The home foreclosure crisis started with borrowers willing to take a risk on sub-prime mortgages. Now it’s reaching people who simply can’t find work.
Cesar Hernandez packed cereal boxes in the kitchen of his Palmdale home. For almost a year, he’s fought to delay this moment. He and his family are supposed to be out of their house by Saturday.
"If I would have not lost my job," said Hernandez, "I would still be doing my payments, and… happy ever after."
Last November, Hernandez was laid him off from his construction job at an oil refinery in Long Beach, and he hasn’t been able to find work since then. He had made $60,000 a year. With that kind of money coming in, he bought a house in Palmdale for $235,000.
He worked long hours and earned more than enough to cover his monthly mortgage payments. Hernandez said he'd get up at 3 a.m. to go to work at 5:30 in Long Beach. He put in 12 hours a day, then head back to Palmdale.
"I did it for a year to accomplish the payments on my house," said Hernandez.
But when he lost his job, Hernandez stopped making the payments. By then, the value of the home had dropped to below $100,000. Hernandez tried to modify his mortgage, but he said he got the run-around.
The mortgage company, San Diego-based Guild Mortgage, wouldn’t return phone calls seeking comment. Hernandez’ three-bedroom, two-bathroom house with a big backyard wound up in foreclosure.
He was not a sub-prime borrower. His mortgage didn’t have an interest rate set to balloon after a year or two. His rate was fixed at 4.25 percent.
Professor Lauren Willis tracks housing and lending at Loyola Law School. She called Hernandez’s case an example of the next wave of foreclosures: people who are unemployed and are unable to make their payments even on a plain vanilla 30-year fixed mortgage, even people who had perfectly good credit before the crisis began.
While the national unemployment rate has approached 10 percent, the unemployment rate in the Los Angeles area is nearing 13 percent. Willis said rising unemployment emerged from the housing bubble that sub-prime mortgages and other complex loans created.
"People took all this money out of their houses over the last decade, and what did they do with that money? They spent it," she said "That created jobs."
Consumers were buying things, so there were people employed to make things and to sell things. Willis said, "That person who sold you your big screen TV is now out of a job because that bubble has burst."
Cesar Hernandez has to pack his big screen TV. He’ll have to move his family to a motel for at least a few days. He’s trying to keep his 7-year- old daughter near her school, and to keep her spirits high.
One day, she cried, he said.
"I was gonna, to cry with her too, but I have to be stronger so she won’t be so sad. She told me two days ago that she was gonna be missing this house. I told her, it’s okay, we might have just fell right now, but we gonna get up, shake our dust, and buy another house."
First, though, Cesar Hernandez will have to find a job.