N.Va. Foreclosures Form 'Ring of Fire'

Foreclosure specialist John Thompson checks on properties in Manassas's Georgetown South community, where more than 35 homes are in foreclosure. (By Tracy A. Woodward -- The Washington Post)
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By and large, those properties are concentrated in lower-priced areas and Zip codes where many immigrants bought homes in recent years, often with subprime mortgages and other risky arrangements that required little down payment or documentation. In Northern Virginia and especially Prince William, many buyers were Hispanic immigrants.

"With the Hispanic community, we had a huge boom in the last few years," said Jose L. Galdos, who recently shut down his settlement company in Woodbridge and laid off his staff, having lost 85 percent of his business in the past year.

"A lot of them had adjustable rates," he said. "A lot of them are walking away from those mortgages now."

Thompson, Galdos and several other real estate specialists in Northern Virginia estimate that 70 to 80 percent of foreclosure cases they see involve Hispanic families. The number of Hispanic surnames in the trustee notices in the classifieds sections of area newspapers appears to confirm the observation.

"What they tried to do was smart. You can't make it in America unless you get into home ownership," Thompson said. "But their timing was bad. They bought at the end of the boom. They were pursuing the American dream, and now it's crashing down around them like an American nightmare."

With the interest rates on adjustable-rate mortgages escalating and job opportunities for immigrants squeezed by a construction slowdown, many families are simply walking away, sacrificing their credit to save their finances.

"Most of the people I deal with are responsible people who are trying to find a way out," Manassas real estate agent Maribel Alvarez said. "Some of the banks are willing and do not want to foreclose on a home, but they're very limited because the homes are so far off what the person owes."

Real estate agents say the foreclosure crisis in Prince William has been exacerbated by local authorities' efforts to crack down on illegal immigrants. They warn that the campaign might have other, more far-reaching economic consequences if homeowners continue to default.

Whether out of fear or the perception that they are no longer welcome, Latino families who were already struggling financially have little incentive to fight to remain in their homes. Anecdotes abound of Hispanic immigrants leaving the county for Maryland or the Carolinas.

"What can I do? I've got no choice," said Jose Ruiz, 27, a landscaper and illegal immigrant from El Salvador who bought a Manassas condo two years ago for $200,000. He has been making $2,000 monthly payments for his mortgage and condo fees since then, spending most of his monthly income and all his savings. He and his wife worry that they'll be deported or separated from their daughters, ages 3 and 1. But they can't sell their condo, which Ruiz estimates is worth $130,000 in the current market. So they're planning to walk away rather than risk a forcible removal.

Finding enough buyers to absorb the foreclosed properties remains a challenge, and some real estate companies are using gimmicks to lure investors, including "home buyer bus tours" of Prince William neighborhoods. "Don't miss the bus!" touts a flier for a tour that offers a rolling foreclosure seminar.

But market watchers say the foreclosure wave in Northern Virginia will have to run its course before prices can normalize. "The correction will continue, but foreclosure properties will be out of the listing pool," said Jill Landsman, a spokeswoman for the Northern Virginia Association of Realtors.

For most Northern Virginia homeowners, Landman urged patience, emphasizing that many parts of the region were holding their value. "Every neighborhood has its own DNA," she said. "Some neighborhoods are really solvent because of land value, while some are more susceptible to foreclosure activity."

As a whole, she noted, the Washington region was doing much better than other parts of the country, mostly thanks to low unemployment. "All the local fundamentals remain strong," she said.