Foreclosures hitting rural communities hard too

updated 3:08 p.m. ET April 3, 2008

MERCED, Calif. - The end came in a blink outside the Merced County courthouse.

Only six people showed up for the foreclosure auction, Janice Pimentel and her son Nick included. By chance, the Pimentels' dairy farm was the first property offered.

The auctioneer, a young man in aviator sunglasses and blue jeans, read their address and paused for bids. When none came, the Joe T and Janice R Pimentel Dairy Farm, 21 years in the life of the family, officially became the property of its main creditor, a local lender.

"Well," Janice Pimentel said, "that's that."

The Pimentels' farm was once a fixture in California's Central Valley, which is best known as the world's fruit basket and, these days, may have with the highest concentration of foreclosures in the country. Many of the properties lost to foreclosure around here are in rural towns that are changing, perhaps forever, because of the nation's housing meltdown.

While news about the mortgage crisis often focuses on cities and booming suburbs, rural America has been hit hard, too. Research by the Housing Assistance Council, a Washington-based nonprofit organization that helps build housing in rural pockets of the country, has found that foreclosures are at least as prevalent in small towns as in cities.

"It's happening all over," said Moises Loza, HAC executive director.

Rich Pedroncelli / AP Janice Pimentel packs for the move. Falling milk prices, higer feed costs and medical bills helped drive her and her husband’s farm into foreclosure.

The foreclosure problems in small-town America may be even more widespread than in cities. Mobile and prefab homes make up at least 15 percent of the nation's rural housing, and three-quarters of them were financed with installment or personal property loans rather than mortgage loans, according to the HAC. When the owners default, it leads to repossession rather than foreclosure, and these defaults are not included in the foreclosure data, Loza said.

Rural residents often have fewer banking institutions to choose from than city dwellers, and can fall victim to high interest rates and predatory lending practices. But precise mortgage statistics for rural areas are hard to come by, because while large banks in metropolitan areas are required under federal law to report lending activity, many small, rural financial institutions are not.

Merced is one of three adjoining counties near the top of the latest national foreclosure rankings issued by RealtyTrac, a real estate data firm. Merced County was No. 4. San Joaquin County, which includes the town of Stockton, was No. 2, and Stanislaus County, which includes Modesto, was No. 3. (No. 1 was Cape Coral-Fort Myers, Fla.)

In these three California counties in February, foreclosure proceedings were started on more than 3,100 properties and nearly 1,300 houses were repossessed, according to RealtyTrac. Foreclosure filings were made against about one in every 100 properties in the three counties, compared with one in 557 properties nationwide.

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