Foreclosure's shadow falls across diverse set of US homeowners

That's weighing on home values in a city where only about twice that many homes sell in a good year, says Mayte Rivera, a Northeastern University doctoral candidate who is researching Lawrence's foreclosure problem.

Lawrence is in some ways typical of the excesses of the nation's subprime boom.

The expansion of higher-risk credit was fueled by a confluence of factors: rising home values, rising buyer aspirations, and an influx of eager lenders.

The borrowers nationwide tended to be immigrants or African-Americans. Subprime loans accounted for some 40 percent of all mortgages for Hispanic borrowers, and 52 percent of mortgages for blacks, in 2005. Meanwhile, 19 percent of white borrowers took a subprime loan that year, according to research by the Center for Responsible Lending in Durham, N.C.

In a ranking of cities with the highest share of subprime loans that are past due, or in foreclosure, cities with a high share of minority residents top the list. But the list is also dominated by places where the economy has been weak, among them Cleveland, Detroit, and South Bend, Ind.

The subprime problems are growing fastest in a state where residents are stretched the hardest in their quest for homeownership: California.

"The negative impact of foreclosures falls disproportionately on communities of color," the Center for Responsible Lending concludes in a recent analysis. Yet, the report adds, "in absolute terms, white homeowners received three times as many higher-cost mortgages and therefore will experience a significant number of foreclosures as well."

Indeed, subprime credit washed through suburban communities as well as inner cities.

Jenison, Mich., is a case in point.

The town, near Grand Rapids, is the place Mary Beyer has called home for 20 years. Her home is modest. But now she is paying dearly for every one of its 900 square feet. Divorced and living on a fixed income, she saw refinancing as a way to bring her budget into balance four years ago.

Although the "refi" deal provided some cash up front, it depleted her equity in the house. Her monthly payments went up. Her troubles deepening, Beyer called her mortgage broker for help. The result: another refi. Then another with a different lender. Then another.

"If I could go back ... ," she muses, recalling the $600 monthly payments she owed in 2002. After four refis in four years, Beyer says she is left with no home equity and a monthly payment that outweighs her whole income. She feels duped by the lenders and is filing a lawsuit with help from Legal Aid of Western Michigan.

She hopes other homeowners can reap some cautionary wisdom from her experience.

"When [you're] not thinking plain and when [you're] desperate, don't make any quick decisions," she advises. "That's when they're going to nail you."

Al Ynigues, a music teacher, also lives in suburban America, in the community of Apple Valley on the outskirts of Min-neapolis. He found a home to buy in 2004.

"It looks like the presidential White House. It's got those colonial columns in front," he says. What he likes best are the rooms inside for his music business – one for teaching percussion, one for piano, one for doing recordings and repairs.

What he likes least is his mortgage arrangement.

His interest rate began moving up last fall, two years into the loan. Meanwhile, his income is now a bit lower than when he bought the home. He had wanted a fixed-rate loan, but the mortgage broker steered him toward an adjustable.

"I was gullible," Ynigues concedes in retrospect. He says he learned later that the broker reaped $5,000 in a kind of kickback, called a "yield spread premium," from the finance company for generating a high-interest loan.

In March, he testified on Capitol Hill, urging Congress to take action to protect future homeowners from predatory practices. With the help of Acorn, an advocacy group, he hopes to modify his loan and keep the house. Many lenders will consider reducing an interest rate, for example, if doing so will save them the cost of foreclosing on a property.

"It's a beautiful home," Ynigues says. "I want to stay."

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