How to lose your home in a few easy steps

SAN DIEGO - Delia Toothman once pursued the American dream of owning her own home. Now, she is living the American nightmare.

In just three years Toothman, 30, a former Navy officer and bioscience technician in San Diego, went from $18,000 in savings to $16,000 in credit-card debt. She once lived in a home she co-owned; now she lives in her father's garage.

Toothman is just one of thousands or even hundreds of thousands of Americans who find themselves homeless and broke in the aftermath of the housing bust. Hers is a cautionary tale of hard-working and well-intentioned young woman who got swept up in the real estate madness of Southern California, helped along by what she describes as bad advice from industry professionals.

“I feel like my life is ruined,” she said in an interview, wiping away tears. “I only wanted a house. I wanted my own property."

Toothman's story began when she left the Navy in 2004 and returned to San Diego at what turned out to be the peak of the city's real estate boom. By mid-2004 the median price of a home in the metro area had risen to $520,000, up 30 percent from a year earlier. Condo prices also were up 30 percent year-over-year to a median of $368,000.

Fearful of missing out, she and her younger sister decided to buy a home together. “We just wanted to get a piece of land, something we could own, so we weren’t paying rent; we were buying,” said Toothman.

While Toothman was only qualified to buy a $360,000 home, Toothman's agent showed her properties in the $400,000 range. Her mortgage broker urged her to finance 100 percent of the purchase price with interest-only loans that would adjust in two years.

Any talk of a housing bubble was dismissed.

“I got pressure from the real estate agent and officer,” Toothman said. “The loan officer was saying, 'Oh, prices always rise on houses.' ... The thing, is get into the house and I can always refinance you after that into another loan."

“I was like, ‘I don’t know,’ but he kept on saying, ‘If you’re renting, you’re losing this much money, but the way housing prices are going up, it’s really a good investment and you get your money back in taxes,’” recalls Toothman. “I was convinced it was a good thing.”

Toothman was hardly alone.

“It’s the American dream and they got caught up in it,” said Gary Aguilar, a vice president at Springboard Non-profit Consumer Credit Management, an advisory agency based in Riverside, Calif. “Even if it didn’t make sense, a lot of people just passed ‘Go’ and went straight to the dream home.”

Now Springboard and similar agencies are being deluged with phone calls from desperate owners trying to save their homes or stave off bankruptcy.

At Springboard, representatives handled 11,000 phone calls in August, up from about 2,000 a month last year, said Aguilar.

Toothman ended up buying a $415,000 condo in June 2004. The mortgage was entirely under her name, since her sister could not qualify. But the two agreed to split the monthly payments of $2,400.

For a year, Toothman struggled with her half of the payment. Her monthly take-home pay was $2,000. She started eating at her savings to pay the mortgage.

Toothman tried to refinance the loan to lower the monthly payment, but she was unable to qualify.

In late 2005, Toothman decided to sell. But prices were already falling, and by early 2006, the condo was worth less than the outstanding balance of the mortgage, putting her "under water." Toothman’s real estate agent found a buyer who offered $350,000 – $65,000 less than what was owed.

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