Homeowner Makes Sign In Foreclosure Fight

Juan Guzman has a large, lawn-wide sign in his front yard labeled 'JP Morgan Chase help.' It's his last hope to save his dream home.  The Acreage man built his house in 2007 but couldn't handle the mortgage payment of $3,600 a month.  He said he tried negotiating a lower loan from his bank but it wouldn't budge.  Last year Guzman became unemployed and now his house is in foreclosure.

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'Vultures' Save Troubled Homeowners

Anna and Charlie Reynolds of St. George, Utah, were worried about losing their home to foreclosure last year. Then they got a lucky break—from an unlikely savior.

Selene Residential Mortgage Opportunity Fund, an investment fund managed by veteran mortgage-bond trader Lewis Ranieri, acquired the loan at a deep discount and renegotiated the terms with the Reynolds. The balance due was cut to $243,182 from $421,731, and the interest rate was lowered. That reduced the monthly payment to $1,573 from $3,464, allowing the family to stay in their home despite a drop in Mr. Reynolds' income as a real-estate agent. "It was a miracle," says Ms. Reynolds.

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Foreclosures Shifting To Affluent ZIP Codes

Foreclosures are going upscale across the Bay Area.

Nearly 1,000 homes valued above $730,000 were repossessed by banks in the nine-county region in each of the past two years, according to a Chronicle review of public records compiled by MDA DataQuick, a San Diego research firm. This year is on track for similar numbers, with 223 homes in that price bracket repossessed by banks since January.

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An Alternative to Foreclosure

The federal government launched rules earlier this month to help facilitate short sales. But for some homeowners who are unable to complete a short sale or who don't qualify for one, there may be an alternative to foreclosure. (With a short sale, the bank agrees to let you sell the house for less than the value of your mortgage.)

The alternative is a "deed in lieu of foreclosure" agreement, which allows homeowners to voluntarily turn over the deed to their house to the lender.

This option often allows the homeowners to negotiate more favorable exit terms than a foreclosure allows, including staying in the home for several extra months or potentially lessening the negative impact on their credit, says Keith Gumbinger, vice president at mortgage-education firm HSH Associates.

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