FRESNO -- Thousands of Central Valley families are losing homes to foreclosure because:
a) They lied about their incomes to secure unrealistic loans.
b) Unethical loan officers took advantage of families by signing them up for risky loans they could not afford.
c) Their adjustable rate mortgages are resetting, resulting in much higher mortgage bills.
All of the above might contribute to the housing crisis, experts said at Thursday's first-of-its-kind San Joaquin Valley Housing Symposium. But all of those factors might be overcome if not for plummeting property values, the experts said.
Even when in trouble, people previously could refinance or sell. That's no longer a good option for many facing foreclosure, presenters said Thursday.
"Foreclosure is the freight train that runs over the homeowner," said Jeff Schrager of the No Homeowner Left Behind nonprofit organization based in Fresno. "I submit that we have a local disaster here. People are losing their homes on a daily basis."
Event organizers had no idea that the foreclosure crisis would become a significant theme when they began planning Thursday's housing symposium a couple of years ago. Back then, the real estate market still was riding a wave of record property value increases.
The valley, with its historically low wages compared with other places, became a breeding ground for subprime mortgages, some of which offered 100 percent financing, unheard of in previous generations. Groans rose from Thursday's audience of several hundred when presenters spoke of stated-income loans, called by some "liar loans."
"Which side of the table was lying?" asked John Olson of the Federal Reserve Bank of San Francisco, rhetorically. "Maybe both were. Some people inflated their incomes. Some borrowers were defrauded, with brokers writing in the incomes they wanted."
The presenters cited statistics showing San Joaquin, Stanislaus and Merced counties at the epicenter of the nation's foreclosure crisis for the past year. Federal officials say the housing slump may extend into 2009, and a California Building Industry Association economist last week predicted the Northern San Joaquin Valley housing market would be among the state's last to rebound.
Foreclosure sales throughout California reached an all-time high this week with a tenfold increase in properties sold at public auction, compared to a year ago.
Martha Lucey of ByDesign Financial Solutions, a credit counseling organization with offices in Modesto and Merced, said her office predicted an avalanche two or three years ago. People were spending more than they were earning and filling the gap by tapping home equity, she said. Most only started to seek counseling when dropping property values shut off that escape valve, Lucey said.
"It was difficult to figure out when (the crisis) was going to hit," she said. "We saw it hit in droves this year."
Some families fell victim because they had no contingency plan for events such as divorce, injuries, sickness or job loss for other reasons, Lucey said.
Life events driving foreclosures
"The foreclosures we're seeing in many cases are due to life events," she said. "Many homeowners planned for a best-case scenario and the best-case scenario didn't happen."
Though her counselors' highest hope is finding ways to save a family's home, they often have no choice but to settle for crafting an effective exit strategy, Lucey said, because owners many times wait too long to seek help.
Many economists in recent months have predicted a deepening disaster because of the 1.8 million subprime mortgages expected to reset in coming months. But Olson said the blame is shifting.
"We're finding that it's not resets, but it has much more to do with declining home prices that prevent people from refinancing or selling," he said.
Lynn Jacobs, Gov. Schwarz-enegger's director of Housing and Community Development, said people are mistaken if they see brown yards from multiple foreclosures in their neighborhoods and conclude that California has plenty of available housing.
"In fact, we're 2 million housing units short for our population," she said, and the number of low-income families unable to afford housing costs continues to rise.
Olson said maps of foreclosures in some Bay Area cities show distressed clusters, while those in the valley commonly spread across all neighborhoods.
Fresno's city housing and community development division sponsored Thursday's symposium, which also addressed issues ranging from green building standards to regional planning.