Buyers couldn't resist the terms: no-down, low-interest and payments delayed, sometimes for years. And with home prices shooting for the moon, many reached beyond their means to seize that upscale dream house.
For some, that dream became a nightmare, and the nightmare extends beyond foreclosure into bankruptcy.
In the first 10 months of 2007, filings in federal bankruptcy court in Reno ran 43 percent higher than they did for all of 2006.
For many homebuyers who face a higher reset on an adjustable-rate mortgage, simply defaulting on a loan handing over the keys and walking away from the property isn't an option. They've piled up other debts beyond the first mortgage.
"People got 100 percent financing to get their dream home," says Patricia A. Phair, a Reno attorney who specializes in bankruptcy cases. "It used to be you had to have at least 10 percent down. Now they finance 80 percent with a first mortgage and 20 percent with a second."
Adding fuel to the fire: Deferred interest payments.
Buyers who got loans that didn't require full payment of interest, but instead added some of the interest to the amount of the loan, now find themselves seriously under water.
"People are saying, I paid $350,000 for this house, now I can't even sell it for $250,00," says Phair.
If the buyer borrowed the full $350,000 purchase price an 80 percent first mortgage and a 20 percent second mortgage simply walking away from the property isn't an option.
While the first lender can take the house, the second lender has no option but to sue on the note. And that can lead a consumer to file for bankruptcy protection.
Bruce Beesley, attorney at Reno office Lewis and Roca and incoming president of the Nevada State Bar Association, says the effects of the sub-prime mortgage meltdown are showing up in other bankruptcy filings.
Also caught up in the downfall, he says, are craftspeople who once built residential projects from carpenters to drywall hangers.
And some residential developers have sought bankruptcy protection after potential buyers who had spoken for units backed out.
Hopes that market would turn more quickly led other consumers into trouble that brought bankruptcy filings.
"Not everyone handed back the keys when they got in trouble with real estate loans," says attorney Nathan Zeltzer. "Some fell back on credit cards. The psychology in that crowd involved the run ups of 2005-06. They felt if they just hung on, they'd make it."
The real estate meltdown, he says, resulted in a 30 to 45 percent increase in consultations with clients last year. And although one option is to refinance, people are finding mortgage companies show little interest in restructuring loans.
"It could be another six to 12 months before it starts to steady out," says Zeltzer. "In exotic loan situations, they don't have the option to refinance. They're stuck."