Hard times costing many people their homes

updated 6:11 p.m. ET Oct. 28, 2007

ROCHESTER HILLS, Mich. - At 14, Joan Cyman hauled wood and clutched a hammer with her father to build a deck on the back of their house.

It was one of many projects to turn the already attractive four-bedroom, three bathroom suburban house into a home. She was 12 in 1976 when they left a rough neighborhood in Detroit to be among the first families on the cul-de-sac in the gleaming new subdivision.

"It was like a family home," she said. "I felt like it was left to me and should have stayed there the rest of my life."

It didn't.

At 41, Cyman is 145 miles north in rural Roscommon County, trying to put her life back together after losing her home to foreclosure in 2006. Now a long-vacant eyesore with a patchy, overgrown lawn and torn for sale sign in front, the Rochester Hills residence has a buyer, a businessman whose sideline buying foreclosed homes has picked up as the housing market has tanked.

"It does present a lot of opportunities," said Mike Smitha, 52, a local investor who is waiting to close on the property.

"You have to look at it as a business. It's simple economics: Buy as cheaply as you can, maximize the money it's going to take to repair and sell it for as much as the market will bear."

The home was one of 700 seeking new life in a recent auction in Michigan, which had the fourth highest foreclosure rate in the nation in September, according to Irvine, Calif.-based RealtyTrac Inc. Automotive industry cutbacks in the state have led to the nation's highest unemployment rate as well as a declining population.

When people fall on hard times, so too do their homes.

Cyman said money disputes with her husband, from whom she's separated and divorcing, made it difficult for her to make ends meet. She fell behind on her mortgage payments, and her lender started the foreclosure process in September 2005 on a $228,650 mortgage she took out nine months earlier.

The colonial-style house at 949 Homestead Court has a purchase agreement for $136,500 — a "deal of the century" for a home whose value, once repaired, would be $250,000, said real estate agent Ron Walraven. The home that once impressed neighbors now is a handyman's special: Walraven estimates it needs about $40,000 to update an old kitchen, repair damage caused by basement flooding and perform other major projects.

Like so many other homeowners, Cyman took advantage of lower interest rates and better terms in the housing bubble in the early part of the decade. In 2002, after the original $37,500 home mortgage established by her late father was paid off, she took out the first of three adjustable-rate mortgages to pay large bills. Two others followed, and she said she was enticed by the lower rates she was being offered.

"I did (get) caught up — everyone was doing it," she said. "They'd call me and say, 'I can put you in a seven-year ARM.' The payment would go down."

Yet her overall household debt rose. Her salary would have covered the mortgage — which she said was about $800 a month by the time of the final refinancing — but hers was the only income coming in at the time.

Cyman said she tried to work with her lender, Wells Fargo & Co., on a plan to catch up on back payments. She said the company was uncooperative and told her there was nothing it could do.

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