Sea World President Terry Prather is this week’s Power Player. Prather shares the career path he took to a position of leadership at one of the most popular theme parks in America. Also, in our Entrepreneur of the Week segment spotlights Rodney Hughes and Tony McGee, the co-owners of Southstar Distribution, an Orlando, Fla.-based commercial roofing and construction supply company. And Executive Style takes a tour of City Walks, one of Orlando’s most celebrated tourist attractions.

Black Enterprise Business Report is the award-winning weekly, half-hour program offering a mix of one-on-one Power Player interviews with top Black corporate executives, Wealth for Life discussions on personal finance, Entrepreneur of the Week profiles of successful small business owners, Quick Tips providing actionable advice from top business leaders, and Executive Style featuring the hottest lifestyle trends and luxury living for today’s consumer.

Click here for times and stations where the Black Enterprise Business Report airs in your area.

In the wake of the recession, millions of Americans have had to give up the American dream of living in their own house and have been forced into foreclosure or bankruptcy.

Others have voluntarily left their residences – often due to underwater homes, or properties where the borrower owes more on the mortgage than the home is worth.

Walking away from a mortgage can be an attractive option for those who simply can’t keep up with their payments. If you can afford payments but choose not to, it’s known as a “strategic default”. Results of Fannie Mae’s National Housing Survey reveal that 27 percent of underwater homeowners say it’s okay to walk away from a mortgage if they were facing financial distress.

Is it the right strategy for you? Here are a few reasons you should consider strategic default, along with several reasons you shouldn’t’:

Reasons You Should:

• Free up extra cash. Walking away from your mortgage means you simply don’t have to keep making your monthly mortgage payment any longer. And since foreclosures in many states are taking a year or longer, you’ll have what’s known as “squatter’s rent.” That extra cash available each month to cover other expenses or even to pay down debt. In fact, there are seven things strategic defaulters do with the money they save.

• No more maintenance expenses. If you are walking away from a mortgage on a second home or vacation rental, you won’t have to worry about paying utilities, homeowner’s association dues or even maintenance costs. You are basically freeing yourself of the responsibility of maintaining the property. This doesn’t mean your actions might not be without consequence. A vacation company or homeowner’s association may still try to get you to pay. Nevertheless, by abandoning a property, you are effectively relieving yourself of this financial burden.

• Prevent bankruptcy. If paying an expensive mortgage means you’ve been defaulting on other loans and can’t keep up with household expenses and other payments because of a lack of income, getting rid of the mortgage payment may be your only option for preventing bankruptcy. Having more cash available means you could catch up on other payments and still stay in good standing with other creditors.

Reasons You Shouldn’t:

• A drop in your credit score – your credit score can take a big hit from those missed payments. But the extent to which your credit will be impacted is a matter of some dispute. According to the American Bankers Association, a strategic default/foreclosure can cost you between 100 to 400 points on your credit score. Foreclosures will stay on your credit report for seven years.Meanwhile, Fair Isaac, the company that created the FICO score, says that a strategic default/foreclosure typically shaves roughly 150 points off a person’s FICO score. (FICO scores range from 300 to 850 points). And experts from YouWalkAway.com, which helps people who are going through strategic default, say that it’s more common for clients to have a 100 point drop in their credit score, with the score often rebounding in less than two years.

• Tax liability – even though you’ll be protected under the Mortgage Forgiveness Debt Relief Act of 2007 (which extends through 2012) from paying federal taxes after a foreclosure, you might still be responsible for paying state taxes. These are imposed on unpaid debts and can cost you more than you had planned.

• You want to get a new mortgage within three years – if you want to get another mortgage within the next three years, you could be out of luck. Some lenders will be unlikely to sign off on that loan when they see a foreclosure or strategic default in your credit history.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox , co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

(Image: File)

WATCH: NASCAR Fans Boo Michelle Obama

It wasn’t all cheers at Sunday’s NASCAR race. After extending a warm welcome to Srgt. Andrew Barry, a sniper for the U.S. Army in Iraq and Afghanistan, race fans booed first lady Michelle Obama and Vice President Joe Biden’s wife, Jill.

The two served as grand marshals for the race at Homestead-Miami Speedway to promote their Joining Forces project on behalf of military families.  The two brushed off the somewhat salty embrace and continued on with the show.

Read more at Madame Noire…

Black Churches Face Real Estate Woes

These days churches and other faith-based institutions’ loan requests and requests for adjustments on existing loans are falling on deaf ears because banks are getting out of the real-estate business.

“They are not picking on churches,” said Dr. Richmond McCoy, president and CEO of UrbanAmerica Advisors. “They have just come to realize it is no longer a lucrative business for them anymore.”

The value of real estate has taken a major plunge – especially in the last three years, said McCoy.  And as unemployment rises, giving goes down.

At one point, there was less than a one percent default rate in terms of churches not being able to pay their loans. Now that number is up to 18%, reports McCoy.

Read more at The Grio…

Outfielder Greg Halman Dead at 24

Seattle Mariners outfielder Greg Halman was stabbed to death early Monday and his 22-year-old brother was arrested as a suspect, Dutch police said.

The police were called to a home in Rotterdam in the early hours of the morning and found the 24-year-old Dutch player bleeding from a stab wound. Rotterdam Police spokeswoman Patricia Wessels said the officers arrested Halman’s brother, however, declined to give his name, in accordance with Dutch privacy rules.

Read more at The Huffington Post…

Bill Gates to Testify in Lawsuit Against Microsoft

Bill Gates was set to testify Monday in a $1 billion antitrust lawsuit accusing Microsoft of duping a competitor prior to its release of Windows 95. Gates will be the first witness in his company’s defense in a month long trial.

Utah-based Novell Inc. sued Microsoft in 2004, claiming it violated U.S. antitrust laws through its arrangements with other computer makers when it launched the operating system.

Novell says it was later forced to sell WordPerfect for a $1.2 billion loss.

Read more at Yahoo! News…

(Image: Facebook)

Cornel West and Princeton Part Ways

Public intellectual and civil rights activist Cornel West is leaving Princeton University this summer to return to Union Theological Seminary in New York –where he started out as an assistant professor in 1977.

Dr. West will teach philosophy and Christian practices at Union.

“I don’t have that much time, and I want to be able to do precisely what I’m called to do,” West said.

Read more at The Root…

No End in Sight for Foreclosure Crisis

The nation is less than halfway through its foreclosure crisis, according to the Center for Responsible Lending report released Thursday.

Roughly 42.2 million Americans took out a mortgage loan between 2004 and 2008.  By February of this year, 2.7 million households, or 6.4 %, had lost their homes to foreclosure. CRL estimates that an additional 3.6 million households, or 8.3 %, are at “immediate, serious risk” of losing their homes.

Read more at the Huffington Post…

White House Shooting Suspect Arrested

The four day search for the person suspected of firing shots from an assault rifle at the White House came to an end Wednesday.

Oscar Ramiro Ortega-Hernandez, 21, was arrested at a hotel near Indiana, Pa. after being spotted by a hotel desk clerk. He is scheduled to make his first court appearance in federal court on Thursday.

Gunfire was reported close to 9 p.m. Friday, south of the White House, the Secret Service said.  Upon investigation, they found two bullets struck the president’s residence. The Obama family was not home at the time of the shooting.

Read more at USA Today…

Persecution of Federal Fraud at 20-Year Low

It’s safe to say Wall Street is on front street these days.

But despite the public mistrust of banks, federal prosecutions for various financial crimes are the lowest they’ve been in two decades.

The federal government will file 1,365 prosecutions for financial institution fraud in 2011, according to the Transactional Records Access Clearinghouse at Syracuse University.

The TRAC report notes that 2011′s relatively low number of financial fraud prosecutions is only the continuation of a trend spanning more than a decade.

Read more at the Huffington Post…

Black Girls Rock!’ scores high ratings

Black Girls Rock!, a television special celebrating the not for profit organization that provides mentoring to young, black girls, scored top ratings in black households.

It ranked second to a NFL regular season football game with over 1.9 million viewers.

Black Girls Rock! ratings beat out the highly popular The Real Housewives of Atlanta and Basketball Wives of L.A.

Read more at The Grio…

Tyler Perry Stands Behind Decision to Cast Kim Kardashian

Tyler Perry defends his decision to cast reality TV star and recent divorcee Kim Kardashian in his new film despite the barrage of backlash.

Perry announced Kardashian would have a role in his upcoming film
The Marriage Counselor just days before she ended her 72-day marriage to NBA star Kris Humphries. To many fans, the decision was malapropos.

In a recent statement, Perry asked fans to hear him out as he explained the premise of the movie. The director/producer said he wanted a younger cast to attract younger viewers.

Read more at CBS News…

Keeping the Faith: UrbanAmerica CEO Richmond McCoy

As an ordained minister and co-founder of Jabez Fellowship International, a Dallas-based church and ministry, Richmond McCoy helps oversee much of the church’s operations. As CEO of UrbanAmerica Principals III L.L.C. (No. 3 on the BE PRIVATE EQUITY list with $1.027 billion in capital under management) helps oversee a billion-dollar commercial real estate portfolio. Now he’s looking to bring business and faith together.

According to McCoy church foreclosures have increased nearly 200% over the past two years. And with traditional lending institutions reluctant to take on risk, this is a figure that’s likely to increase. “Everywhere we go we’re seeing the same situation where the banks, with loans maturing, the banks don’t want to renew the loans and tell the churches you know you got to go find a replacement capital and we’re not going to renew you and pay us our money.”

He says the rise in church foreclosures is partially due to the economy. “Up until the economic crisis the churches had less than a 1% default rate.  They didn’t default, but that’s gone up to 3% now at this point and it may go higher, because just economic crisis and you look at the high unemployment in our communities and all these things and decreasing property values.”

Increased banking regulation is another factor as lenders look for churches to operate more like a business. “The Dodd-Frank bill dramatically changes the guidelines under which a bank can even make a loan and many of the churches never really prepared themselves to operate in this new paradigm where they need to really reflect their operations, need to reflect a commercial entity, very similar to how our firm serves our institutional investors with quarterly reporting, audits, property evaluations.”

UrbanAmerica invests solely in commercial real estate in urban areas, and is looking to expand its services by providing services to some of the struggling inner city churches. Those services would include:

• An advisory where the firm would represent religious institutions in negotiations with their lender to extend loans, reduce interest rates or reduce the principle. This service would also include business coaching and consulting to help the churches operate much like a business.
• Providing capital. McCoy is also looking to raise $200-$500 million to provide financing for qualifying religious institutions.

McCoy says this makes good business sense. According to the CEO, church loans are cumulatively an $80 billion market, some $20 billion of which is rolling over in the next two years. But McCoy sees this as an investment. “We’re going to look for ministries that have tenure and that have been in business a minimum of five years and have a diversity of revenue streams,” he says. “That it’s not just offerings that they’re getting, but maybe they have other income from daycare or maybe they’re doing work with assisted living. They have other means of income coming into the business side of the church.” UrbanAmerica will also consider the quality of the real estate—the location and condition.

Will this become a significant part of UrbanAmerica’s business? “That’s the big question isn’t it,” responds McCoy. “I think it could be very significant. We’ll see.  It’s an important endeavor for us on many levels.”

The ongoing foreclosure problem facing U.S. homeowners is about to get worse now that Congress has eliminated the entire mortgage-counseling budget for HUD, the Department of Housing and Urban Development. The 2011 federal budget completely eliminates all $88 million in HUD funds for housing counseling. It’s yet another blow to those struggling to stay in their homes, especially African-Americans, who have borne the brunt of the mortgage meltdown and the U.S. housing crisis. There were a record 3.8 million foreclosure filings in 2010. And since even more foreclosures are expected in 2011, housing advocates are shocked at the magnitude and timing of the HUD mortgage counseling cuts. After all, it was the housing mess that tipped America into the Great Recession.

George Roe, Chief Operating Officer of the National Foundation for Debt Management, a HUD-certified credit counseling agency that helps struggling homeowners called the funding cuts “devastating,” and said “the timing of these cuts could not have come at a worse time.”

“It seems that most of our counseling sessions are growing more complex, requiring additional time to complete as well as an enhanced skill/knowledge ability for our counselors,” Roe said. “This does not come without additional costs to provide these services.”

“The end result is that our agency will be forced to reduce our staff and some of our much needed services that we provide,” he added. “I believe that this will be the case for most HUD approved agencies throughout the country.”

Russell Graves, Executive Director of Consumer Credit and Budget Counseling, another HUD-certified agency, echoed Roe’s sentiment. “The housing counseling industry is reeling from this blow,” Graves said. “We all understand the need for government support cuts to balance the budget, but this was unexpected.”

“Taking away funding for housing counseling is selling the American homeowner short,” Graves added.

Housing counseling is designed to educate and empower consumers, giving them the knowledge and information they need to make good choices when it comes to buying – and keeping – a home. In decades past, getting a mortgage and buying a home was a relatively simple process. Most people bought reasonably-priced homes, obtained a 30-year-mortgage, and could count on their homes appreciating in value. Today, however, despite the recent drop in values, housing prices remain out of the reach of many would-be buyers. What’s more, the mortgage process is far more complicated, as is the range of mortgage products being offered to consumers. And unfortunately, most U.S. home buyers are ill prepared to take out a mortgage, with nearly half of them failing to understand the basics about mortgages, according to a May 2011 Zillow Mortgage Marketplace survey. For instance, 57% of prospective homebuyers polled did not understand how adjustable rate mortgages (ARMs) work.

That’s why housing counseling is so vital.

So if you’re having trouble paying your mortgage, where should you turn for help? Here click to the next page for 5 tips to keep in mind:

• 1) Start by contacting your lender or loan servicer.

Unfortunately, many people on the brink of missing a payment say that banks won’t do anything for them until the homeowner misses a payment. As frustrating as this scenario can be to deal with, it’s still wise to advise your lender of problems you may be facing in order to inquire about any special programs, loan modification initiatives or other options they may offer.

• 2) Seek reputable housing counseling.

Even after the HUD funding cuts to mortgage counseling agencies, some agencies may still opt to provide this service free of charge to consumers. Others housing counseling agencies simply won’t be able to afford to provide this service at no cost, and will thus begin to charge consumers. You’ll only know if an agency’s mortgage counseling help is free or not by contacting the entity in question.

So be prepared to call a few agencies to track down free assistance. If you can’t find any free agencies, you’ll have to pay for mortgage counseling. Such help can be well worth it if the advice and information you get from a HUD-certified credit counseling agency helps you remain in your home. To locate HUD-approved housing counselors, call 888-995-4673 or visit http://makinghomeaffordable.gov.

• 3) Never sign over your deed.

Be wary of people who approach you claiming they can help you “save” your home. Some of these are foreclosure rescue scams. Also, never sign over the deed, or agree to transfer title to your home—even if someone promises to let you stay in the house or rent it. Doing so could put your ownership of the property in jeopardy.

• 4) Only make payments to your lender or mortgage servicer.

Even if a third party helps you, perhaps by serving as a “middleman” to negotiate with your lender or loan servicer, don’t make any mortgage payments to this third party. Don’t even agree to turn over your housing payment to a third party under the notion that they will make mortgage payments on your behalf. If the third party doesn’t make payments as agreed, you will have very little recourse to recoup your funds and get caught up with your lender.

Get back into the home you love (Image: Thinkstock)

Many homeowners experience foreclosure as the end of a long, tumultuous process—oftentimes beginning with a job loss. They fall behind on their mortgage payments, perhaps make unsuccessful attempts at a government-assisted loan modification, and then finally accept that foreclosure is inevitable. The average borrower who loses a home to foreclosure has gone 14 months or more without making a mortgage payment by the time their home is repossessed. After a foreclosure, many former homeowners realize that losing their house is just the beginning—they now face the uncertain process of rehabilitating their finances, credit, and self-esteem.

If you’re on the verge of a foreclosure, there are a few things you can do before, during, and after the process to help ease some of the pain:

1) Get a roof over your head. Before your mortgage holder confiscates your home, locate and secure affordable rental housing. This will help ease the transition, especially for any children involved.

2) Boost your income. If you’ve lost your job, work on locating new sources of income, whether through unemployment benefits, a temporary job placement, or part-time work.

3) Regroup emotionally. It’s a tough time for everyone involved, and foreclosure can be especially hard on a marriage. Don’t blame yourself or other family members for your predicament. Commit to working as a team to rebuild.

4) Educate yourself. Now’s the time to learn what you don’t know about personal finance. Learn the intricacies of how loans work. Study how credit scores are calculated. Keep reading BLACK ENTERPRISE.

5) Seek counseling. Many organizations offer free counseling to help those recovering from foreclosure. Try GreenPath Debt Solutions, CredAbility.org, or locate a federally approved advisory service in your area through the U.S. Department of Housing and Urban Development.

6) Draft a budget. With the help of a debt counselor or financial planner, create a budget for your new living and financial situation. Many former homeowners will also want to begin saving for the day when they can buy a home again.

7) Repair your credit. You’ll need to create a detailed plan that includes specific amounts and timetables for attacking all debts, including any residual balances from the foreclosed home, such as utility bills or property taxes.

The end result was the letter Denisha, 43, and Ricky, 48, received, informing them that the bank was about to foreclose on the $120,000 four-bedroom Ellenwood, Georgia, home they purchased in 2005. The couple had known foreclosure was imminent, so Denisha worked hard in the months leading up to the event to find a nearby home for the family to rent. In the meantime, they did all they could to shield their daughters, Tyra and Tiffani—who at the time were ages 9 and 12—from the ugly financial realities they faced. Says Denisha: “We told them Mommy and Daddy don’t like this house anymore. We’re going to get another one.”

The couple’s suburban Atlanta home was one of 2.5 million foreclosures that took place in the United States between 2007 and the beginning of 2010. It’s no mystery to blacks living in middle-class enclaves such as suburban Atlanta, parts of New York City, or Prince George’s County, Maryland, that African Americans have been disproportionately affected by the housing crisis. The “for sale” signs are everywhere. A recent study by the Center for Responsible Lending found that among borrowers across the country who took out new home loans between 2005 and 2008, 8% of black and Latino homeowners lost their homes to foreclosure, compared to 4.5% of whites.

Like the Seals family, many homeowners experience foreclosure as the end of a long, tumultuous process—oftentimes beginning with a job loss. They fall behind on their mortgage payments, perhaps make unsuccessful attempts at a government-assisted loan modification, and then finally accept that foreclosure is inevitable. The average borrower who loses a home to foreclosure has gone 14 months or more without making a mortgage payment by the time their home is repossessed. After a foreclosure, many former homeowners realize that losing their house is just the beginning—they now face the uncertain process of rehabilitating their finances, credit, and self-esteem.

“Don’t beat yourself up,” advises Manisha Thakor, founder of the Women’s Financial Literacy Initiative. Guilt can spiral into depression, which can paralyze former homeowners, preventing them from moving on with their lives. Indeed, Denisha and Ricky had some tense marital moments in the months leading to—and after—their foreclosure. “When one spouse loses a job, there’s some blame that goes around,” says Denisha. “There was some strain on our marriage. I developed high blood pressure and gained weight. It was hard to keep the children from seeing us argue, but we told each other we take our wedding vows seriously. That made me confident we could get through this together,” she says.

For the Seals family, part of getting through the tough times included seeking help from CredAbility.org, a nonprofit financial counseling and education organization. Denisha and Ricky took financial literacy classes where they learned, among other things, debt management strategies and the intricacies of mortgages, including “how little of your monthly mortgage payment goes toward principle” when you have a traditional 30-year, fixed-rate mortgage, Denisha says. They also realized they were not alone in their predicament. “The basics of personal finance are not widely taught,” Thakor points out. “Millions of people made the mistake of biting off more home than they could chew.”

After moving beyond feelings of guilt or loss of confidence, there are a number of legal and financial matters to address. Begin by coming up with a plan to boost your income. Aggressively pursuing and securing a new job (or a second job) can empower former homeowners with the money necessary to rebuild their finances and help restore confidence. For her part, Denisha immediately signed up with a temporary employment agency, after her family moved into their rental home. The income added to money she was already bringing in as a part-time Mary Kay cosmetics sales associate.

After a few months in their rental, Ricky and Denisha, still recovering from their home loss, received another foreboding message from their former mortgage holder. This time, the bank told them they were about to be sued for $33,569—the difference between what they owed on their mortgage at the time of foreclosure and what the bank was able to sell their house for­—as part of a “deficiency judgment.” Foreclosees should brace themselves for legal repercussions such as this. In many states, lenders have the right to sue for an unsatisfied balance even after a foreclosure auction has taken place. Also, if there were any second or third mortgages on the home, those lenders may seek to collect from the borrower.

“After the foreclosure auction, borrowers often incorrectly believe that the first and second loans are extinguished because the property is sold,” explains Lafayette, California-based attorney and CPA G. Scott Haislet, an expert on foreclosure-related legal and tax issues. “However, the second lender merely changes from a secured loan to an unsecured loan.  An unsecured lender may sue the borrower for the balance.”

To make matters worse, lenders sometimes saddle foreclosed homeowners with so-called cancellation of debt income if the deficit between what they owed and what their home was sold for has been forgiven. This “income” can sometimes trigger additional taxes for the foreclosee. While the federal Mortgage Forgiveness Debt Relief Act exempts most homeowners from federal income taxation on debt cancelled through a foreclosure through 2012, the law doesn’t apply to all states.

Foreclosure sufferers should consult with a real estate attorney and have their tax filings prepared by a professional who has experience with returns involving a foreclosure. It was Ricky and Denisha’s tax lawyer who helped the couple sift through the financial fallout after foreclosure. After reviewing their situation, the tax adviser suggested that the couple file Chapter 13 bankruptcy to shield them from the $33,000 deficiency judgment.

The Seals family’s string of bad luck wasn’t quite over. In 2010, the State of Georgia Revenue Department came after Ricky, claiming he owed taxes on money he received in 2001 as part of an employment-related legal settlement. The couple answered with a Chapter 7 bankruptcy filing in 2011 to prevent the IRS from garnishing Ricky’s wages. The couple made arrangements with the state to pay back the debt over the next three years.

Even after all their financial misfortune, Denisha and Ricky say they have plans to own a home again someday. “We’re scaling down,” Denisha says. “We don’t need new furniture. We’re scaling back on energy use. We’re clipping coupons and not taking family vacations. I can’t remember the last time I bought something for myself.” As they economize and pay down their debt, they are also putting money away to use as a down payment on a future home. They are well aware that they will have to be patient. In general, a homeowner who has experienced foreclosure won’t be able to get another home loan for three to four years. Those who’ve filed for bankruptcy, like the Seals, can expect the credit blemish to stay on their credit report for at least 10 years.

For now, the Sealses are doing the right thing. Once their post-foreclosure income, tax, and legal issues are resolved, foreclosees need to rehabilitate their wounded finances. Bari Tessler, Boulder, Colorado-based founder of financial coaching company Conscious Bookkeeping, advises clients who’ve been through foreclosure to “complete incompletes,” meaning that they need to take “a deep look at what needs to be forgiven or completed from our past regarding our money exchanges.” This should involve creating a written list of all debts such as credit card balances or any lapsed utility bills, and implementing a plan for settling them.

The good news is that eliminating debt is easier after a foreclosure. Monthly rent payments are usually less burdensome than mortgage payments. Similarly, funds saved by former homeowners during the months of mortgage non-payment may also be available for paying down debt. And while declaring bankruptcy may seem a viable option for some, especially those unable to find work, today’s laws often provide less debt relief and more negative credit consequences than negotiating directly with creditors. Former homeowners should consult with more than one local bankruptcy attorney before declaring bankruptcy, which results in 10 years of derogatory credit reporting.

Those who’ve been through a foreclosure can reposition themselves to buy another home. As the foreclosure rate has increased over the past few years, lenders have become much more forgiving of foreclosures on prospective borrowers’ credit histories, and more likely to extend mortgages to them within just a few years following the foreclosure. Low down payment FHA loans (which require only a minimum 3.5% down) are now available to borrowers with a 640 FICO credit score as soon as three years following a foreclosure, says Yvonne Hemmingsen, a Pleasanton, California-based mortgage broker.

Conventional, or non-FHA, loans require a minimum 680 score and are also available three years after a foreclosure. But they have much higher down payment requirements—even if the borrower’s credit score is in the 720 to 740 range. Fortunately for post-foreclosure buyers, FHA and conventional loan rates have been running neck-and-neck as of late, Hemmingsen points out. “The most important elements in obtaining financing after a foreclosure are the time frame that has passed since the foreclosure and having no derogatory credit after the foreclosure,” says Hemmingsen. A solid rental history is also a big factor. The new lender will require verification of at least 12, and possibly 24, months of on-time payments.

Hemmingsen also points out that most lenders will impose strict mortgage debt-to-income ratios on those who have experienced a recent foreclosure, with the aim of keeping them from overextending themselves again. Thakor offers this guidance for making future mortgage decisions: “A simple rule of thumb for how much house you can comfortably afford is three times your annual, pre-tax household income. If your housing costs run one-third or less of your gross income, that leaves you much more wiggle room for all of life’s other necessary expenditures.”

Those who are really determined to own a home again quickly  find ways around the banking restrictions, mostly by orchestrating all-cash purchases. Larry Bobo, 45, was involved in a foreclosure in 2008. But the divorced father of two was unwavering in his quest to buy a home again so his children could have a nice place to stay when they came to visit. Although he was a victim of the housing crisis, Bobo was later able to take advantage of the downturn. In the spring of 2009, he attended an auction of foreclosed homes, and bought a $73,000 Covington, Georgia, house with money he received from his mother coupled with an inheritance from his late father. “It’s a blessing that we have a home,” he says.

By taking an intentional, step-by-step approach to dealing with the consequences of foreclosure, former homeowners can emerge from the shadows with less debt, a more affordable home, and lifelong lessons drawn from the experience.