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In Foreclosure Capital, Meltdown And Poverty Feel Permanent

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CAPE CORAL, Fla. -- They sent her off with a lavish retirement party -- dinner and drinks at a local yacht club, overlooking the inky waters of the Caloosahatchee River. They thanked her for her more than two decades of service in the office of a local real estate company and they wished her well.

She was 63 years old and looking forward to the rewards of a lifetime of work, moderate living and diligent savings. She had stashed away nearly $400,000 in her retirement savings account, a sum that seemed sufficient to produce the income needed to make the payments on her modest home in this community alongside the Gulf of Mexico. She envisioned occasional vacations, entertaining friends on her patio, and seeing a show every now and again.

But 10 years later, she is sitting inside the Cape Coral United Way house, amid hungry people waiting to pick up groceries at a food bank. She is about to see a career counselor, hoping for insights on how a woman might reenter the work force at age 73 with minimal computer skills, a rusty resume and a local unemployment rate above 11 percent.

The stock market crash that accompanied the financial crisis of 2008 wiped out half her retirement account. She is current on her mortgage, but only because her son has been making the payments. She worries that she might yet slide into the weeds of foreclosure.

Eileen -- who asked that her last name be withheld, citing embarrassment -- could pass for any retiree you might encounter on a cruise ship or at the Grand Canyon. She wears a crisp white blouse over Bermuda shorts and sandals. Her silver hair is cut short and neat. Yet here she is among the homeless and near-homeless, her gaze steely, as a clerk calls names to pick up donated cans of green beans and chicken noodle soup.

"It's humiliating to be in this position," she says, her composure giving way abruptly to tears. "There's a value that is inbred by your parents. You contribute to society. You don't take from it."

Eileen has landed at the confluence of two precarious currents tearing at the foundation of this waterfront community on Florida's southwestern coast and, more broadly, the American economic landscape. The gears of the foreclosure machinery grind on as millions of formerly middle-class suburbanites continue to slip into poverty -- each reinforcing the other.

Since the real estate bubble burst, replacing the finer points of no-money-down mortgages with details of the bankruptcy code, Cape Coral and the city of Ft. Myers across the river have become leading centers of foreclosure. As of August, more than one in 10 homes in the greater metropolitan area was in some stage of the process, according to CoreLogic, a housing data research firm. Nearly 17 percent of homeowners were delinquent on their mortgage payments by 90 days or more.

"I'd like to think we've been through the ugliest part of the foreclosure process," says Marc Joseph, a local realtor. "But we're nowhere near out of the woods."

Not coincidentally, Cape Coral has emerged as a conspicuous example of another wrenching American trend -- the growth of the suburban poor. Between 2007 and 2010, the share of people living in poverty in the suburbs of Cape Coral, a city of about 150,000, leaped from 11.3 percent to 18.6 percent, according to analysis of Census data by Elizabeth Kneebone, a senior research associate for the Metropolitan Policy Program at the Brookings Institution. Only Modesto, Calif., another community assailed by foreclosure, suffered a larger percentage increase during those years.

A full accounting of the human costs of this reckoning runs beyond the material facts of diminished incomes and homes lost to foreclosure. It encompasses the anxiety and bewilderment that now dominates life in many households.

That includes the soaring demand for aid. Local relief organizations such as Community Cooperative Ministries, Inc., which runs the food bank at the United Way House, have grown accustomed to a steady influx of people who had never before in their lives asked for help.

In 2007, the year the recession officially began, United Way received 19,000 calls on its 211 hotline, a kind of 911 call center for people who need food and help paying their bills. Last year the hotline fielded 59,000 calls.

A full accounting also includes those hunkered down inside deteriorating houses effectively lost to the messy filing cabinets of the financial system -- people who have not made payments to the bank in years, yet have received no orders to vacate. They occupy the surreal purgatory of the mortgage crisis, a morally ambiguous realm in a nation where the very concept of ownership seems to have been compromised. To the outsider, they are freeloaders occupying properties at no expense, but they speak of daily fears of eviction and a dispiriting sense of rootlessness, their futures colored darkly in uncertainty.

And a full accounting must include the spectacle of a senior citizen who began working as a teenager, who thought she would by now be sitting on her lanai drinking in the musty Florida breeze, yet instead needs charity to keep herself fed.

"It's devastating," Eileen says. "I did everything I was supposed to do."

HOUSE OF CARDS

Ever since the boom in American real estate gave way to a crippling bust, I have used Cape Coral as a journalistic laboratory to explore the consequences. On my first trip here, four years ago, I confronted a community in which declining housing prices were insinuating themselves into basic expectations about the future. The school district was scrapping plans to construct new buildings. The city was putting off a plan to expand the sewer system.

On my second trip two years later, the mess left behind by the real estate disaster had seeped into the fiber of the community. Code enforcement officers found themselves picking through the detritus left behind by families abandoning homes lost to foreclosure -- human excrement, boxes full of unpaid bills, furniture left curbside. Joseph, the real estate agent, had begun running foreclosure bus tours, serving up distressed real estate as something like an amusement park adventure for opportunistic buyers.

But on my most recent trip here late last month, the mess seemed to have crystallized into something permanent. More than its physical imprint of dilapidation, the decline has brought financial pain to the doors of people who did not even participate in the upside, back when real estate was synonymous with growing local spending power.

Even people like Eileen are now suffering.

Eileen did not partake in the orgy of real estate speculation that has made Cape Coral an involuntary poster child for homes surrendered to banks. She is living in the same 1,900-square-foot, single-story stucco home she built 18 years ago. Her mortgage balance is just $43,000. Unlike many of her neighbors, she did not tap her home equity for a newer car or a boat. She did not sign off on an exotic mortgage to trade up for a larger lot on the water with a swimming pool. She watched such things happening all around her with a mixture of scorn and alarm.

"I saw all these young people buying all these beautiful homes on the water," she recalls. "I thought, 'I can't afford to get something like that. How can they afford it?' It was not obvious to me, and I knew there had to be a consequence. It's a house of cards. It's going to come tumbling down."

But even as she avoided participating in the events that turned Cape Coral into a financial wasteland, her prudence did not render her immune to the consequences of its collapse. In every direction, houses once full of retirees and families with children have gone lifeless, with weeds overtaking some formerly well-tended yards, and trash piling up in empty driveways. She is not clear on the particulars -- who landed in foreclosure, who walked away, who moved, who died. But the effect is palpable: Her neighborhood is pockmarked by abandonment.

"It's been happening up and down the street," she says. "It's tragic. Young people raising families, they need a home. It's home to their kids. They're in school. They lose everything when they walk away. It's a very, very sad thing."

Eileen is adamant that she will hang on to her own home, yet she is also cognizant of the arithmetic. Her monthly mortgage payment is only $600, yet her retirement savings now produces less than $1,000 a month in income.

"Every month," she says, "I struggle to make that payment."

So she applies for jobs, bracing for rejection. Online applications for secretarial work yield come-ons for commission-only positions selling insurance. An administrative job she sees advertised at a nearby hospital attracts 1,500 applicants.

She is taking classes on how to use spreadsheets and word processing software, but she cannot dismiss the sinking feeling that even additional skills will not transcend the crudest facts of her situation.

"Look at me," she says. "I'm an old lady. Nobody wants to bring an old lady in."

LIFE BEYOND WINTER

Sprawling across a flat peninsula, Cape Coral has for decades beckoned as a developer's paradise, with tens of thousands of buildable lots arrayed on a network of canals filtering into the Gulf. From the Midwest to the Northeast, the winter-averse have descended, availing themselves of waterfront access at discount prices.

By the dawn of the 2000s, this process was accelerating dramatically, fueled by a credit bubble that made mortgages nearly as easy to secure as scratch-off lottery tickets. Speculators poured in, smelling easy winnings.

Between 2000 and 2004, the median house price in the Cape Coral-Ft. Myers metro area soared by 70 percent, reaching $192,100, according to the Florida Association of Realtors. In 2005 alone, the price jumped by another 45 percent to $278,000.

But these increases rested on the assumption that new people would continue to pour into the area and snap up the properties then being constructed seemingly at the rate of Lego pieces. When the markets figured out that much of the appreciation was the result of speculators flipping properties to other speculators, local real estate suddenly looked like a Ponzi scheme and prices commenced plunging. By 2008, the median home was selling for $153,000. In 2009, it dropped to $88,000, less than one-third of its value only four years earlier.

Thousands of homeowners who had bet on being able to refinance their mortgages before their low introductory rates jumped sharply higher instead saw their equity wiped out, triggering a wave of foreclosures. Speculators walked away, leaving their bad investments to the elements.

At the worst of it, in the summer of 2009, nearly 14 percent of all houses in the metropolitan area were in foreclosure, according to CoreLogic.

At the offices of the realty companies that remain, marketing efforts filled with golden sunsets and yachts have given way to signs promising full lists of distressed property. Outside Lehigh Acres, a spread of suburban development carved from former pasture east of Ft. Myers, the model homes once draped in banners for national homebuilders are largely abandoned. A hot-pink stretch Hummer sits parked in front of one such home, now the headquarters of a limousine company.

Some now see signs of a turnaround. By the middle of this year, the median home was again selling for more than $100,000 -- a fraction of the market's peak, yet up from its nadir. And sales volume has exploded: More 16,000 homes changed hands in Lee County, which contains Cape Coral and Ft. Myers, in both 2009 and 2010. The county is on track to hit similar numbers this year.

But much of this volume represents speculators returning to scoop up distressed assets. Few foresee an end to the ceaseless drip of foreclosed homes landing on the market, even as the pace of foreclosure has slowed.

The slowdown has more to do with bottlenecks in the court system than improving economics, say realtors and housing experts. Following disclosures that many lenders did not properly handle the paperwork during the real estate bubble, many banks lack the documents needed to establish title and foreclose on a given property. Faced with a flurry of lawsuits from state attorneys general charging them with unlawful foreclosures, and under fire from some judges who accuse them of unjustly seizing homes, mortgage companies are generally moving much more slowly to take possession of homes when the owners stop making the payments.

Where a foreclosure in Lee County once took an average of six to nine months to complete, the process now runs nearly two years.

Indeed, banks now find it so difficult to complete foreclosures that they are pursuing alternatives -- not least short sales, in which a house is sold for less than the outstanding balance on its mortgage. Four years ago, homeowners who owed more than their homes were worth were generally eager to unload their properties via short sales, but banks were reluctant to go along, resistant to selling at a loss.

Today that dynamic has reversed. Cognizant that they can remain for years before foreclosure becomes final, so many people here now live in houses without making payments that the banks offer them $10,000 and $15,000 checks to sell their properties short.

Whatever happens next seems certain to involve more distressed property landing on markets, though likely in a trickle as opposed to a surge. Realtors engage in a parlor game, trying to calculate the size of the so-called shadow inventory -- homes that banks have taken or will take through foreclosure, but which are not listed on the market. So long as this inventory remains, so will downward pressure on prices and the financial strain that has become as much a feature of life here as palm trees and golf carts.

"There's so many people that haven't even been addressed," says Joseph, the real estate agent. "There's still a big shadow out there."

PURGATORY IN PARADISE

Lisa Chandler is living in that shadow.

More than two years ago, in April 2009, the duplex she was renting fell into foreclosure. A judge gave her 30 days to vacate.

For Chandler, 40, this was an emergency. She had been unemployed since almost two years earlier, when the construction supply company where she worked fell on hard times and laid her off. A single mother of two boys, she went from earning more than $40,000 a year to subsisting on a $250 weekly unemployment check, supplemented by $400-a-month in food stamps and $200-a-month in child support. She was pregnant with her third boy. She needed a new place to live, fast.

She soon found a four-bedroom, two-story house with a swimming pool and jacuzzi in an older, established part of Cape Coral. The owner told her that he, too, was behind on his mortgage payments, but expressed confidence that he could ultimately work something out with the bank. He let her rent it for a mere $600 a month, with the proviso that the property was entirely her problem: If something broke, she was on her own.

"It sounded like a good deal," she says.

Two weeks after she moved in, the foreclosure paperwork arrived in the mail, and she prepared herself for another forced exit.

Then, nothing happened.

Months passed without clarity. More than two years later, little has changed.

"I think my particular house is kind of lost in the system," she says.

Last April the bank sent two people to the house with clipboards and cameras. They took photos and made a note that she was occupying the property, but nothing more came in the mail.

She recently checked the website of the Lee County Clerk's Office and discovered that the house was officially foreclosed in September 2010, yet no eviction notice has come.

She stopped paying the rent more than a year ago, when her unemployment benefits ran out. When she bumped into her landlord recently, he expressed surprise that she was still in the house, but seemed not to care.

Meantime, Chandler has grappled with the consequences of living in a home she cannot maintain. Back when her baby was only a few weeks old, one of the toilets developed a leak that she did not detect until it produced a $1,000 water bill. When she could not pay, the city shut off her water. After a month of shuttling in buckets of water from neighbor's homes, she persuaded the city to restore the flow while putting her on a payment plan, she says.

Then the central air conditioning system gave out. She added a window unit to a small bedroom downstairs, where she and her boys now typically cluster, exploiting their lone refuge from the heat. While her sons watch television, she sends out fresh job applications. She pressed her laptop against the wall to tap the one spot where she can sometimes cadge a free internet connection from a neighbor's Wi-Fi network.

Her house feels like what it is -- a tenuous shelter of indeterminate duration. Upstairs, clothes lie strewn across the bedroom floors. A bed sits parked in the living room downstairs, amid half-open boxes of books and clothes.

Behind a sliding door, the pool and hot tub are choked with neon-green algae and mud, since she cannot afford the chemicals needed to clean them.

The garage is full of odd pieces of furniture and bric-a-brac she picked up from an older couple who walked away from their home and moved into their RV. She has sold some of this stuff at garage sales to raise funds -- tools, a picnic table, a workbench.

She sold a lawn mower for $200. Since then, a city code enforcement officer has begun threatening her with a fine if she does not trim the green haze of grass and weeds -- a potential nesting ground for snakes and rodents -- encasing the property.

"He says, 'You shouldn't even be living here,' " she says. "You're squatting."

If only she had an alternative, she says, she would have moved out long ago.

"I don't want to stay here until I have to leave," she says. "I'd like to move, but I can't. I don't have any money."

The local utility recently informed her it would shut down her electricity for lack of payment. She managed to keep the lights by calling in a payment by phone, despite the fact that her bank account lacked the funds.

"I wrote a bad check," Chandler says. "I knew I didn't have the funds, but I said, 'Let me try it. If it goes through, I have electricity for another day.' "

Then she called 211, where an operator referred her to the United Way House. When she arrived, Community Cooperative Ministries agreed to pay her electric bill for a month.

How long will she stay in this home seemingly claimed by no one? Where will she go if she must?

She contemplates these questions while her 18-month-old son cheerfully explores the wooden children's table and chairs painted with farm animals set in a corner of the United Way House. At home, he lacks such amenities.

"My plan?" Chandler asks. "My plan is to get a plan. I'm just trying to get through, and I'm hoping they don't come knocking on the door."

THE SHADOW LENGHTENS

By all indications, several more years could pass before a knock comes. Cape Coral is so saturated with delinquency, and the banks are grappling with so much legal scrutiny, that the foreclosure process is lengthening further.

"The bank can only take back so many homes at a time," says Bobby Mahan, a real estate broker whose company, Selling Paradise, has become largely focused on the trade in distressed property. "Everybody who knows anything says this shadow inventory isn't going to clear out until 2016."

On the other side of the river in Ft. Myers, a woman who once earned a six-figure salary selling real estate says she has not made a payment on her own five-bedroom house for more than four years. Yet she is still there, inside a gated community. Her lender, Bank of America, sent her a delinquency notice back when she first stopped paying, she says, but has yet to complete the foreclosure.

The real estate agent, who shared her story on condition she not be named, says she was laid off in the midst of the unraveling in 2007. She now works part-time answering the phones at a retail business and does some real estate sales on the side, not enough to afford her nearly $5,000 monthly mortgage payment.

"I want out of this house," she says. "At this point, it's just depressing. It would be nice to get on with my life. But it wouldn't be fair to my neighbors to just walk away. The house is going to go to hell. There would be mold. I'm in a holding pattern."

Last month, she called Bank of America to check on the status of her file and see if she could pursue a short sale, she says.

"This idiot tells me that they don't have access to my file," she says.

Apparently, the bank lost the paperwork and has been unable to track it down. The representative promised to call back, she says, but three weeks later, her phone has yet to ring.

Sometimes, though, finality comes even when it is unwanted.

Four years ago, Asheley Mass, a 30-year-old single mother, paid $184,000 for a three-bedroom home in Cape Coral, taking on mortgage payments of $1,220 a month. At the time, she was able to manage that sum easily. She worked as a permitting and office manager at a local civil engineering firm, earning nearly $60,000 a year.

But when construction dried up, so did her hours and her annual bonus. Last August, she was laid off.

Mass tried and failed to secure relief from her bank through a mortgage modification, she says. Initially, she was turned away because she was current on her mortgage, making the payment by tapping her rapidly diminishing savings. A representative told her only the delinquent were securing relief. But when she stopped making payments, the bank offered to cut her burden by only $20 a month.

In January, she gave up altogether on making payments, intent on putting aside as much cash as possible to start over in a rental.

Last month, she found herself in a courtroom in downtown Ft. Myers, where she hoped to plead her case to the judge. This was the first house she had ever owned. It was home to her 11-year-old daughter. She had refurbished the kitchen. She wanted to keep it, if only the bank would share the loss and give her a lower payment.

The lawyers for the bank and the judge all seemed familiar with one another in a clubby sort of way, she says. They exchanged inside jokes and spoke in shorthand as they processed a fat stack of files. They acted as if they were surprised that she had bothered to attend a hearing that seemed merely pro forma, another box to check on the paperwork. And the judge appeared amused and unmoved by her speech, she says.

"I tried to tell him what had happened, how my hours had been cut and how I'd lost my job," Mass says. "He said, 'Well, when you signed the note, it didn't say I promise to pay unless I lose my job.' He was very sarcastic and treated me like another person trying to put one over on the system."

It was as if they occupied two separate worlds: these men of the court, moving their files through the pipeline, closing the books on failed investments -- and her, an oddball just for showing up, confronting the loss of her home.

"It feels awful," she says. "This was my first house, and it hurts."

THE NEW NORMAL

When the unraveling began here, a sense of hope endured that it was perhaps a momentary pause. Housing prices were plummeting, as they would soon nationally, but people told themselves that the Florida story would again prevail, exerting its magnetic pull on regions familiar with snow tires. Houses would be filled with retirees and younger people seeking bargains. Fear would give way to the next wave of upward mobility.

But so much time has elapsed with the damage still rippling out that a sense of resignation has entered the local conversation. Among those focused on providing aid, the mission has evolved from one of handing out temporary relief. Now, they talk long-term strategies to assist a community in which poverty has become indisputably entrenched, albeit papered over for a time by easy money.

"This is the new normal," says Jorge Acevedo, pastor of the Grace United Methodist Church. "The old normal wasn't normal."

Back in early 2006, Grace Church bought a failed grocery store in a low-income pocket of Cape Coral. The plan was to turn the building into a community center for after school programs, support groups for those struggling to overcome drug and alcohol problems, and other church gatherings.

The church envisioned operating a modest food pantry that would feed perhaps 1,000 people a year. Last year, it fed about 10,000 people. This year, it is on track to feed more than 20,000.

Acevedo and Wes Olds, the pastor for the campus that includes the community center, have launched a dialogue with university economists to try to settle on job creation strategies. They have begun classes to help people obtain GEDs, and coach job applicants on resume writing and interviewing strategies.

They are reaching out to area businesses to foster a sense of community in the interest of spurring growth, functioning as much like members of an economic development authority as spiritual advisers.

"We never dreamed this is what we'd be doing," says Acevedo. "This is nothing that Wes and I studied at seminary."

On a recent Wednesday evening at the community center, as people wait for donated bags of groceries, some pick up donated bags of pet food. The pet ministry, as it is known, was launched in recognition that when people sink into poverty, they often give away their pets, facing a choice between feeding the children or feeding the dog.

In a darkened wing of the former supermarket, dozens of bicycles line one wall. Volunteers attached to the bicycle ministry bring in abandoned models and donated parts, putting them in working order and handing them out to people who have lost cars and require transportation to get to work or school -- no minor matter in a sprawling metropolis with minimal public transportation.

The church is now pursuing the development of a community garden on a quarter-acre patch of the parking lot. The idea is to add homegrown fruits and vegetables to the typical goods donated to the food bank, where sugared cereals and glazed donuts take up shelf space. The garden project is also aimed at teaching congregants techniques they can use to grow food for themselves at home.

The church is working to develop the garden with a group called Educational Concerns for Hunger Organization, or ECHO, which is accustomed to helping poor people in malnourished corners of the globe.

"They have been doing this in Africa," says Olds. "Now, there's a need to do this right here."

At the back of the community center, a thrift store offers many of the goods needed to outfit a home -- high chairs, clothing, appliances.

It is also the scene of a love story that seems perfectly emblematic of the age, a romance forged in foreclosure.

Two years ago, Stacy Linder, 42, broke his wrist, causing him to miss three months of work as a driver for Federal Express. Without his wages, he found himself unable to make the mortgage payments on his three-bedroom house, beginning a painful slide into foreclosure.

Distraught and in need of fellowship, he began volunteering at the Grace Church thrift store. He found himself drawn to the store manager, Donna Wenzlaff, who had lost her own home to foreclosure after she was laid off from a local bank. Kindred spirits, the couple was soon engaged.

They now spend much of their time sifting through the household goods that arrive at their loading dock -- some donated, others scavenged from houses lost to foreclosure.

"It's strange," Linder says. "You see truckloads pulling in here with furniture and things, and you think about the heartbreak of the people who left it behind. You know what they've gone through. It's amazing what people have had to walk away from."

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