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The housing crisis, in retrospect

The Sinclair family in front of their home in Patterson, CA.

Tess Vigeland: We met the Sinclair family of Patterson, Calif., three years ago, just as the housing crisis was coming to a head. Patterson is a subdivision just off Interstate 5, south of Stockton.

The family had stopped paying their mortgage and were, essentially, squatting in their own home. They it bought in 2005 for $440,000. When we visited in April 2008, it was worth less than half that. They wrote to us recently with an update. So we went back to Patterson for a visit.

Dan Sinclair: Welcome back!

Vigeland: Dan! How are you?

Dan: Nice to see you!

Vigeland: Good to see you!

Dan: Come in, come in. Watch out for the train tracks.

Vigeland: Oh my goodness.

A kid's train set took up most of the living room floor. Dan Sinclair is a 46-year-old systems analyst. He, his wife Esmerelda and their three kids now live in a rented home just a few blocks away from their old house.

Vigeland: Last time I was with you, we took a walk around the neighborhood and it was astonishing to see how many foreclosure notices were on doors, dead lawns. This doesn't look too bad.

Esmerelda Sinclair: It's getting better. Next door, the house was empty for over a year. And it just got occupied by renters.

Dan: It's a mix now of renters and people who own the house. On the left, we've got some renters and they're always cranking the loud rap music. Not that there's anything wrong with rap music, but because I don't...

Vigeland: So more renters in the neighborhood now than there used to be.

Esmerelda: Definitely.

Dan: Yeah, including us.

Vigeland: Including you.

Dan: But we're nice renters.

When we profiled the Sinclairs three years ago, they knew they would not get another 3,600-square-foot home with a four-car garage and a pool anytime soon. One lesson they learned was that a big house wasn't worth a big mortgage. The one they're now renting is a 1,000-square feet smaller. But they are still dealing with the financial aftershocks of the last one.

Dan: Looking back, I don't think the bank ever really intended to work with us at all. They wanted to push into foreclosure, and they did. And they sold it for less than what we wanted to renegotiate for.

Esmerelda: You know, at least Dan still has a job, which has been...

Dan: See, that's been the saving grace, is that I've kept my job through this whole thing. I'm pretty well compensated and I was still able to do a Chapter 7 bankruptcy and that's what we had to do to get rid of our debt.

Chapter 7 bankruptcy. Why such a desperate measure? Because they owed almost $200,000 on their home after taking out equity loans. And they owed $500,000 on a second rental property that they were trying to sell. In the end, they lost both homes.

Dan: You know, there's something else strange that has happened as part of this process. Now we're in the clear, I can't declare bankruptcy for seven years, so financially, I'm a really low risk. But the banks will not lend me money.

Vigeland: But wait a minute, wait a minute. Are you telling me that you think you should be able to get another mortgage?

Dan: I do.

Vigeland: Three years after basically losing two homes? How does that make you low risk?

Dan: Well, I guess it depends. If you look at the pattern of was there reasons for that? I mean, how many people are out there -- 20 percent of the residents in this area are like that? You know, this house that we rent, we pay $1,400 a month. I can own this house if I bought it and pay less in mortgage than what I am paying in rent, which is kind of a heartbreaker for us. Yeah, I consider myself a really good opportunity for someone to loan money to, history aside. Because I don't think the history...

Vigeland: But you can't say "history aside."

Dan: But that doesn't indicate the level risk here. I can't declare bankruptcy for another seven years. They should be banging down my door, because they're going to make their interest money back regardless or put me in debtor's prison. I mean, there's nothing I can do if I tried to default in the next seven years. I'm not the bad guy! I mean, whatever.

Vigeland: But, wait a minute. Look at this from the point of view of people across the country who are going to hear this and say, "Waaaaaaaaaaait a minute!" You were part of a serious problem. I mean, yes, banks certainly had a large role in it. But so did home owners who got themselves into homes that they couldn't afford.

Dan: Yes, I think we made risky decisions. I'm really surprised by your surprise! How much do I have to pay for my sins, if you will, you know, we through an incredible stress.

Vigeland: What has this done to your credit scores?

Dan: Well, while we were going through it, they were down to 550. As soon as I closed my bankrupty, it went up to 630. So, you know, that wouldn't get us a very great loan, but we're back in loan territory except for the bankruptcy and the history.

Vigeland: Yeah, except for that.

Dan: Yeah, it's so funny. Your surprise is so funny to me. It's kind of a wake-up call from where we see things. When I talk to our friends and stuff, nobody looks at us as part of the problem. We all kind of look at ourselves, not as victims, but as not guilty in this whole process. Maybe that's not realistic or self-preservation, but when I talk to people at work, either they're holding their tongues or they don't say, "Well, it was partly your fault." Because I guess, we've all done it out here.

And surely that sentiment is not exclusive to the Sinclairs. It's a frustration millions of home owners nationwide are grappling with. You can hear our original visit with the Sinclairs from three years ago here.

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