When Dana Haycock first made her way to California’s Antelope Valley almost 20 years ago, she was in a realtor’s dream come true.

Nestled in the heart of the valley just 70 miles outside of Los Angeles, the city of Lancaster offered just as much to realtors as it did to prospective homeowners.  The city had thrived from a boom in the aerospace industry in the 1930s and offered a strong support network for local small businesses and families alike.  Lancaster also had an enviable location, with clean air, wide-open spaces, and desert sunsets that stretched as far as the eye could see.

For the past several years, however, Lancaster has boasted a less appealing statistic: the highest rates of foreclosure in all of Los Angeles County.  According to RealtyTrac, 1 in every 91 housing units received a foreclosure filing in December 2010.  While the foreclosure crisis has arguably been the most taxing on families stuck in housing limbo, realtors have not escaped unscathed.

In a typical housing market, real estate agents sell desirable properties from which they take a cut of the profit.  As more and more properties go into foreclosure, however, many agents in the Lancaster area have had to sell foreclosed homes for a fraction of what they were once worth, which has taken a toll on their pay.

What’s more, realtors like Haycock, of Coldwell Banker Bozigian Realty in the Antelope Valley, must bear the brunt of the frustration, confusion, and devastation of families that have been foreclosed upon.  The distress doesn’t end with homeowners—realtors must constantly adjust to the tumultuous housing market.

“Every day, I’m being bombarded on my e-mail about record-level foreclosures,” says Haycock, who, like her clients, is wondering when things will change. “I think there’ll be an end to it, but it’ll be a few years before we see it.”

Lancaster: The Breakdown

Lancaster is currently home to about 145,000 residents, up from the 37,000 people that resided in the city when it was first incorporated in 1977.  About five years ago, an explosion of housing tracts in Lancaster brought a flood of new homeowners into the valley.

“Up here, the building was just massive,” says Ruth Amm, a representative from the Antelope Valley Chambers of Commerce.  As more and more people flooded into the valley, supply had to continue to match the demand for homes—but the growth was impossible to sustain for long.

Randel Davies, a lawyer who specializes in real estate law and the foreclosure process in Southern California, said Lancaster’s foreclosure crisis may have stemmed from the real estate bubble that swept the country.

“Everyone was making money and hearing about people making money,” Davies said.  As a result, a skyrocketing demand for property drove up house prices, and more and more people sought to get involved in the realty business.  Overzealous builders in up-and-coming cities like Lancaster tracted entire neighborhoods in no time.  The lucrative real estate market also opened up the option for people to take on second or third homes to rent or sell for a profit, which further fed the real estate bubble.

Many analysts have blamed the breakdown of lending accountability in the private sector as a root cause of the nation’s financial woes, which in turn has devastated real estate across the United States.

The Growth of the Housing Bubble

As recently as thirty years ago, banks were much more stringent with loan applicants, because banks were the ones who lost money if their applicants couldn’t pay back their loans.

Starting in the 1980’s, however, the financial system underwent a massive process of deregulation, which some analysts argue led to the housing crisis.  Financial institutions soon realized that they could make even more money by levying fees off multiple mortgages or loans, which they sold off in packaged bonds.

The crucial thing to understand is that the banks’ role in these real estate transactions had fundamentally changed.  Instead of acting as primary lenders, banks became servicing agents, which meant they were only responsible for collecting payments and sending them to bond owners.  If borrowers defaulted on their payments, banks wouldn’t lose money—the bond owners would.  Consequently, banks could no longer be held accountable for ensuring the credibility of their loan applicants.

“Bankers were throwing money at people who didn’t have any business getting loans,” said Haycock. “All they needed to do was be able to breathe.”

Easy credit flowed as a result, and new loan applicants required virtually no qualifications to be accepted.

But banks aren’t the sole party at fault for exacerbating the national housing bubble.  Bond-rating companies played a huge role in the housing bust by providing inaccurate bond ratings, which led many borrowers to believe that these mortgage bonds they were buying were solid investments.

Analysts suspect that many prospective homeowners, eager to capitalize on the housing boom, caught a “speculative fever” during the mid-2000’s, which may have led them to misrepresent their assets in order to secure loans.  For example, some homeowners will apply for a loan by stating that they intend to move into a house, when their plan all along is to take on a second property to rent or sell out for a profit.

“Loans went, and they shouldn’t have, in my opinion, because [homeowners] didn’t qualify,” Amm said.

Like their clients, lenders at the time were optimistic that the housing market would work in their favor.  “It was being driven by this exuberance and enthusiasm that it was going to keep going,” Davies says.

But it stopped.  Lancaster, which had stacked up tract after tract of new homes in recent years, saw their supply of properties overshoot the demand for them.  Builders and prospective homeowners who had borrowed money from investors to build or buy houses now found themselves unable to repay their loans, and the real estate bubble burst.  As with the economy, the success of the real estate market depends on supply and demand; and with so many unoccupied houses for sale, any leftover demand simply evaporated.

To make matters worse, unemployment rates in Lancaster skyrocketed as the national economy floundered, which made sales even more difficult for realtors.  In May 2010, 17 percent of Antelope Valley residents were reportedly unemployed, making Lancaster’s unemployment considerably higher than the 12.4 percent reported for the rest of California by the U.S. Bureau of Labor Statistics.

Finally, Lancaster, which sits at the outskirts of Los Angeles, requires a much more substantial commuting distance into the city.  Although the draw of job opportunities and new homes made Lancaster extremely appealing at the height of the city’s growth, its distance from the city center makes it less desirable in theory than the properties that stud the coastline at the Palisades and Santa Monica.  The commute may help to explain the more drastic drops in property value in the valley as compared to the rest of Los Angeles County.

“It went so fast,” says Amm. “I don’t think anyone saw this coming.”

Foreclosure Complications

According to Haycock, however, homes in Lancaster are extremely well-priced at the moment, and the interest rates are reasonably low.  RealtyTrac reported the interest rate at 4.7 percent in December 2010.  So why aren’t more people buying houses?

For one thing, many homes that have been scheduled for foreclosure simply don’t make it into the system fast enough.  In normal foreclosure proceedings, a mortgage payer has a specified amount of time to repay their loan before they must default and have their home repossessed.  In Lancaster, however, banks have shied away from seizing properties, hoping to mitigate the housing crisis.  Quick property turnovers and valuable properties might allow realtors to profit in a typical foreclosure markets, but the lack of property movement in Lancaster has cut into realtors’ incomes.

“We just don’t understand… what’s going on, or what the banks’ thinking is,” sighs Haycock, referring to the banks’ inconsistency in carrying out foreclosures.

Davies, who has also represented banks in the real estate industry, speculates that the lapses in Lancaster’s foreclosure process may relate to banks’ inability to manage the staggering amount of homes in default.  Foreclosure crises are characterized by a market in which properties go into default faster than they can be processed, and the institutions in charge of dealing with foreclosures may simply be overwhelmed.

“If you’re one person working at a servicing office and you’ve got hundreds of people calling you at once, there’s physically no possible way you can even respond to everyone,” Davies said.

“We’re shorthanded, we have a lot of work, and we’re backlogged,” confirms Bridget Crosby, a representative for the Court Services division of the Civil Management Unit at Lancaster’s Sheriff’s Department. “We’ve been getting complaints because we’re not getting it done quickly enough.”

Crosby adds that the Court Services department, which is responsible for processing everything from court orders to bankruptcies, receives anywhere from 15 to 20 evictions a day to process. It makes them rather unpopular with the area’s troubled homeowners.

“[People] think we’re the ones taking their money and threatening eviction, but we’ve been hired to do a job,” says Crosby. “A lot of people are upset with us because they think we’re doing it, but it’s not us. We’re the middleperson.”

The good news for both realtors and prospective homeowners is that housing trends are shifting, and the current rate of foreclosure in Lancaster has fared slightly better than in past months.  According to RealtyTrac, the number of new properties in the process of foreclosure for December 2010 was 576, down from the 613 properties reported for November 2010.  However, the numbers aren’t reason enough for optimism.

One reason that foreclosures have been slowing, Davies said, is that “once the foreclosure rate reaches a certain point, the owners of properties are going to say, ‘If I already have two houses for sale on a block, why would I go and foreclose upon more so now I have four houses on sale on my block?’  All they’re doing is competing against themselves.”

Release too little of their housing inventory, and the banks risk not being able to meet demand, thereby slowing the rate of housing recovery.  Release too many foreclosed homes at once, however, and the banks are flooding the market.

Vacant homes are also subject to natural wear and tear that contributes to the depreciation of a property’s value, not to mention vandalism.  In severe cases, allowing people to keep their homes for a net loss may simply be the lesser of many evils.

“[Banks] want people to remain in their houses.  Otherwise, they’ll lose more money as far as taking care of the property, having all the lights turned on, and so on,” says Ron Bayan, a real estate agent with Lancaster’s division of Keller Williams Realty.

Another significant problem seems to lie in mix-ups of communication between lenders and borrowers, in terms of when and how foreclosed homes will be processed.  Families, stressed and confused by the pre-foreclosure process, may also choose to avoid responding altogether.

“The problem is that sometimes homeowners don’t want to respond.  They’re afraid, or they don’t want to communicate,” says Bayan. “And the lender, the bank?  They have so many things going on—so much foreclosure to work with—that if they don’t take action on a file and just sit on it, it’s just going to go to the back of the pile.” At this point, the banks often have to re-request documents and statements from borrowers, which further slows down the process.

Tack that onto the overworked civil management department, and you have a self-sustaining crisis.  Since Lancaster’s latest foreclosure crisis took place during what many have termed “the worst financial crisis since the Great Depression,” there has been no precedent as to what should—or will—be done about it.

Shaky Solutions

Some realtors have put the blame on the government for mismanaging foreclosures.

“We know the way they attack the foreclosure process is not working,” Haycock said.

It’s a fair assessment.  President Barack Obama’s Home Affordable Modification Program (HAMP), which was put in place in May 2009 to help people renegotiate the terms of their mortgages, has been slammed for its complexity and dismal success rates.  The Homeowner Affordable Foreclosure Alternatives Program (HAFA), which was designed to help those who failed to qualify for HAMP, is similarly troubled.

In the meantime, Haycock explains that there has been increasing pressure on realtors to get trained and certified to conduct short sales on their own, which happens when a owner of record—the person who has his name on the mortgage agreement—owes more money than he can sell his home for.  In this case, banks must agree to take less money for properties.

According to the 2010 Housing Market Recap & 2011 Outlook compiled by the California Association of Realtors (CAR), the number of “distressed sales”—or the urgent sale of assets due to debt or other adverse conditions—has declined in the past year, suggesting that “the market is heading in the right direction.”  The report also confirms that short sales, which stay on the market longer and post higher returns than real-estate owned property (REO) and foreclosure sales, have risen from 14 to 22 percent in the past year.

“Because short sales are more favorable financially for banks and we are seeing them in higher frequencies, this could lead to improvement in lending conditions, which would be favorable for the housing market,” the report said.

But that’s not reason enough for unbridled optimism.  2011 is still widely anticipated to be a “transition year,” but the forecast seems to be clearing up.

The Bottom Line

While relaxing trends in the housing crunch are good news for banks and courts, many families are still navigating the uncertain future of the housing market.  And realtors are the ones that must face firsthand the emotions of many families fighting for their homes.

“We’re the people that everybody sees… But we didn’t invent the lending system, or the foreclosure system,” says Haycock.  “We’re just the ones who have to show up and do the cash for keys to get people out of their homes.  We’re the ones who have to put the signs up after the people have been foreclosed upon.”

However, realtors have also taken personal initiative to mitigate the crisis to some extent, turning one family’s inevitable loss into another’s reward.

James Hanible, now a proud homeowner in Lancaster, accounts for one of Haycock’s recent success stories.  He had been jumping from rental home to rental home for at least two years, and returned one day to find a foreclosure notice on the door of the home he was renting from another family.  Frustrated and confused, Hanible called the number listed on the notice and got in touch with Haycock, who helped him secure his dream home at no profit for herself.

“We was upset with the people that put us in the house and the people who took our money.  What I liked about it was that she came to us with the option to buy the house,” explains Hanible.

“She said, ‘James, don’t worry, we’re going to get you the house,’ and got the lender to come out and see me.”  Hanible received the keys to the house in December 2008, and has just celebrated his second year of owning his home.

“Dana just made our lives work out great,” recalls Hanible. “I call her once in a while just to thank her for being there for us.”

Haycock, deflecting praise from herself, speaks fondly of her colleagues in the business instead.

“Almost all realtors care about what’s really going on,” she said.

Realtors are often dismissed as profiteers in foreclosure markets.  While the desire to make a living is certainly a driver of their work in real estate, there are other forces at hand.  Empathy is one of them.

“My main goal is to assist families that are losing their properties.  I’m out there to educate them and share what I know with them,” Bayan said.

“We see so many people in such terrible situations, and we really feel it.  And we really, really care for people,” says Haycock. “I don’t think we’d be doing this if we didn’t.”