Community Columns

Saving homes from becoming foreclosed 'browners'

We have all become aware of the housing problems in our communities, and our awareness is enhanced when we seeing empty homes with yards turning brown due to a lack of maintenance, houses I call "browners." When the real estate signs come down, the problem becomes even more acute. No one wants to put time and effort into selling something when there is no market for it.

It's no secret that a lot of unorthodox financing went on with most of the "browners," with both lenders and homeowners contributing to the problem.

But let's give this all a second thought. Instead of the lenders and homeowners parting ways when the homeowners go into default, they should both sit down, be calm, avoid blame and try to work this out. Experts are now suggesting homeowners talk to lenders as soon as possible whenever foreclosure becomes a possibility.

A new contract, usually in the form of a purchase contract, should be considered. This would allow both parties to make the best of a situation that might otherwise be mutually detrimental. It would give both homeowners and lenders breathing room.

Under such an agreement, the homeowner would remain in place and the lender would not foreclose. Monthly payments would be based on what the homeowner could afford to pay rather than on the value of the property. Such payments would go directly into the maintenance of the home and the payment of all taxes. Improvements to the home, such as landscaping, patios, etc. would also be part of the homeowners' obligations. The residents would be considered homeowners, not renters, because they would be living there through a purchase contract, not a lease.

So what is in this for the lenders? Well, first of all, the house would be kept in a state of good repair and out of the "browner" category. Also, the lender wouldn't be in a panic to try to sell the house when the real estate market is depressed and prices are low.

At the end of a specified period, during which the homeowner could have breathing room to get on his or her financial feet, the lender and homeowner could agree to buy/sell the house for a fixed price that was established at the inception of the agreement.

Lenders don't want to take losses or be in the property management business, and financially troubled homeowners still need a place to live. This arrangement would allow both parties to survive what can only be described as a perfect storm of real estate miscues.

All arrangements have a down side, including this solution. One of its down sides is that it is harder to enforce a default when it occurs during a breach of a purchase contract. Formal legal action is required. When a default occurs during a breach of a trust deed, it is quicker and easier to get the defaulting resident out of the house.

However, nothing will ever work unless it is given a chance. Our foreclosure rate, being the worst in the nation, has to be brought under control. That will only occur when all parties realize cooperation, not confrontation, is the solution to the current dilemma.

Bultena, a retired Merced County deputy district

attorney, is a former visiting editor. E-mail him