly ready, she can buy another home.

"When I do, it will be the house I want to be in for 30 years, and a lot of research will go into it."

'LIVING AT THE EDGE'

The depth of the foreclosure problem hit home in March when 25,000 people showed up at the Carolina Coliseum for mortgage help.

The Neighborhood Assistance Corp. of America, which has a small local office, brought in hundreds of counselors and lender representatives for a three-day "Save the Dream" event. The nonprofit mortgage counseling agency, which had signed agreements with more than half a dozen lenders, promised to help struggling homeowners find a solution. Some found help on the spot; many more still are waiting.

Karen Long of Blythewood sat in line for 16 hours at the coliseum waiting for help with rising interest rates on her mortgage. She didn't get help that weekend and spent months trying to work with NACA before reaching an agreement with her mortgage company on her own.

Long said she is in a trial payment period with her lender and has been on time with her reduced payments for two months. After she makes her November payment, her new 2 percent interest rate is supposed to be set for five years. Then, it will go up 1 percent a year until it reaches a cap of 6 percent.

Meanwhile, Northeast Richland resident Myrtle Stewart said homeowners shouldn't count on their lenders to help until they have an agreement in writing.

During the NACA event, her lender stood up with her and announced her new rate of 3 percent, down from 9.5 percent. The crowd applauded.

What she didn't know at the time, she said, was that she had to make a $2,000 payment to the mortgage company to get a restructured loan. And the rate ended up at 4.5 percent, she said.

Stewart works part time as a bus driver and is in training to become a tractor-trailer driver.

She said she is making her reduced monthly payments, but her lender is still telling her the payment is not finalized.

NACA officials have said getting a resolution takes time and some lenders have been slow to respond.

At the Benedict-Allen Community Development Corp., two counselors work with people in foreclosure and host foreclosure prevention workshops.

Several years ago, the agency would get four or five calls a week, said director Larry Salley. Now, they get four of five calls a day, he said.

"Three to four years ago, you could get a house before you could get a car," Salley said. "People were just doing deals."

Last year, many homeowners were seeking help because of rising interest rates. Now, the economy is a bigger factor, Salley said. People are losing jobs or they are having to live with less money as their companies cut overtime work or salaries.

"They're living right at the edge of their income," Salley said. "It doesn't take much to send it over the edge."

Salley frequently gets calls from people whose homes are set to be sold at a foreclosure auction within days. There is not much he can do. Because counselors and lenders are overwhelmed with requests for help, the only people who have a chance are those who call early and often, he said.

"They're all in the pipeline. And that pipeline is jammed," Salley said.

A NEW NORMAL

Coming out of the foreclosure and housing crisis will be long and slow in the worst economy most people have seen in their lifetimes, industry experts said.

Bridges, the longtime real estate agent, said he remembers getting started in the real estate business in the early 1970s, when people had to wait in long lines to buy gas and interest rates were in the double digits. He got a buyer an interest rate of 14 percent, and people in his office cheered.

"Everybody felt good about it," he said.

But today's economic crisis - even with its record-low interest rates - has a different feel, he said, because of unprecedented unemployment numbers and the length and reach of the recession.

"That was nothing like this," Bridges said. "This is changing the face of residential real estate."

South Carolina has the fifth-highest unemployment rate in the nation.

The crisis will not end until foreclosures start to subside, which is not likely to happen soon, experts said.

More homeowners who are entering foreclosure now are those who had fixed-rate loans and good credit but have been sidelined by a job loss, said Don Schunk, research economist for Coastal Carolina University.

Schunk predicts another year of "real sharp pressure on households" struggling with reduced income.

There are positive signs. Home sales in the Columbia area increased slightly in September for the first time in more than two years. First-time home buyers last month rushed to take advantage of an $8,000 federal tax credit that is set to end later this month.

But as more foreclosures come on the market, they will delay a sustained improvement in the housing sector, Schunk said, because they bring down home values and add to already high housing inventory levels.

The effects of the foreclosure crisis likely will be lasting, Schunk said.

"We, ultimately, will settle in at a lower rate of homeownership than we have seen over the last decade."

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