Getting a real estate license seemed like the perfect career move for Janelle Pereira. A 19-year-old single mother who had separated from her high school sweetheart a year after marrying him, Janelle was working as a waitress and living with her parents. The year was 2003, and Merced County in California's rural San Joaquin Valley was experiencing a boom—houses were selling faster than the hotcakes at the restaurant. She figured selling homes was like waiting tables; talk to people and give them what they want. "Only the tips are bigger," she says.

After a three-week course to get her license, Janelle landed a job at Coldwell Banker. Sure enough, she went from minimum wage to making an average of $25,000 a month. "I got in and worked very, very hard," she says. "People were buying houses sight unseen."

She quickly cleared up $15,000 in credit card debt and bought a new Toyota. By 2005 she was ready to become a homeowner, purchasing a $315,000 four-bedroom contemporary on a quiet cul-de-sac, perfect for bike riding with her young son. The house was 100 percent financed with an adjustable rate mortgage, and she put $60,000 of her savings into renovations. Janelle felt she was being responsible: "I thought, 'Okay, I can remodel, get new this, new that, and the house will be worth even more, because that's what's happening today.'" Besides, she says, wasn't real estate always a solid investment?

But as 2006 wore on, the housing boom started to go bust, and Merced County ultimately gained the unfortunate distinction of having one of the highest foreclosure rates in the nation. "People stopped buying, and those who wanted to sell were having a hard time because now they had negative equity," Janelle says. "My income started to disappear." Just as that happened, payments on her mortgage—which had seemed like such a good idea when she was making $25,000 a month—ballooned from slightly under $2,000 to $3,700.

Janelle threw herself into her work, but by the end of 2006 she was going months without a paycheck. The only bright spot in her life was that she reconciled with her husband, but even with the help of his modest salary from a retail job, they struggled. "I remember sitting down one month to write the mortgage check, and it was literally all the money we had," she says. After April 2007, they could no longer pay it. 


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