Mortgage Crisis Spreads Past Subprime Loans

But Ms. Harris does not want to leave her home. She estimates that she has spent close to $40,000 on her property, about half for a down payment and much of the rest on a deck and landscaping.

“I’m not behind in my payments, but I’m trying to prevent getting behind,” Ms. Harris said. “I don’t want to ruin my credit.”

In addition to the declining value of her home, Ms. Harris, 53, will soon be hit with a sharply higher house payment. She has an option adjustable-rate mortgage, a loan that allows borrowers to pay less than the interest and principal due every month. The unpaid interest gets added to the principal balance. She is making the minimum monthly payments due on her loan, about $2,400.

But she knows she will not be able to pay the $3,400 needed to cover her interest and principal, which she will be required to pay once her loan balance reaches 115 percent of her starting balance. And under the terms of her loan, which was made by Countrywide Financial, she would have to pay a prepayment penalty of about $40,000 if she chose to refinance or sell her home before May 2009.

She said that she now wishes she had taken a traditional fixed-rate loan when she bought the home. At the time, she asked for a loan that could be refinanced after one year without penalty. She said her broker had told her a week before the closing that the penalty would extend until May 2009 and that she reluctantly agreed because she had already started moving.

A nonprofit community group, Acorn Housing, is trying to broker a modification of Ms. Harris’s loan. In a statement Friday, Countrywide said the company had been in touch with Ms. Harris and would work with her.

Credit counselors say many borrowers like Ms. Harris were cajoled or pushed into risky mortgages that they never had the ability to repay.

Others disregarded warnings about complex loans because they wanted to be a part of the housing boom, which like the technology stock bubble lured people in with seemingly instant and risk-free profits, said Mory Brenner, vice president of Financial Firebird Corporation, a company based in Pittsfield, Mass., that publishes consumer debt information and refers borrowers to credit counselors.

“I’d say, Let me tell you something, this is crazy,” Mr. Brenner said. “You cannot afford this house, even if nothing happens and rates stay as low as they are today. And the response would be: I don’t care.”

Lenders extended credit to people without verifying their incomes and allowing them to make little or no down payments.

But borrowers like Mr. Doyle, the engineer in Northern California, say they are victims of their circumstances — housing prices collapsed and lending standards tightened just as they needed to sell or refinance.

In refinancing their home in 2004, Mr. Doyle and his wife were doing what millions of other homeowners did in the last decade — tapping into the rising value of their homes for home improvements, paying off credit card debt, college tuition and for other spending.

The Doyles took advantage of the housing boom by refinancing their home nearly every year since they bought it in 1995 for $275,000. Until their most recent loan they never had a problem making their payments. They invested much of the money in shares of companies that subsequently went bankrupt.

Still, Mr. Doyle does not regret refinancing in 2004. “My goal was clear: I wanted to help my daughter go through college,” he said. “It wasn’t like it was for us.”