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Foreclosure Crisis in California Devastates Some Neighborhoods

February 16, 2009 at 6:40 PM EST
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In California, one in 25 homes faces foreclosure. Areas such as Inland Empire, known as "the affordable Orange County," are particularly hard-hit. KCET's "SoCal Connected" program reports on the crisis.
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TRANSCRIPT

JUDY WOODRUFF: Now, excerpts from two reports produced by our PBS colleagues. First, the story of a family facing foreclosure in Riverside County, California. It was originally aired on KCET Los Angeles as part of its weekly series “SoCal Connected.” The correspondent is Judy Muller.

JUDY MULLER: It’s another weekend in suburbia, and Joe Balli is cutting his front lawn. His wife, Erin, cleans the patio door and wipes down her favorite thing in the kitchen, the big center island. The family is also having a yard sale today.

JOE BALLI: All the stuffed animals are 25 cents each. There you go, you got a sleeping buddy, our first customer of the day.

BALLI CHILD: We have Scooby Doo movies with the Flintstones and Yogi Bear.

JUDY MULLER: None of this would be at all unusual except for one thing: The Ballis don’t even live here anymore. They’re facing foreclosure.

JOE BALLI: I can’t even short sell it. I mean, just can’t do it.

ERIN BALLI: Trying.

JOE BALLI: You know, one thing about our kids is they don’t wear them out. They just outgrow them before they can wear them out.

Troubles start with layoff

Erin Balli
You feel like you're in the deep end of a pool, and you're underwater, and you can't breathe or get up.

JUDY MULLER: Their financial problems started when Joe was laid off from his job at an R.V. dealership.

JOE BALLI: Rock bottom prices today.

ERIN BALLI: Yes, we can help you out.

JUDY MULLER: Joe's new job as a truck driver pays about half of what he used to make. And, even with Erin working, the numbers just don't add up.

ERIN BALLI: You feel like you're in the deep end of a pool, and you're underwater, and you can't breathe or get up, and just -- I was glad my kids were with my mom at that time, because I lost it. And it just -- it's hard.

JUDY MULLER: They felt lucky to find this mobile home to rent.

JOE BALLI: $2,700 a month or $1,000 a month, when you take a $3,000 a month pay cut, I've got to do what's best for the family.

JUDY MULLER: Reluctantly, the Ballis moved out of the house, stopped paying the mortgage, and listed it as a short sale, which is when an owner owes more than the property is worth.

JOE BALLI: Whatever we can salvage of our credit, if it means taking the short sale, working the numbers with the banks, in lieu of just totally packing up and walking away and letting the lawn turn dead and letting the house go to pot, we're trying to salvage something, for them and for us.

Home's value plummets

Joe Balli
There's one thing I could take out of that house would be that door jamb. Our kids grew in this house, so it's tough.

JUDY MULLER: Joe and Erin's house was once appraised at over $400,000. It's now listed for $180,000.

JOE BALLI: Many Christmases.

JUDY MULLER: Many Christmases? Where was the tree?

ERIN BALLI: Right here.

JOE BALLI: Right there in the corner.

JUDY MULLER: Right there in the corner.

JOE BALLI: Right there in the corner.

Matthew asked me the question -- it was the hardest thing. "Well, when we lose our house, do we lose all the furniture? Do we lose our toys?" And it was hard, because they thought they were going to lose everything, toys and all.

ERIN BALLI: On our pantry wall, on the -- oh, God...

JOE BALLI: Door jamb.

ERIN BALLI: Thank you. On the door jamb -- I need a minute.

JOE BALLI: On the door jamb in the pantry, we started marking the kids' height. And every couple of months, we progressively just marked and dated them. I mean, it goes back all the way to '01 and all the way up to '08 of last year. There's one thing I could take out of that house would be that door jamb. Our kids grew in this house, so it's tough.

JUDY MULLER: One thing you can't take.

JOE BALLI: No, one thing you can't take. Sorry.

That house just sold as a foreclosure. This house here sold as a foreclosure. The house across the street has been a two-time foreclosure. That house over there was a foreclosure. And there's three more just two houses up from us that were foreclosure.

JUDY MULLER: So what does that do to your possibilities?

JOE BALLI: It makes it very difficult.

Short sales

James Festini
Realtor
And we'll lose the buyer and the property values continue to decline in that three to five months, which is a lifetime in this market.

JUDY MULLER: The catch with short sales is that the bank can either accept or reject whatever offers come in. And with all the foreclosures around, including one right next door, the Ballis' house has to be competitively priced.

Competition with foreclosures is just one factor working against families like the Ballis. Here's another: Banks and lenders are dragging their heels when it comes to approving short sales. And that means potential buyers are lost and the homes often end up in foreclosure.

JAMES FESTINI, realtor, Century 21: This was the affordable Orange County.

JUDY MULLER: The Ballis' realtor, James Festini, says bank negotiators handling short sales are overwhelmed and backlogged.

JAMES FESTINI: The length of time it takes to get the property approved by the bank or the first mortgage-holder is generally three to five months. And we'll lose the buyer and the property values continue to decline in that three to five months, which is a lifetime in this market.

JUDY MULLER: How many buyers have you lost?

JAMES FESTINI: On this particular house?

JUDY MULLER: No, any of the houses you've been...

JAMES FESTINI: Oh, countless, countless buyers.

Keeping memories

Balli child
We could swing at the park at our new park.

JUDY MULLER: He says a well-priced foreclosure can sell immediately because the red tape has already been cut, but a short sale is often complicated by a property having a first and second mortgage, so it's harder for the two lenders to agree. That's exactly why the Ballis lost their first and only potential buyer.

JUDY MULLER: So, someday, who would you like to have living here?

ERIN BALLI: I'd like it to be a family, you know, with kids so they can enjoy it, because we have the pool and the -- you know -- can't take the swing set with us, so that's still here. And just someone can enjoy it just as much as we have.

BALLI CHILD: We could swing at the park at our new park. So maybe that will be funner or people will love it the same way ours is.

JUDY MULLER: But you have to leave it behind?

BALLI CHILD: Yes. I'll remember it forever.

JOE BALLI: The one person that touched me, well, was -- bought some stuff. How much? Two dollars, handed us a $20 and said, "Keep the change."

Erin, why are you going to cry?

That was overwhelming.

Sweetheart?

He wasn't driving a Bentley. He wasn't in Beverly Hills.

It's OK.

He's just probably an average Joe, middle-class working guy, that his heart opened up to us.

We'll be fine, OK?

ERIN BALLI: OK. OK.

JOE BALLI: How about some water? Your son will sell you water for a buck.

JUDY MULLER: Humor, humility, hope, the Ballis are rich in those qualities. And as for homeownership, they have their own system of appraisal.

JOE BALLI: A home is where we're at, where my four of us are, my wife and my two boys, where my family can come over, Erin's family can come over, and celebrate Christmas, Thanksgiving, Easter, holidays, birthdays. That's a home. What we let go was a house. The home, I could take all those memories with us.