U.S. housing chief visits troubled Merced

MERCED — U.S. Housing and Urban Development Secretary Shaun Donovan stood Thursday in front of two foreclosed houses here to reiterate plans to offer more help to distressed homeowners.

As he did Wednesday in Las Vegas, Donovan announced that more homeowners will be eligible to modify their loans under the Obama administration's Making Home Affordable program, which targets people who have mortgages owned or guaranteed by Fannie Mae or Freddie Mac.

The loan-to-home-value ratio had been set at 105 percent. It's now 125 percent, which Donovan said will increase the number of people eligible in California by 60 percent.

The change should allow more valley residents to qualify for the program, though it's likely people who bought at the peak of the housing market still won't be helped.

The housing secretary toured Merced at the request of Rep. Dennis Cardoza, D-Merced, who has been trying to focus Washington's attention on the Northern San Joaquin Valley.

Stanislaus, Merced and San Joaquin are at or near the top of the list of counties with the most foreclosures nationwide.

Adjustable-rate mortgages, subprime and other loans with extremely low initial interest rates were a popular choice for valley residents trying to get into a market where prices had soared beyond the reach of most of them.

The housing market downturn that started in late 2005 quickly snowballed as prices collapsed. That left homeowners with payments that were resetting to dramatically higher levels and no way of refinancing because their houses were worth far less than they paid for them.

That resulted in record foreclosures. About 40,000 homes have been foreclosed on in Stanislaus, San Joaquin and Merced counties since January 2007, costing lenders more than $16 billion in unpaid mortgages.

Every community has been touched, with vacant houses, brown lawns and for sale signs in most neighborhoods.

Cardoza likened the area's devastation to that seen after Hurricane Katrina.

"It really doesn't matter to a family if a windstorm put their possessions on the front yard or the foreclosure agent put your possession on the front yard," he said. "You're still homeless. You're still having to look your family in the eye and explain to them you have no place to go tonight."

Cardoza and Donovan walked along Independence Court, a well-established neighborhood off Highway 140 that's been hit by foreclosures. They then went across town to Saddleback Court, a street inside the half-built Sierra Vista subdivision in the southeast part of the city.

One house was sold April 12, 2006, for $340,000. It's being sold to a first-time home buyer and was listed at $83,500. There's another foreclosed house next door with weeds all over the property.

"This is a cancer all over the country," Cardoza said. "We're just more affected by it."

Donovan touted the administration's economic stimulus package, which included $2 billion more in foreclosure aid funding for local governments, and also the proposed consumer protection agency.

"We're working together to make sure this never happens again," Donovan said. "I've heard stories about people being taken advantage of that make my blood boil."

No jobs worsens the trouble

Problems in the valley housing market have been compounded by double-digit unemployment.

Stanislaus County's jobless rate was 16.3 percent in May, considerably higher than the same time last year when it was 10.5 percent. San Joaquin County's was 15 percent in May and Mer- ced's was pegged at 17.3 percent.

Those figures were lower than April, but they follow the traditional trend of rising employment as the region's harvest season kicks into gear. However, the double-digit unemployment rates are the highest for the region in more than a decade.

The housing market has shown some signs of improvement. Sales have picked up steadily over the past year and home values even rose slightly in Stanislaus County in May for the first time in months.

But most housing experts are forecasting a new round of foreclosed properties will hit the market as legislative moratoriums designed to encourage mortgage modifications begin to expire.

Merced County Association of Realtors President and Councilwoman Michele Gabriault-Acosta noted that many homeowners owe far more than what their homes are worth.

Still, she said the expanded program may help a little.

"Any help we can get will be appreciated," she said, but added, "I don't know what kind of change we'll see."

Bee business editor David W. Hill contributed to this report.