The foreclosure crisis is having its biggest impact in some surprising places. One of those is Isanti County, about an hour north of the Twin Cities. The foreclosure rate there is the second highest in the state. It's been a hard fall for what the U.S. Census called one of the fastest growing counties in the nation back in 2002.
The crisis has put a great deal of pressure on local governments and nonprofit groups to provide assistance to residents who are in bad financial shape, even as many of them are too proud to accept it.
FROM BOOM TO BANKRUPTCY
Like almost 20 percent of the men in Isanti County, Lon Lane's income was tied to construction. He's a carpenter who built a small empire during the housing boom.
He and his wife Julie started their own company, LJ Level Construction. They refinanced their own home to buy rental property in Blaine and Minneapolis. But by early 2009, the couple had declared bankruptcy.
This summer Lon couldn't find work, and the couple was concentrating on just keeping their house. They hadn't made a house payment since winter, but they were hoping the banks and the county were too swamped to notice.
"They're so far behind," Julie said. "There's so much of it going on that there are people in their houses for a year and haven't been notified," added Lon.
Sitting in the shade in front of their 1960s rambler, Julie and Lon often finish each other's sentences. Their son, Garrett, who's 4, scoots shirtless on a tiny motorized tractor, and their old black lab sits panting at their feet. The bed of an old but shiny Ford pickup has custom shelves and drawers full of tools. Down the hill, past the apple trees, sits a big garden.
The Lanes appreciate the idyllic setting in the rural part of the county where they both grew up. They say the only outings they can afford are to church on Sundays.
They have two mortgages on their property. They owe $446,000, but haven't made a house payment since winter. They're behind on all their other bills, too. They sold their motorcycle and some jewelry, but can't catch up.
The Lanes won't seek assistance because they say they don't believe in it. Instead, they're praying for a miracle.
"We're not going to be booted," Lon said. "We're waiting for the Lord to show up huge. He likes to wait until the last minute."
"A couple of good jobs is all we need, so that the bank won't start foreclosure," Julie added.
THE VALUE OF SELF-RELIANCE
It seems like all of Isanti County is braced for bad news. The county used to be full of families on their way up. Now, like the Lanes, many of those families are struggling.
In the first half of 2010, nearly 3,000 families were receiving cash assistance. In Cambridge, the county seat, dozens of homeowners are behind on taxes and utility bills.
At the food shelf, director Mary Everett calls many people coming through "the new poor."
"They had made a living," Everett said. "They have never needed help, and they are ashamed."
Everett is program director at Family Pathways, a nonprofit group that runs programs for seniors and teenagers, as well as 10 food shelves in Isanti and neighboring counties.
Everett says it's important to her clients that Family Pathways is not a government program, but rather a grassroots nonprofit that values self-reliance as much as the clients do.
Most of Family Pathways' revenue comes from a chain of local thrift stores. The thrift store business is booming. There are three of them along Main Street in Cambridge, and they give the big box retailers on the highway a run for their money.
The Family Pathways store in Cambridge is in a strip mall next to City Hall. It is enormous and brightly lit. When you walk in, you see racks and racks of clothes, and a couple dozen people browsing. Talk to any of them, and they'll tell you a story of layoff or foreclosure.
Two women looking at a big old coffee container turn out to be mother and daughter. The daughter, Brenda Peterson, is 45. Her kids are grown and gone. When she and her husband were foreclosed on last spring, she moved in with her mother, Pam Bishop, who is a retired beautician.
Brenda and her husband bought their house at the height of the boom. He got laid off, just as their mortgage payments ballooned.
"We didn't see it coming, and it just hit us," Peterson said.
She faults the government for not letting homeowners know more about the precarious mortgages and the impending crisis.
"It's like having a horrible tsunami and not telling you about it, because they can't deal with the panic," Peterson said.
IS THE GOVERNMENT TO BLAME?
Prentiss Cox, who studies the foreclosure crisis at the University of Minnesota Law School, says the federal government should have seized the moment in spring 2008, "when the collapse in the mortgage industry was obvious, but the financial services industry hadn't yet collapsed."
"You've got a situation where declining home values mean a shrinking tax base, at the same time you have a skyrocketing need for services in a down economy," said Cox. "So no magic bullet for Isanti County. No magic bullet for anyone."
Cox says homeowners like the Lanes should not be blamed for refinancing with treacherous mortgages, which were crafted with professional sophistication to make money for lenders. He thinks there's still an opportunity for the federal government to act effectively.
Cox says the Obama administration can do more to help the economy if it acts independently of the financial services industry. "The problem is the companies that caused this mess have a hand in writing the policy," he said.
Cox recommends sweeping "FDR stick-in-hand" loan modification policy that makes the process accessible and transparent, instead of arbitrary and opaque, the way it is now. Then, he says, homeowners who qualify can hang onto their homes, and those who don't can "figure out what to do and move on." Keeping underwater homes off the market is in everyone's interest, he says.
AN URGENT NEED FOR NEW IDEAS
At Community Pride Bank in Isanti County, president Greg Owens is eager to hear all ideas, especially if they can be applied soon or locally. He says the need is urgent, since there's a glut of commercial property as well as residential. Foreclosed homes are not turning over, even though their median price is about half what it was four years ago.
"People keep saying, 'The rental market's got to be just phenomenal,'" Owens said. "But what you're seeing are two or three families moving in together. That's going back how many hundreds of years?"
Isanti County prides itself on traditional values and self-sufficiency. It's not surprising that families, churches and grassroots nonprofits like Family Pathways are providing stopgaps to augment government services.
But many local leaders worry that the local economy isn't strong enough to support the population. The vacant houses will need attention soon. Banker Greg Owens says mold is a serious problem, and mold mitigation costs dissuade potential buyers.
"Some of these homes are simply going to be bulldozed," said Mary Everett of Family Pathways. "A few years of them being empty and they will be valueless."
She and others suggest they may go back to being the farm fields they were before the boom.
'NOT AFRAID TO START OVER'
Julie and Lon Lane's hopes that the bank would forget about them didn't pan out. In August, the bank sent them a foreclosure notice. The family, which has never lived more than five miles from this place, may have to hit the road. Lon was planning to look for work in North Dakota.
"I'm not afraid to start over," he said. "We had a bunch and now we don't. Who cares? It's only things; it's only stuff."
A few weeks ago, Lon found a temporary job in St. Paul. The family is waiting to hear if the bank will negotiate on their mortgage.
The seesaw they're on is typical. The "new poor" are learning to live with wild swings in their circumstances.
Like the American Dream, Isanti County was supposed to keep on expanding. Instead, people are moving to where the work is, and learning to live with less.
Read the first part of this series, which investigates the boom and subsequent bust of Isanti County.