Califoreclosure

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Major banks and savings and loans may let payments slide for a three-month grace period before starting foreclosure on a property. In California, homeowners legally have 90 days to make up delinquencies once a foreclosure starts. After that, lenders can move to sell the property. However, some moneymen offer almost no grace period. A group of private investors started proceedings against Colombian Immigrant Francisco Cubillos in March when he missed a $1,131 payment by just 17 days. Cubillos was able to keep his Chatsworth house only after he paid a $600 penalty along with the missed installment.

A few California consumers have turned their monthly housing payments into a risky financial game. Businessman Craig Bowers stops paying the mortgage on his Tarzana home whenever he is short of cash, and resumes when times are better. Bowers has survived three foreclosure actions in the past two years, and still has his house. Says he: "Foreclosure is a game which I play. I know down to the hour when I have to pay the piper."

Many experts expect foreclosures to continue climbing in the U.S. because of the recession and towering interest costs. A rising default rate can also make hard times worse. Consumers feel poorer and tend to spend less when they fear for their homes, or when values are dropping, since housing is the largest investment that most people make. In California, where home prices have more than quadrupled since 1970, the impact of foreclosures may be especially damaging. Says Shulman: "People here have been counting on their homes to build their fortunes." Those fortunes increasingly look as if they may be built on sand.