June 28, 2008  -- Time is running out for Tracy Mosely.

A single mother of five, Mosely is on the brink of homelessness after the house she's rented for a year fell into foreclosure and was sold at auction. Mosely, a part-time restaurant hostess, came up with $500 for a security deposit on another place. But she says all the landlords she's contacted want $1,000 or more.

She doesn't have it.

Lying on her bed in Florissant, Mo., flipping through the newspaper, seeking a place to move her family, Mosely says she's not sure if she has weeks or days before she'll be evicted. She may wind up, she says, in a homeless shelter.

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"My blood pressure is sky-high," she says. "We'll be on the streets. I'm just lost about what to do. We were settled here, this was home, and the kids are looking at me like, 'Mom, please.' I told them I'm doing my best."

Mosely is one of the faces of a national real estate crisis whose most grievous victims are increasingly facing the ultimate fate: homelessness. With more families on the cusp of having nowhere to live, thousands of both former homeowners and renters are winding up in shelters or turning to charities for food or other aid to get by.

Nearly 61% of local and state homeless coalitions say they've seen a rise in homelessness since the foreclosure crisis began in 2007, according to a study released in April by the National Coalition for the Homeless.

According to the study, which let respondents offer multiple replies when asked where they're headed once their property is foreclosed on, 76% of displaced homeowners and renters are moving in with relatives and friends. About 54% are moving to emergency shelters. About 40% are already on the streets.

Those facing homelessness include the working poor, who were among those hardest hit by the collapse in subprime mortgages. But others are middle-class families who scarcely expected to find themselves unable to afford their homes.

"Shelters are full, and it's getting worse," says Michael Stoops of the National Coalition for the Homeless in Washington. "There are more homeless homeowners, people who first try to downsize, then wind up living with family and friends or in vehicles. At the shelters, there's almost no room at the inn. It's first come, first serve."

Six cities reported a rise in the number of homeless people who used emergency shelter and transitional housing programs in the past year, and 10 cities reported an increase in households with children seeking help, according to a 2007 survey done in part by the U.S. Conference of Mayors.

The report cites several reasons for the increase, with the rise in foreclosures at the top of the list. Many cities that have seen an increase in homelessness — among them Detroit, Portland, Ore., and Salt Lake City — have also suffered sharp jumps in foreclosures.

The Salvation Army, which provides transitional emergency and shelter housing, is reporting a surge in demand for homeless services. For the first time in memory, it's seeing the trend in such middle-class enclaves as Olathe, Kan., and Englewood, Colo. In Kansas City, the Salvation Army has opened shelters in middle-class communities that are serving more families and middle-income wage earners. In Anchorage, a shelter has expanded from six rooms to 16.

"Typically, if families lose their homes, unless they have relatives, they're scrambling," says Maj. George Hood, national community relations secretary for the Salvation Army. "We're really seeing an uptick in homelessness right now. You have to rescue some from sleeping in vehicles.

"They're embarrassed and don't want to ask for help. They've found themselves in situations they never expected, and you're also finding families and people with established homes out there on the street."

Foreclosure Figures Rising

The intensity of the foreclosure crisis helps explain why. For the first quarter of this year, the rate of new foreclosures hit 0.99%, the highest since record-keeping began in 1979, the Mortgage Bankers Association reported. About 2.47% of all mortgages were in some stage of foreclosure during those three months, another record. And more than 2 million foreclosures were reported in 2007, according to the National Coalition for the Homeless.

For some who've lost homes to foreclosure, charitable groups are a desperate alternative to living on the streets.

Take Judy Johnson, 46, of Sacramento, who works 10-hour days as a hair stylist. Johnson and her husband, Gregory, 52, had been living for eight years in a two-story, 3,000-square-foot home when he lost his job as a supervisor in waste management. He also developed diabetes, fell into a coma and was hospitalized for a short time. He is now recovered.

Judy, a mother of four, tried to support her family and make the mortgage bills on her single income because Gregory was unemployed.

"We became paycheck-to-paycheck," she says.

Ultimately, the family fell behind on their payments. In December, the home was sold at auction, and the family had to move out. They had no savings left, Judy says, and no family or friends who could take them in. And they couldn't afford the security deposits of $2,000 or so that landlords were requesting.

"We were thinking we would have to separate the family; we had nowhere to go, nobody to help us," she says. "We were basically homeless. We were on the verge."

The tension caused Judy to overeat, and for her and her husband to fall into frequent arguments. But just days before they were to leave, the Salvation Army told them it could provide her with a security deposit on an apartment.

Some charitable groups will provide financial help, such as a rental deposit and money for groceries. The Salvation Army will provide assistance to people who meet certain qualifications. Clients meet with a case worker and provide information such as proof of residency, Social Security numbers of each person in the household, proof of income, statements of alimony and/or child support and lease agreements. A background check is often conducted, too.

"I was just sitting on the couch, and I was just sitting there lost, thinking, 'I have to figure out how to get all this stuff out,' and we had no place to go," Judy says. "I never thought I'd be facing homelessness. Some days, I couldn't focus on my job. The tension was so high in the house."

Now, they're in an apartment with three bedrooms, two bathrooms and a balcony to barbecue on. Judy says that after facing homelessness, she realizes that in today's wobbly real estate market, the same fate can befall almost anyone, even a middle-class two-earner family, as her own had been. Gregory is still looking for a job.

Rising Prices a Contributing Factor

In addition to foreclosures, other factors are driving families to the edge of homelessness: mounting utility bills, the surge in gas prices and the rise in unemployment, which jumped from 5% to 5.5% in May, the government reported. Often, those factors make it harder for families to afford their mortgages — especially for those who bought homes with adjustable-rate mortgages that have reset to higher rates.

Foreclosures have been spreading to prime loans, the kind made to those with good credit. About 2.3% of prime loans were 60 days or more past due in April, the highest level in at least a decade, according to data issued by First American CoreLogic LoanPerformance. That's up from about 1.4% a year ago.

"There are people coming home from work, and their houses are boarded up," says Jean Beil, senior vice president for programs and services at Catholic Charities USA in Alexandria, Va. "They're working poor, middle class. Many were surprised when mortgages increased, and they couldn't pay it."

Homeless coalition and advocacy groups have called for steps to help ease the problem. Proposals include state laws requiring home foreclosures to be entered into courthouse records within 30 days of a foreclosure sale, which would help renters determine the status of properties. Another idea would require homeowners to provide potential tenants with information about a home, such as whether it's under foreclosure.

In addition, groups such as the National Coalition for the Homeless want all federally insured mortgages to protect tenants in case of foreclosure by allowing them to maintain their lease until it expires. In many cases, tenants who live in properties that are foreclosed upon may have little time before being forced to move out. They may also lose any security deposits they had put down.

Some advocacy groups also favor more federal oversight of the financial services industry. States have jurisdiction over non-bank mortgage lenders; the National Coalition for the Homeless argues that this system creates inconsistent regulatory standards.

Homelessness Affecting Schools

In the meantime, the effects of foreclosures and homelessness are seeping into public school systems that are now serving more children without permanent addresses. An estimated 2 million children will be directly affected by the subprime mortgage crisis as their families lose their homes to foreclosures, according to First Focus, a bipartisan children's advocacy group that issued the report. The April 2008 report indicates that foreclosures often result in disruptions to a child's education.

Losing one's home and having nowhere to go can also leave former homeowners emotionally wounded, seized by a sense of failure and shame. Others struggle to hold onto their pride and a fierce desire to avoid the help of charities or government services.

Sandra Wright, 37, and her three children and three grandchildren have lived in a rental home for about a year in Gary, Ind. The home has been foreclosed on, and she has until Friday to move out.

Wright, a housekeeper at a hotel, was worried that she'd wind up in a homeless shelter. But she's hopeful of finding another rental in time because the lender on the home is offering her $1,000 if she leaves the house by Friday.

"I was worried I'll wind up in a shelter," Wright says. "They could come and put everything out on the streets. I've been praying a lot. All you can do is pray."