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A year ago, Sharon Roullins thought she was getting a chance to "start over."
Finally approved for credit after three years of trying to buy a home in the Kansas City area, Roullins bought a three-bedroom home off Ward Avenue in East Lawrence last June.
For the first time, her children had their own rooms. Her two grade-school aged daughters liked their new school, and for single mom Roullins, the difference from Kansas City was "night and day."
But Roullins was in for a nightmare when foreclosure proceedings began. Foreclosure occurs when a lender acts to repossess a property, usually when the homeowners get too far behind on their mortgage payments. This week, her home and four others are scheduled to be auctioned from the steps of the Douglas County Judicial and Law Enforcement Center, 111 E. 11th St. Roullins is one of the scores of Douglas County homeowners who have faced prospects of foreclosure this year.
"I really don't know what to do," Roullins said.
For Roullins, the downward spiral into foreclosure started with a trip to the emergency room last September. The visit was followed by a stay in the hospital that lasted into November, meaning there was little money to make the roughly $850 monthly mortgage payment.
"Basically, I got sick, went into the hospital and just fell behind," Roullins said. "I missed one payment, and it just kind of snowballed."
Now she gets daily phone calls from her mortgage company asking her about the payments and letters in the mail from businesses that say they want to help her.
But Roullins said her credit score is too low to qualify for any of the programs her mortgage company is offering, and she doesn't trust out-of-town companies whose offers to help seem too good to be true.
She can't find the real estate agent who sold her the house, and she doesn't have the expertise to sell the house herself. Nor does she have the money to hire a lawyer.
So Thursday - the day of the sale - looms.
"Social services, church, family - we just don't have those things to fall back on," Roullins said.
Rash of foreclosures
The number of foreclosures has increased across the country, and Douglas County is no exception. In the first four months of 2007, the Douglas County Sheriff's Office - which presides over the sale of homes that go into foreclosure - auctioned 39 homes. Comparatively, in the first four months of 2006, 28 Douglas County homes were auctioned at a sheriff's sale. That's a roughly 40 percent increase.
Many more homeowners, closer to 80, have received notices from the sheriff's office that auction was pending unless they paid up on their mortgages.
Robert Baker, education coordinator and counselor at Lawrence's Housing and Credit Counseling Inc., said a main reason for the increase in foreclosures is a change in the economy.
"The economic times aren't quite as heady as they were in the go-go '90s," Baker said. "So, if people have any kind of economic setback - serious health problems, reduced income, that sort of thing - it is going to affect their ability to pay all their bills, and sometimes that affects their mortgage payment."
Jonathan Becker, a bankruptcy and real estate attorney, lists four reasons for the rise in foreclosures: a lessening of credit standards, an increase in the kinds of loan options, a lack of home value appreciation, and a decrease of new homebuyers' financial experience and education. Combined with any catastrophic event such as a job layoff, reduced income, illness or car accident - "you've got a recipe for foreclosure," Becker said.
Although foreclosures in Douglas County have jumped, those who deal with the housing market in Lawrence say the community is not nearly as bad off as other parts of the country where waves of homeowners have defaulted on mortgages. For the first quarter of 2007, Kansas ranked 34th in the country for foreclosure rates, according to RealtyTrac, a Web site that compiles a database of foreclosures nationwide.
"We haven't seen it here, but it doesn't mean it isn't coming," said Doug Stephens, president of Stephens Real Estate Inc.
Baker, the housing and credit counselor, said higher housing prices in Douglas County have precluded many lenders from issuing riskier loans. Known as subprime loans, these lending options are made to borrowers with below-average credit scores and require little or no money upfront. And according to Baker, they are much more likely in a market where homes go for $50,000 or $80,000, not $200,000.
However, Becker said he is starting to see a lot more homeowners come into his office who are caught with loans that carry interest rates that are suddenly going up.
In the past few years, companies have offered low-interest, adjustable rate mortgages - but the low rate lasts only a few years. After that - for up to 28 years of a 30-year mortgage - the interest rate has a good chance of moving higher.
In the next few years, millions of these mortgages are expected to reset at higher interest rates, meaning homeowners will see a dramatic jump in their monthly mortgage payments.
"The 2-28 loan was becoming the welcome mat into the house. It's now becoming the prison bars when the 28 (years) kicks in," Becker said.
Staving off foreclosure
On Chastity Beerbower's birthday, Jan. 18, her family's house in Eudora was slated for sheriff's sale. If the foreclosure had gone through, Beerbower wasn't sure what her family - husband Jack, three boys and a girl - would have done.
"It's either keep the house or become homeless," Beerbower said. "Right now we don't have the money to move, and no one wants to rent to someone who forecloses."
The day before the sheriff's auction, the sale was canceled. The family was able to save the house by filing for bankruptcy protection.
But it was a close call, Beerbower said. She and her husband, a self-employed carpenter, saw an ad for a lawyer who handled foreclosures. They hired him and were told to file for bankruptcy immediately.
Two years ago, the couple purchased a house on Acorn Street for $145,000. The five-bedroom home in a neighborhood with trees and nice yards was the first the Beerbowers had owned.
"We were going along just fine until (Jack's) knee injury," Beerbower said.
With her husband being out of work for injuries and then not being able to find work, the family got behind in paying their mortgage, Beerbower said. In a year and half, Jack had surgery on his knee and back. And in between the time off to recover from the surgeries, he found a sputtering construction market and few jobs.
A stay-at-home mom for 10 years, Chastity Beerbower went back to work at Eudora's Kwik Shop, where she is an assistant manager. Jack traveled as far as Junction City and Louisiana for jobs, Beerbower said. As foreclosure was pending, they kept thinking the work would come.
"What our plan was: Get income, then pay up and hope for the best," she said.
Eventually, the only choice was to file for bankruptcy, which stopped the foreclosure process.
Bankruptcy allowed the family to stay in the house, but Beerbower said they are still teetering on the edge of foreclosure if they can't make their $1,500-a-month mortgage payment.
The family was willing to take the hit bankruptcy would leave on their financial record, Beerbower said, because it was better than losing the house. The main concern was making sure their children had a stable environment.
Filing for bankruptcy
When a foreclosure is pending, Becker said, filing for bankruptcy can be like nabbing home field advantage for the homeowner. In most cases, Becker said, the bankruptcy has to be filed before the court issues a judgment on the foreclosure and the notices start to go out that the house will be auctioned at a sheriff's sale.
The bankruptcy will allow the homeowner to keep the house and set up a payment plan to the mortgage company through the court. The homeowner also still has to make the regular monthly payment to the mortgage company.
Bankruptcy does leave a mark and stays on credit reports for seven years.
However, Baker said that most credit scores are largely based on payment history from the past two years, the amount of debt and whether there is enough income to cover the loan.
Instead of traveling the bankruptcy route, many homeowners opt for dealing straight with their mortgage company in attempts to save the home.
Baker said the No. 1 mistake is to not act immediately.
"The longer you are delinquent and the more you owe, the less options you have. So start early," Baker advised on seeking help, whether it comes from a certified mortgage default counselor, lender or even a relative who could loan the money.
Becker said many mortgage companies operate on a calendar that starts the foreclosure process rolling when payments are more than 59 days late. Letters are issued and attorneys contacted.
At that point, Becker said, the homeowner has to cover not only the missed payments but also the mortgage company's attorney fees.
"Once you get to the 59 days, the alarms go off," Becker said. "Automatically add on $800 to $1,000."
Looking back, Beerbower said she recommends that those approaching foreclosure stay on top of the problem.
The effort can take hours, but most mortgage companies will work with borrowers who are seeking a remedy.
"They don't want to repossess your house. If they foreclose on your house, they have to market it to sell it," Baker said.