Cato's story is typical of the heady bubble years and their aftermath. The widow refinanced her San Bernardino house to pay down debts in 2006, taking out an adjustable-rate mortgage. At the time, she was working in San Jose as a special-education teacher, pursuing a dream of becoming a high school counselor. Her sister lived in the house, and Cato said she kept up on her mortgage despite having to also pay rent in San Jose.
"I wanted the American dream," she said.
Then her mortgage reset. Last year her payments increased to $2,700 from about $2,300. A family emergency cut deeply into her income. Her sister moved out of the house. She was unable to make her mortgage payments.
Cato asked for a loan modification, and her bank lowered her payments to about $1,700 for four months -- an amount she said she could afford. Then the bank offered her a long-term solution: a 30-year, fixed-rate loan with payments of $2,100 a month. But with her newfound financial troubles, she couldn't make that and sent the paperwork back to the bank.
"When they offered it to me I told them I couldn't pay it back," she said. "I could not handle $2,100."
Cato defaulted on the loan. Foreclosure proceedings began. And as a sale date loomed in May, Cato filed for Chapter 13 bankruptcy protection in the hope of delaying the sale of her home by JPMorgan Chase & Co.
Things got worse.
In July, Cato said, her school district in San Jose assigned her a schedule loaded with algebra classes, which she said she didn't feel qualified to teach. She abandoned her hopes of becoming a counselor, took an early retirement and began making plans to return to Southern California.
When the bank asked to be released from the bankruptcy proceedings, she relented. The home is scheduled to be sold next month and Cato is hoping to work out a short sale, in which Chase would agree to sell the home for less than what she owes.
"I was tired of fighting them," she said.
For Cato, renting didn't prove easy either, with the bankruptcy on her record. She found several properties, but as soon as landlords saw the bankruptcy on her credit file, they wanted more money than she could afford.
Her San Jose lease was due to expire Aug. 31 and she still hadn't found a place by Aug. 30. Then as she and her daughter were walking out of a Century 21 office in Chino Hills, Cato spotted a Ford F-150 emblazoned with the website of an Internet rental agency, Renttoday.us, a citation for one of Cato's favorite Bible passages, John 3:16 (which says in part: "For God so loved the world that he gave his only begotten Son"), and the agency's phone number. They called, and by the end of the day, the two had a new rental home to move into.
It was a serendipitous encounter with the divine, Cato thought.
"When we saw that John 3:16, we saw that as divinely ordained and we got in touch with them," Cato said. "Apparently it was so, because they were the ones who helped us."