Empty Nests

To satisfy the demand, the industry loosened its standards. Lending became a high-volume game. In a recent Washington Post story about how the industry got so out of control, one appraiser who worked for New Century recounted how salesmen would bang her desk with baseball bats when she rejected a loan application.

When a mortgage goes bad, it's not just the borrower who suffers. Foreclosures drag down the property values of surrounding homes. Nearby schools suffer collateral damage, too. "Anytime there's a home foreclosure, that means there's no tax money coming in. And anytime there's no tax money coming, the district in essence loses money," says John Baccala, a spokesman for the Hickman Mills School District.

Cities and school districts in Kansas and Missouri are feeling the pain. In both states, subprime adjustable-rate mortgages are being foreclosed at a higher rate than the national average, according to a report by NeighborWorks America, a community-development nonprofit.

Of course, brutal lending agreements alone did not send thousands of Kansas and Missouri homes into foreclosure. Scheming borrowers have a played a part, too. Instances of mortgage fraud, when borrowers and brokers lie on lending applications, have exploded in recent years. Earlier this year, sitting Kansas City, Missouri, Councilwoman Saundra McFadden-Weaver was indicted after borrowing $400,000 for a house that she never intended to occupy. When the bank foreclosed, the house sold for only $255,000. Former Jackson County Executive Katheryn Shields and her husband also face federal mortgage-fraud charges.

But the bulk of foreclosures are owed to ignorance or naiveté. Kevin Glendening, a deputy state banking commissioner in Kansas, says many borrowers fail to comprehend what they're doing on the way to fulfilling the American dream. "People, I think, sometimes get caught up in the moment in getting the transaction," he says.

The consequences can be devastating.

Gary Butcher is sitting at a table in his narrow kitchen. He's sifting through old papers, an activity that prompts two of his four children to begin doodling. Crayon marks on the wall tell of past occasions when the budding artists didn't wait for scratch paper.

Butcher is watching the kids, who range in age from 2 to 8, while his wife is sleeping. She's a respiratory therapist at Overland Park Regional Medical Center. Gary Dee, the oldest of the four children, explains his mother's job like this: "She works with babies that can sit in the palm of your hand."

Gary Dee settles in for a late-afternoon viewing of The Prince of Egypt on DVD. The living room is a riot of newspapers, plastic cups, dolls and pieces of train set. The untidy house reflects the challenge two parents face in working two jobs (Gary delivers newspapers) and raising four children. The two boys are old enough to attend elementary school, but Robert, age 7, is autistic. Today, he is refusing to wear anything more than his eyeglasses and a pair of white briefs.

Robert hadn't been diagnosed at the time the Butchers sold their home in Roeland Park and bought a four-bedroom house in western Shawnee. Tracey was pregnant with Elizabeth, now 4. The couple thought that it be nice to have something bigger.

Gary, who says he wasn't even that crazy about the new place, wishes they had stayed in Roeland Park. "We were so stupid," he says. "We had three bedrooms. That would have been fine. Even with four kids, we would have been fine."

A mortgage broker found them the loan with NovaStar. The note quoted an interest rate for the first two years of 7.99 percent and monthly payments of $1,161.

The numbers looked manageable. But when they signed an adjustable-rate mortgage, the Butchers put themselves at the mercy of an interest rate that could nearly double over the life of the loan.

Gary says he felt pressure from the broker and NovaStar to sign the papers and finish the deal. He says they reassured him that they could refinance the loan before the interest rate changed.

"We never should have gotten the loan," he says. "But everyone was pushing us."

Their move to Shawnee didn't go smoothly. The Butchers ran up charges on their credit cards to replace a $200 high chair and other items the movers broke. Crunched for money, they took out a second mortgage, borrowing $18,000 from another lender.

The interest rate on the original mortgage wasn't supposed to increase until April 2005. But Gary says the monthly payments to NovaStar began increasing almost immediately. "It was, like, every six months, it went up," he says. Tracey says she remembers making mortgage payments of around $1,400 at the end of their stay in the Shawnee house.