When Stephanie bought her Napa house in August 2003, she figured she was buying into the American dream of home ownership and the benefits of home equity. But her dream turned into two-year nightmare.

For her desire to buy her first home, the emotional and financial price she paid included the threat of foreclosure, bankruptcy and more. The toll it took on her was nearly overwhelming.

Stephanie is a self-employed service industry worker who is married and has a family.

"I'm a decent person who works hard," said Stephanie, who declined to give her real name for this story. "I'm not a person who can't afford to own a home. However, when you have a big mortgage, if you get caught with your pants down, you're stuck."

In Napa County, there was an 87 percent increase in the number of foreclosure notices from the first quarter of this year compared to the same time period in 2006, according to numbers from DataQuick Information Systems. Overall, the number of default notices sent to California homeowners last quarter increased to its highest level in almost 10 years.

Like many people across the country recently, the lure of 100 percent real estate financing was too much for Stephanie to pass on. Just as similar as stories of some of those same people, Stephanie nearly lost all she had.

"I just didn't realize the signs until it was too late."

Their first home

When Stephanie, a Napa native, said she never imagined she could be a homeowner when she and her husband first started looking at real estate.

"I was afraid they would tell us we didn't qualify." With her credit score of 620, the couple's credit was considered subprime.

Buying a home in northeast Napa, the couple took out two loans, one for 80 percent and a second for 20 percent, avoiding private mortgage insurance. Their adjustable rate started at 5.3 percent. The house cost $399,000.

"I was so proud of myself. I thought this is the greatest thing I've ever done," she said of the purchase.

Right away, buying seemed like it paid off.

"About two months after we moved in, a house down the street sold for more than what we paid." To Stephanie and her husband, "We had already made $36,000. We thought we did the right thing," she said.

Their $2,700 mortgage payment -- including $400 per month in property taxes -- was high, but manageable. Stephanie and her family settled in and made regular payments.

In 2005, the couple decided to refinance to one loan. They took $50,000 in cash from the new loan to remodel two bathrooms and pay off their one car.

The new loan was barely signed when the first lender, Meritage Mortgage Group, sold the loan immediately to a subprime mortgage servicer, Saxon Mortgage Services based in Glen Ellen, Va.

After the sale, Stephanie made her payments to Saxon. However, in September 2005 Saxon called looking for her payment.

Stephanie had bank statements to document her payments but for Saxon, it was too late. She believes Saxon erroneously paid Meritage one payment, causing her account to be late one month.

"We are confident that we serviced the loan in compliance with standard servicing practices, the loan terms and applicable law," read an e-mail from Saxon spokeswoman Jennifer Sala. Due to client confidentiality, representatives from Saxon said they were unable to comment further on Stephanie's story.

The couple was given 14 days to pay Saxon $6,350 and make their payments current. But Stephanie's savings had been spent on home improvements. Then, in October 2005, Stephanie received a Notice of Default, the first step in foreclosure proceedings.

Growing desperate, Stephanie turned to the Internet looking for a mortgage assistance program.

Looking for help

"I found this company that was very friendly," called Integrity Foreclosure Prevention Service, she said.

Ohio based, IFPS serves as a loss mitigation consultant that sets up escrow accounts to pay mortgages.

"They told me they were going to get me out of trouble," said Stephanie. "I thought they'd help me pay my mortgage. They said I was to pay them one payment, to start the process."

Stephanie said she paid approximately $12,000 to IFPS during a short time frame.

IFPS claims she paid them $4,155, and did not accept a payment program they proposed. Stephanie disagrees.

But time had run out. In December, Stephanie received a registered letter. The news was bad. Her home was to be sold at a public auction.

Stephanie again scrambled to find help. After one counselor suggested bankruptcy, she filed for Chapter 13 in March 2006.

"At that point I didn't have time to worry about how much money I was getting back (from IFPS), I had to file for bankruptcy to save my house."

Stephanie said the family had no other debt, not even credit cards, besides the home loan.

"I felt relieved initially" about the filing, she said.

But her bankruptcy repayment plan, coupled with her rising debt with Saxon, soon became hard to pay.

"I thought, 'How am I ever going to get out of this?' We should have sold the house then," said Stephanie, in hindsight.

The last resort

The stress began to wear on Stephanie and her family. "I tried to think positive but in the end I couldn't any longer."

After months of struggling, during which Stephanie spent $4,000 on attorney fees, she and her husband put her house up for sale in March 2007. The asking price was $539,000.

She described the decision to sell.

"I felt like it was bittersweet because everything we did was (to) keep the house. But once we sat down (we realized), it's just a house."

Stephanie's goal was to walk away with a clean credit rating and hopefully $10,000 in equity.

Mike and Melanie Muters of ReMax are Stephanie's agents.

"They saved me in a way I thought I could never be saved. Because I thought that I was going nowhere," said Stephanie. "They came in and took over. It was like a thousand pounds had been taken off my shoulders."

"I've seen it happen more and more in the market," said Mike Muters. "You want to help the person before they lose their home. And counsel them: It's hard to get a home loan again if you let the bank take (the home) back."

Muters started working on Stephanie's behalf. "There was a prepayment penalty, we got (Saxon) to waive it," said Muters.

"The bigger negotiations were over the final payoff. The hardest part was trying to reach the ultimate decision maker. Finally, I found a compassionate person at Saxon to help me," said Muters.

A new start

Two weeks later, Stephanie received an asking price offer on her home. Recently, her home closed. She walks away debt free and her credit to be restored. Her bankruptcy payments are complete, but she made no profit off her home sale.

A local landlord heard of the family's plight and offered to rent them a home near downtown. For $1,500 a month, Stephanie's family moved into a newly refurbished home with three bedrooms, and a rent-to-own option.

"I feel like I have a chance at a new start," said Stephanie. She hopes to buy again, "but this time, eyes wide open and never again a 100 percent financing loan."

Stephanie said she doesn't want other homeowners to suffer the same mistakes. "This can happen to the best of people," she said. "Always have at least three mortgage payments in the bank, just in case. ... Before we realized we were in too deep it was too late.

"At one point I was only one payment behind, and if I had known how to talk to the mortgage company, this wouldn't have happened to me. I wish I had known all of this before I bought a house."

She's still embarrassed about what happened to her.

"I haven't even told my own mother about this, that's how embarrassed I am," she said with a sigh.