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By: Joanne Cleaver, Milwaukee Journal Sentinel
Date: January 6, 2008

Keith and Vicky Newson appeared destined to become subprime-lending statistics. Three years ago, at the height of the housing and lending boom, the longtime renters and parents of three children started house hunting in Milwaukee in earnest.They quickly found real-estate and mortgage brokers intent on persuading them to take on more house and more debt than they thought they could afford. At that time, such was the common wisdom of the housing boom. Annual house appreciation in many areas hit double digits in 2005. Anyone could get a mortgage, even without a down payment or proof of a steady income. Some of the easy loans of 2005 and 2006 were bound to sour, but lenders figured borrowers could get out of them by selling their houses, maybe even at a profit. The great mortgage mess of 2007 was but an economist's frown line. Meanwhile, moderate-income families who bought during the great real estate run-up often found that holding onto their new houses was at least as much work as buying them. Keith Newson started searching for a house in 2003, driving around on weekends looking for "For Sale" signs, driving down alleys to check out yards and garages. Keith, 40, and Vicky, 39, were renting a house for $640 a month. It was crowded, with three kids. Keith wanted a place of his own -- "a piece of America," he said -- something solid to show for years of work, rooms of their own for the kids and a garage for the 1993 Cadillac Seville he was restoring. Newson figured he could pay no more than $100,000 for a house and carry no more than $800 a month for a combined mortgage and property taxes. But as he tried to piece together a house and a loan, Newson said, mortgage and real-estate agents pushed and pushed him to reach beyond his grasp. A real-estate agent showed him through house after house priced at $120,000 to $130,000. A mortgage broker told him he could swing a monthly mortgage payment of $1,250. "I can't afford that," Newson told him. So he went to another mortgage broker -- who calculated the same number. He saw houses with fresh green yards, perfect for games with his boys. He drove by, pulled over to look at clean-cut split-levels with sturdy garages flanked by regiments of shrubs. He approached the sellers on his own to see whether they'd budge on their asking prices, but they wouldn't. Meanwhile, brokers continued to urge him to make an offer, any offer, that would result in a mortgage payment 50 percent greater than what he believed he could swing. They would make it work, they said. "Man, it hurts," he said. "You get hyped up about a house, and then you tell them, 'I know what I make and what my wife makes, and we can't make it. We have to leave it alone.' But they still keep calling. It was tearing me up to deal with these people." A year of fending off mortgage brokers and real-estate agents was starting to wear down Newson's resolve. He and Vicky went to a Milwaukee homeownership-counseling agency, Housing Resources, partly for moral support and partly for practical guidance on repairing some credit stumbles. These days, staff members at Housing Resources are seeing a lot of homeowners who fear they won't own their houses for much longer. "People are more apprehensive [about buying a house] because they are seeing the fallout. They have friends who are losing their houses, friends who had to give their houses back to the bank," said Consuelo Hernandez, a counselor with the agency. There isn't much the counselors can do when a homeowner calls in a panic, months behind on the mortgage with creditors threatening foreclosure. The counselors wish that homeowners would come to them before they buy, as the Newsons did. "He was in a big rush," said Executive Director Trena Bond of Keith Newson. "It had been on his mind so long. And there were so many messages: 'Do it now. You don't have to wait.' " Mortgage payments are a big factor, but not the only factor, in holding onto a house, Bond said. Property taxes, utility costs, gas and food expenses have risen faster than wages, especially for working families such as the Newsons. The Newsons were "better than typical" in their commitment to cleaning up their credit and getting into a house on their own terms, Hernandez said. They saved three months' worth of house payments as an emergency fund. They agreed to not refinance the conventional mortgage they applied for through a local lender recommended by Housing Resources, and to not take on any more consumer debt for at least six months. The first two or three years are iffy for new homeowners as they meet unexpected expenses and struggle to maintain their financial balance, Hernandez said. Some new homeowners fall prey to easy- credit offers, and their bills soon overwhelm them. Others take on second jobs to pay for the new roof or the new sofa. By the end of the second year, the Housing Resources staff can tell who will make it and who won't. In the fall of 2006, Keith Newson's scouting led him to a solid 1950s-era ranch house. He negotiated the price down from $112,000 to $105,000; went with the conventional lender recommended by Housing Resources; netted a $6,000 down-payment grant; and persuaded the seller to include installation of a new sump pump at the recommendation of the home inspector, in hopes of heading off at least one likely expense. On the morning of Dec. 15, 2006, the Newsons took the morning off from work to close on the house. Vicky went back to finish her shift at a child-care center, and Keith returned to American Millwork & Hardware, a Milwaukee building-supply warehouse, where he works as a forklift operator. "You're happy," his boss told him. "Go home." He drove to the yellow brick ranch and turned the key in the front door, walked into the tiny living room, cleaned out the broken dresser and papers left by the sellers, and started to paint. Behind the house was a one-car garage with battered siding and an eroding roof. It needed a complete overhaul, but worn as it was, it was one of the reasons the Newsons bought this house. The garage was home for the Seville, a "flashy car," said Keith, to take for summer drives with Vicky, and the seed of a sideline business restoring vintage autos. An ancient lilac burst into purple bouquets in late April, perfuming the Newsons' comings and goings through the side door. Three months of grime traipsing over the front threshold was too much for Vicky Newson, who taped a paper sign to the front door directing everyone to come in through the side door, where the sight of a dirty vinyl floor didn't rile her as much. The Newsons had made it through their first winter of homeownership with no financial upsets. So far, the Newsons hadn't had any unexpected expenses; even the first quarterly water bill was so low that Keith kissed Vicky with delight. The last thing they wanted was to start spending money they didn't have, though lenders thought they had plenty -- if they borrowed against their new equity. "We get all sorts of mail since we've been here," Keith said of the onslaught of refinancing and home-equity lending offers crowding into the family mailbox. "I'll read it and I'll be, like, 'Man, I'm not going to take that chance.' "

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