Foreclosure crisis hits South Shore families

Nancy Reardon

The foreclosure crisis has ripped 1,031 houses from South Shore homeowners in the past 18 months – almost 500 of them in the first six months of this year. From January to June, 453 homeowners representing every South Shore town except one have faced the heartbreak of losing the roof over their heads. That’s more than twice the number of foreclosed homes in all of 2006, and hundreds more are set to face this nightmare in the next three months.

The housing market in Massachusetts has started to crumble, and experts say it’s going to worse before it improves.

Thousands of homeowners across the state are dealing with adjustable rate mortgages that are just starting to go to higher rates or that have gone up a second or third time, leaving them scrambling to pay utility bills and using credit cards for gas, food and other necessities.

“It’s kind of like having one row of sandbags in front of the tide and what you really need is sandbags 10 deep,” said Vincent Valvo, publisher of the Warren Group, which began tracking foreclosure data in 2005.

A Plymouth homeowner knows exactly what that feels like. Anthony asked that only his first name be used because he’s ashamed that friends, neighbors and work colleagues will learn his secret: he’s losing his home.

On Thursday, he had only $8 in the bank. And that was after saving all month and waiting until his last paycheck cleared to phone in his mortgage payment of $2,100.

“I don’t know how much longer I can hold on,” he said. “I’m just stuck.”

His story is echoed across the state: People signed onto adjustable rate mortgages without understanding how drastically their monthly payments could jump, some by hundreds of dollars from one month to the next.

These so-called ‘alternative’ loans allowed borrowers to pay very little down and make very low rate payments for the first two to five years. After that, the rate changed every few months for the term of the loan.

Some people didn’t understand that their rates would change. Others understood the terms, but gambled that their financial situation would improve or assumed the housing market would remain more stable than it has.

They also didn’t count on the rapid increase in the cost of food, gas and heating oil.

As Plymouth Realtor Peter Ruffini points out, many of these alternative loans were designed for investors seeking to quickly flip property, not average homeowners.

“They’re for investors who want the lowest loan possible to stay liquid and go in and make renovations to turn around for sale,” he said. “That’s why the product was created, not for people to buy their first home with no money down.”

The Warren Group studied a sampling of foreclosures in the Boston area over eight months of 2007 and found that many people hadn’t owned their homes for very long. During the period from January to September, 11 percent of the foreclosures hit people who had owned their homes for less than a year, said Katie Curnutte, spokeswoman for the Warren Group.

Twenty-one percent had owned their homes for one to two years, and only 34 percent for more than five years.

In the latter group, many of the homeowners in trouble have already drained the equity out of their property by refinancing one, two or even three times, and now they actually owe more than their home is worth.

And, according to people who work closely with struggling homeowners, many of them are working, middle-class families.

“I don’t think any segment of income is immune to it,” said Roger Goguen, a director at South Shore Housing, who has worked with families at each end of the income scale.

Laura Joseph, 37, is a middle-class woman who launched her second business in the fall, a spa in Hingham. But she's been living with her father since February, when her Plympton home went to foreclosure, and makes trips each month to pack it up before it's auctioned this month.

“I owned my first property at the age of 19 thinking I was getting a jumpstart on my life and I would be prepared,” she said. “I’m 37 now and I’ve lost everything.”

Her best hope is to put all her efforts into her business, slowly repair the damage to her credit and save up for a new home down the road, she said.

The road to recovery will be rough for others as well. Goguen, at South Shore Housing, helps people find affordable housing options. In addition to losing their home and selling their belongings, many families may need to give away pets or transfer their children to new schools.

A housing relief bill signed into law by President Bush this week may delay some foreclosures, but it won’t help everyone, economists and market experts say.

“I do believe it’s going to get worse before it gets better,” Goguen said. “I think there’s a whole group of people who haven’t even faced the adjustable rate yet but it’s looming on the horizon.”

Nancy Reardon may be reached at nreardon@ledger.com.