House of Cards: The Faces Behind Foreclosures

• Share

(4 of 4)

"I always managed to make ends meet," Stevens said over breakfast at a burned-toast diner near her home in Independence, Mo. "I was working day and night, but that's what happens in this country if you're not educated. Anyway, I'm not afraid of hard work."

Along came the curveball. Gateway's personal computers, marketed in cow-spotted boxes, lost their appeal. Sales tumbled; stores closed. The company's stock price plummeted. Fewer customers meant less customer support. When the Kansas City operation finally closed in 2006, Stevens was among the last employees let go. Now, for the first time in her life, she's finding it difficult to talk her way into a new job.

"It's a hard time to be 56, going on 57, and looking for work," she said matter-of-factly. "They're not allowed to say it, but you see it in their eyes: Why hire an older person who might have some medical issue when there are young people behind you in a line that goes clear out the door? I really can't blame them. Businesses are struggling, and insurance is a big problem." That's when she can manage a face-to-face encounter at all. Many employers take only online applications nowadays, a fact that discounts her charm while highlighting her lack of education. "You can't go in and sell yourself anymore," she lamented. "You just send your résumé into cyberspace and hope that it works."

In the roughly 14 years that she has owned her home, Stevens refinanced three times — nothing crazy — but the bad news for her was that the third time was very near the peak of the real estate bubble. At that time, in 2005, her 3,000-sq.-ft. house was appraised at $185,000; she now owes about $159,000 on it. Real estate agents have advised her that she could not sell it for more than $145,000. Her debt is actually two loans, the larger of which was recently modified from an adjustable rate to a fixed-rate note at 9% interest. The second loan charges over 10%, and the two payments combined are slightly more than $1,400 per month. (Read: "How Stressed Is Your Bank?")

With only a part-time job — she visits office-supply stores and makes sure that the floor-model printers have enough paper and ink for demonstrations — Stevens found she could pay for food and utilities, or she could pay the mortgage. Not both. After she fell four months behind on her payments, the bank moved to foreclose. Stevens briefly considered letting the bank have the house, but her oldest daughter, Maggie, 28, has a new baby and is enrolled in nursing school. "I just have to get her through that," Stevens explained. So after several sleepless nights, she decided to go see Wagoner and file for bankruptcy, which stalled the foreclosure process. Now Stevens is hoping that Obama's new program will persuade the mortgage company to reduce her debt to the current value of the house.

And her job search continues. "It takes $14 per hour for me to meet my bills," she said. "That's what I was making at Gateway when I was laid off. But no one wants to pay that much, so I will be starting lower and hoping for a raise. That's how it works. You just keep starting over." A few months back, Stevens had a lead on a customer service job with a large, venerable company. The pay wasn't great; the commute was long; gas prices were high — yet Stevens had just about concluded it was the best she could do. The company was called Citigroup; they're not hiring anymore. (Read: "Will Citigroup Survive?")

The Brutal Game
There are about 75 million homeowners in America, according to the U.S. census. The latest gloomy estimates suggest that upwards of 6.4 million homes are at risk of sinking into foreclosure by the end of 2012. That number has no precedent, and its impact is only beginning to register. Populist pundits have struck a nerve with angry denunciations of Obama's plan. "See if we really want to subsidize the losers' mortgages," CNBC's Rick Santelli demanded — and the gut level reaction of millions of taxpayers across the country was, unquestionably, no. Not if we have a choice. (Read: "How to Fix the Housing Market?")

It's a brutal game, though, in which a single strike makes you a loser. And that brutality explains another strain of anger beginning to bubble up from the newly bankrupted. People like Paula Stevens and Joseph Zachery weren't flipping houses or lying on their loan applications. They didn't pile up mountains of credit-card debt. They worked hard for what they had and shared their modest portions with others. Each readily admits to making occasional mistakes with money, but even Warren Buffett has made occasional mistakes with money. Their bitterness stems from a feeling that they've held up their end of the social contract, but now the terms of the deal have been rewritten by malign forces. "It's a different world and a different time," Stevens said ruefully. "Even if you work hard you get laid off." Zachery put it this way: "It's not the United States anymore. Those at the top have sold out the bottom for money."

Both the rant and the laments are too broad. Not everyone who has fallen behind on a mortgage is a loser complicit in the housing collapse. And not every solvent American has broken faith with those who are struggling. Obama, in presenting his mortgage plan, promised to distinguish between the sinners and those unlucky bystanders dragged down by the economy's undertow. His lifeline, he insisted, will not "rescue the unscrupulous or irresponsible." Delivering on that promise is vital to Obama's future, because hope is a tough sell to people who believe that only the wicked prosper. And though it's not easy preaching cooperation when the public is feeling tapped out and TARPed to death, Obama may not get a second chance.

— With reporting by Maya Curry

See pictures of the global financial crisis.

For constant business updates, go to 24/7wallst.com.