Chris Earl, agent for Stephens Real Estate, is representing the owner of a home that has been foreclosed on, and now is going through a waiting period in which the owner can buy it back by satisfying the debt, plus fees and interest.

Compared with May 2006, sheriff's sales of foreclosed homes are up more than 60 percent.

The phone will stop ringing soon in an east Lawrence home. For the past few months, it has rung four, maybe five times a day.

It’s collectors who are calling, always with the same question: When will the homeowner catch up on missed mortgage payments?

Her answer is always the same. She doesn’t have thousands of dollars to make good on the loan.

But in recent weeks, something has changed.

Her house now is slated for a short sale, meaning a buyer will purchase the house for slightly less than what is owed on the mortgage. The money goes straight to the bank.

After purchasing the home 10 years ago with $20,000 down, the 72-year-old woman will walk away with nothing. She and her two cats will move into a low-income apartment. Her 50 years of home ownership have ended.

The woman, who didn’t want to be named by the newspaper, had taken out a mortgage from an out-of-state company when she first bought the home. A few years later, she took out a second mortgage to cover car and home repair costs.

When she retired, 50 percent of her income went to paying off these mortgages. About a year ago came more unexpected car repairs, medical bills and home fixes. Her house slipped into pre-foreclosure status.

“I just got behind trying to pay everything,” she said.

A steady stream

This woman is one of many who have sought help from Housing and Credit Counseling Inc. Counselor Anju Mishra said Lawrence continued to see a steady stream of homeowners defaulting on mortgages.

Douglas County hasn’t seen the steep increase in foreclosures more common on the coasts – and even in Topeka and Kansas City.

Compared with the same time last year, the number of homes that are foreclosed on and sold at sheriff’s sales has climbed by 25 percent in the first five months of 2008. And, for the same period in 2006 – long before the mortgage crisis mushroomed – the number of sheriff’s sales has increased by more than 60 percent.

A total of 55 homes were auctioned in Douglas County from January to May.

Many say it has yet to have any effect on Lawrence’s housing market.

Local real estate appraiser Jeff Hatfield said while some parts of town are overbuilt and had seen a stagnation in prices, values aren’t declining. And foreclosures aren’t being factored into the selling prices of neighboring homes.

“We have got a very resilient local economy,” Hatfield said.

Tightening credit

However, some Lawrence homebuyers are feeling the effects of the national foreclosure problem.

Rebecca Buford, executive director of Tenants to Homeowners Inc., said first-time homebuyers now had fewer lending options.

The disappearance of risky loan products keeps homeowners away from what could turn out to be messy financial transactions. However, those same loan products did help some first-time buyers, Buford said.

“It really does hurt people who maybe are able to use those financial options wisely, but suddenly they don’t have that option any more and now they have to come up with 4 to 7 percent down. It’s another obstacle for first-time home purchases,” she said.

Rick Jackson, first vice president at Capitol Federal Savings Bank, said conservative lending practices kept his institution safe from the rash of foreclosures experienced in the subprime market. However, nationwide underwriting standards mean borrowers must have lower debt-to-income ratios and higher credit scores.

Now getting a loan with a 620 credit score (formerly considered the bottom edge of good credit) is “very tough,” Jackson said.

And, Robert Baker, a counselor at HCCI, said that even with a credit score of 680, extra closing costs could be added on to loans or some kind of down payment may be required.

At the same time that higher credit scores are needed to get into loans, Buford said many prospective homebuyers she sees are carrying high debt loads – as much as $800 a month.

“A lot of Realtors would say it is much more of a buyers’ market than it was two or three years ago because they are not selling as quickly, there is not as much demand. Now you can say that is partly because people don’t have access to these easy loan products and people are in more debt,” Buford said.

Finding help

The increase in foreclosures has spurred new lines of work. Rob Lang, a Realtor, now is a certified foreclosure prevention specialist. In a role reversal, Lang wants to help people keep their homes, not buy new ones.

For those on the verge of foreclosure, Lang said he would work with lenders to determine whether loans could be modified and, if not, to help with a short sale.

People continue to wait too long before seeking help, said Baker, who counsels homeowners through HCCI, a nonprofit organization. And, he noted the foreclosure problem hasn’t abated, forcing people into tough choices.

“We are seeing people give up the house before giving up the credit cards. You need credit cards for gas in the tank and to buy food,” Baker said.