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Local Home Foreclosures on the Rise
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"It wasn't big companies, but regular people who took a gamble and lost," said Margie Leon, a housing counselor at the Virginia Cooperative Extension in Prince William County. "It's people who were comfortable and had equity in their homes. They saw all these big-name builders expanding all over the county, and it gave the impression that it was okay, that it was safe, to invest in real estate."
Many invested in second homes. They typically did that by refinancing their existing home with an adjustable-rate loan, Coppedge said. Then they would take equity out of that house to buy a newer one. The first home would then be rented or flipped. But now that the market has slowed and prices have dropped, these investors are left holding two properties.
Oscar Reyes, 29, did exactly that and ended up losing both his homes. Reyes said he owned a townhouse in Manassas and had no plan to move, until his real estate agent and good friend coaxed him into looking at a larger house in a nicer neighborhood in Dumfries.
Reyes doubted he would qualify to buy that house on his $3,000 a month salary. But the deal went through. He said that only later, when he got walloped by a rate increase, did he realize he had taken out an adjustable loan to refinance the townhouse and another one for the new house. Before he knew it, he had more than $6,000 in monthly mortgage payments and he could not sell, or even rent, the townhouse as planned.
Reyes now lives in an apartment in Fairfax County with his wife and baby.
"I speak a little bit of English, but not 100 percent," Reyes said. "So I believed my friend when he said my loan was fixed and everything was okay. My mistake is I believe people more than papers."
The Bush plan would not aid anyone who is in foreclosure or anyone who is more than 30 days late on mortgage payments.
Coppedge, the Prince George's County counselor, said nearly half her clients fall into the latter category.
The pity of it is, she said, that many of those borrowers called their lenders before they got into trouble to try to work out a deal.
"But the usual response was: 'Come back to us after you've missed one or two payments,' " Coppedge said. "Now that they have, it's become much harder for them to get help."
