Tuesday, May 21, 2013
SACRAMENTO, Calif. - The streets of Gretchen Lancero's neighborhood in Sacramento's North Natomas area have names like Dreamy, Charm and Celebration, reminders of the heady days of the housing boom when people lined up to buy new houses here.
Gretchen Lancero, who lives in the Natomas neighborhood in Sacramento, Calif., owns a home worth less than what they owe. The family has stayed, she said, because “We gave our word. We signed the documents.”
Today, North Natomas epitomizes the nation's housing bust. And on Celebration Street, Lancero and her family are among a handful of the original buyers still clinging to their homes.
Many people on Celebration Street and elsewhere in North Natomas lost their homes because they could not pay. Others who could pay chose not to stay chained to houses worth much less than they owed, and either got their lender to agree to a short sale, or simply walked away and allowed the home to go into foreclosure.
Bankers have coined a term for this: "strategic default." The practice has become common, with some financial experts urging people to do it if they have little chance of recouping their investment.
"All of our friends are doing it," Lancero said. "Good, moral people are doing it. I've talked to people in the mortgage business. They say, 'It's morally fine. Just do it.' But if we can, we really want to do the right thing."
What happened on Celebration Street has played out on streets all over North Natomas and other newly minted communities in the Sacramento region. Entire neighborhoods turned over in the space of a few years as home values fell by half. In each of these places, however, there are people who have stuck it out in the face of overwhelming financial reasons to leave.
"The people who have found a way to stay have great resolve," said Sacramento City Councilwoman Angelique Ashby, who represents North Natomas and lives there in an underwater house, meaning she owes more on her mortgage than her house is worth.
In this sprawling community of 55,000 that rose from a floodplain in less than a decade, about two out of every five homes has received a foreclosure notice since 2006. Nearly the same proportion of homes has changed hands since December 2007, a McClatchy Newspapers review of foreclosure data and property records show.
Lenders sent out nearly 7,500 foreclosure notices in the past six years, though some homeowners received more than one notice.
On Celebration Street, only three of the 15 homeowners who bought new houses in 2005 remain. Two homes are being rented out by the original owners. Four homes were lost to foreclosure. Others were unloaded in short sales, where the bank agrees to accept less than what is owed.
Families who have stuck it out say a sense of moral obligation to pay their debts and a desire to give their children stability are among the reasons they stay in homes so deeply underwater.
"We gave our word. We signed the documents. We try to have integrity in everything we do," said Lancero, a mother of three who cited her Christian values as one reason her family has stayed put.
She and her husband, Jeff, a state worker, sold their SUV and took in a boarder to help pay their mortgage. They stopped driving their children to school in Davis, Calif., and began homeschooling them instead.
The couple are refinancing under HARP, a federal program that allows many underwater homeowners who are current on their mortgage payments to get a lower interest rate.
The Lanceros paid $447,500 for their 2,000-square-foot home in October 2005 and put $100,000 down from the sale of another Natomas home. It's now worth about $218,000, the tracking firm Zillow estimates.
That's typical for the neighborhood.
Home building giant Lennar built the three- to five-bedroom homes on Celebration Street on ample lots between 2004 and 2006. Prices ranged from $350,000 to more than $450,000.
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