The question looms: Foreclosure or not?

FRUITPORT, Mich. (WOOD) - With so many people fighting foreclosure, maybe losing the house could be the best thing of all.

"We get clients who come in here and say, 'I just can't do this anymore, I can't continue the battle to be a homeowner,' and when they realize that that is acceptable, that it's OK not to be a homeowner, mentally, they're in a much better position, because they feel relieved that nobody is saying, 'I have to live the American Dream,' " said Nancy Lathom, of the Neighborhood Investment Corporation, a nonprofit agency that tries to renegotiate mortgages for homeowners.

If there are any lessons from the past five years, it is that homes are not foolproof investments.

Sure, you have a hard asset to show for your money. But many distressed homeowners had gotten into loans that failed to keep up with the market. Many had no deposits and ended up owing a bundle of interest at a time when they had to sell the home, perhaps from unemployment.

Take, for example, the Stevens family, of Fruitport. The couple is trying everything to save its home.

"If we do have to leave, we want to walk out knowing that we did everything we could," Todd Stevens said.

There are compelling reasons not to move. Rent for the family of five could cost more than half their mortgage payment. They would have to uproot three children. They may never get a zero-down, 30-year low-interest mortgage again.

Most of all, they had to sell at a loss.

They owe $1,000 more on the house than it is worth, based on current market rates, not including the $20,000 they spent repairing it. They have two loans on the house, one for the down payment and one for the mortgage.

It's conceivable if the house goes into foreclosure, that the down payment lender could sue the Stevens for the lost amount. That is not common but possible, Lathom said.

"It's hard to stomach, because we worked so hard to get to this point," Carla Stevens said.

This is the Stevens' third home. They have been paying toward their mortgage for 16 years and have no equity. The loss went to interest payments and nearly flat growth in the state's real estate market.

The Stevens' case came to a boiling point when Todd Stevens lost the job he held for 16 years as a machinist in November.

He filed for unemployment, which gives him $1677 a month for as long as 79 weeks. The family collects $535 a month in food stamps. Todd Stevens is getting free tuition under the No Worker Left Behind Program. Their three sons get Medicaid, and Carla Stevens gets free medication from the company that makes the drug she requires for a health condition.

Still, it is not enough.

The Stevens purposely defaulted on one of their house payments, believing it would compel the mortgage company to work out a better payment deal on the loan. Instead, they got slapped with late fees. The house went into foreclosure three months later. By this point, they were four months behind on their payments, Lathom said.

The Stevens sought assistance from Lathom's agency. The first step was a budget analysis based on the family's bill history.

Although the Stevens had a steady source of income, the two mortgages on the house were eating up most of it, about 70 percent. By the agency's calculation, the Stevens were coming up short $848 a month.

The Stevens tried to refinance under Fannie Mae, but the agency requires that mortgage payments be no more than 31 percent of their income - about $500 a month. The lender was not interested, Lathom said.

"If it's save now, are we going to have to do another loan modification eight months down the road?"

Lathom points out that by this point, the lender has spent money on the foreclosure process and is not inclined to do that again.

The Stevens thought the lender would be convinced by their history of making payments, their lack of credit card debt and their job plan. Todd Stevens is studying to become a nurse and feels confident he will have a job when he graduates next year.

Carla Stevens said rent will cost them more than 31 percent of their income. She says they care about the house, have invested in it and thought the last thing a lender would want is another foreclosed house sitting on the market.

Budget experts say homeowners need to calculate the added costs of owning a home, especially the hidden costs. The interest payments on the mortgage. The property taxes. The unanticipated repairs.

The Neighborhood Investment Corporation was able to delay the auction sale of the Stevens' home. Homeowners get a six-month reprieve once a bid is made. Lathom suggests homeowners save all the money they can during this time to prepare for a move, or to make good on the missed payments if one of the Stevens does get a job soon.

The couple is prepared for the worst.

"The last moment that we're in the house, I'll just leave it behind in the house, all the work, the effort, the stress, the struggle. And once the door's shut, we're starting a new chapter," Carla Stevens said.