Housing programs could have little impact here

Two new foreclosure prevention programs may do little to help Northern San Joaquin Valley homeowners because housing values here have fallen too far.

Foreclosure counseling experts expressed disappointment Wednesday about limits placed on the federal refinancing and loan modification programs.

"They don't address the problem we have here in the valley," lamented Martha Lucey, who runs ByDesign Financial Solutions in Fresno. Her nonprofit agency provides housing counseling throughout the region. "This will only apply to a very small percentage of homeowners in the Central Valley."

Here's the main problem: Home values have plunged 64 percent or more in Stanislaus, San Joaquin and Merced counties since peaking in 2005.

As a result, most of the region's homeowners owe substantially more on their mortgages than their homes are worth.

A just-released study by First American CoreLogic calculated that 51 percent to 55 percent of the region's loans were "upside down" two months ago, and another 4 percent were on the verge of tipping.

The new federal refinancing deal, unfortunately, only is being offered to home-owners whose first mortgage doesn't far exceed their home's value.

"That's not going to help 50 percent of the people in our area. We're almost all underwater," said Edward Parcaut of Lighthouse Residential Mortgage in Modesto. "Even those people who put 50 percent down on a home four years ago owe more than their home is worth now."

In 2005, for example, Stanislaus County homes reached a median sales price of $396,000. The median price dropped to $140,000 in January.

Parcaut said the new refinancing program was supposed to prevent homeowners who have been paying their mortgages on time from eventually defaulting on their loans.

"But the valley has taken too big of a hit (from falling home values)," Parcaut said. He is a leader in No Homeowner Left Behind, a nonprofit group that organizes monthly foreclosure prevention workshops. "Now we see even higher-income people coming to our events because they're in trouble."

Of the 130 people who turned out for Friday's foreclosure prevention workshop in Lathrop, Parcaut said, 40 percent had annual incomes of more than $56,000.

More than 11,000 Stanislaus County homes were repossessed by lenders during the last two years. The new loan refinance and modification programs were supposed to slow the rate of future foreclosures.

"People frequently ask me, 'Why shouldn't I just walk away from my loan?' " Lucey said. "I tell them it will ruin their credit. So they have to ask themselves whether it's worth it. For many of them, the answer is yes."

Jim Bryant is one homeowner who doesn't want to walk away. He paid $375,000 for his Delhi home in 2006, then spent $30,000 on repairs.

"If the mortgage company takes it back, they won't even get $150,000 for it now," said Bryant, 63. "They would have everything to gain if they would give me a new mortgage at the current market rate and for a reasonable loan amount."

Bryant was hopeful the much-touted federal refinance and modification programs would save him.

But that isn't likely because he was injured, lost his trucking job and temporarily is on state disability. He hasn't paid his mortgage in eight months. Bryant said his lender won't renegotiate because he doesn't have a permanent income source.

"These (federal programs) are not going to help everyone," cautioned Karen Cosner of Community Housing and Shelter Services in Modesto.

"A lot of people got into houses they couldn't afford," Cosner said. She said many people now want lenders to reduce their rates and lower the principle they owe. "That isn't going to happen for everyone."

Bee staff writer J.N. Sbranti can be reached at jsbranti@modbee.com or 578-2196.

This story was originally published March 4, 2009 at 11:12 PM with the headline "Housing programs could have little impact here."