Eddie’s story: Foreclosure ends one chapter, starts another

By Pam Bailey, NeighborWorks America blogger

Below is the final story in our four-part series on “life after foreclosure.” Read the previous posts beginning here.

One of the lessons Eddie Hines has learned from his ordeal of the past four years is to seek professional help early.

Hines and his wife bought a house in Pittsburgh in 2000. It was their first, and he admits now that they did it “blindly” – without the expert counseling provided by organizations like NeighborWorks of Western Pennsylvania, which stepped in later to help, in much less happy circumstances.

Hines was in good company, unfortunately. A survey commissioned by NeighborWorks America last fall found that when asked where they would go first for advice before buying a house, more than a third of American adults (39 percent) cited family and friends who had already purchased a home. Distant runners-up were the Internet (17 percent) and real estate agents (16 percent). Far behind were housing counselors and (more specifically) non-profit homeownership advisers (3 and 5 percent, respectively).

“We bought directly from the owner, and he took advantage of our obliviousness,” recalls Hines. “We basically paid too much.”

Still, they lived in their home comfortably until Hines, a school counselor, lost his second job with the local newspaper when his shift was cut. The income on which the family of four had relied dropped significantly, and they didn’t make the necessary budget changes. “We had gotten attached to a certain lifestyle,” he admits now. “We didn’t face up to reality.”

A NeighborWorks America
survey found a widespread
lack of emergency savings.

Once again, Hines was part of a national “epidemic.” A 2014 survey commissioned by NeighborWorks America found that almost a third of adults have no emergency savings, and another 21 percent have only enough to tide them over for a month. A related poll conducted by the National Foundation for Credit Counseling documented that just two in five U.S. adults (39%) – a proportion that has held roughly steady since 2007 – say they have a budget and keep close track of their spending.

The resulting stress proved too much for Hines’ marriage, and his wife moved out, leaving him solely responsible for the house. When he became ill, forcing him to take extended sick leave from his job at the school, it was the proverbial last straw. Hines tried to apply for a loan modification while he was still paying, but was denied because he was current – a common Catch 22. When Hines eventually fell behind on his mortgage payments, he was denied once again due to his wife’s refusal to co-sign.

Eddie Hines and Devon March

Finally, he turned to Devon March, a counselor at NeighborWorks of Western Pennsylvania.

“I was extremely stressed at that point,” he recalls. “I had lost my family, and living alone. Devon assessed the situation and asked me a simple, direct question, ‘Is this house worth the cost to you to keep it?’ And I realized the answer was no.”

Since then, Hines and March have become more than just client and counselor, frequently emailing each other to keep in touch. Today, Hines is renting an apartment and is back at work. He is still meeting with March, this time to build a budget and action plan so that he can someday become a homeowner again. With her help, he is on track to achieve that – just not right now.

“Eddie has a very positive attitude,” March says. “It’s like he has begun a second life. Now that he has a plan, he can sleep at night.”

Hines agrees: “Overall, I can say now that the ordeal has had some positive effects. If you take this kind of thing too much to heart, it will destroy you. But I’ve discovered my own resilience, and learned not to take everything so personally. I can’t control the actions of everyone else, so I am focusing on me.”

Although he is happy in his apartment for now, Hines still values homeownership because “it teaches my children, for whom I want to be a role model, to strive for your goals. They look to see how you handle adversity, and I want to show them that you can bounce back.”

Preserving ‘home’ after break-up and illness: Angela’s and Winnie’s stories

By Pam Bailey, NeighborWorks America blogger

Below are the stories of two women who sought help from a professional participating in NeighborWorks’ National Foreclosure Mitigation Counseling (NFMC) program – with two different outcomes, but the same fighting spirit. The five stories told in this series offer a flavor of both the trauma that foreclosure inflicts on families, and the ability of the human spirit – aided by the practical support of a trusted advisor – to bounce back. Read the previous posts here and here.

Angela Hawthorne, Illinois

“Happily ever after” is one of those fairy-tale phrases that in real life, only applies to about 50 percent of marriages.  That’s what Angela Hawthorne discovered, nine years after she and her husband moved into a house in Flossmoor, IL, with their two children.

Angela Hawthorne

Suddenly, Hawthorne found herself responsible for a mortgage on her own, on an income that had dropped precipitously when she took a leave of absence from her job as an underwriter for professional liability insurance to care for her ailing father. She attempted to negotiate with the lender directly and received a significant modification that gave her some breathing room -- but for three months only.

“I would find myself crying in the shower in the morning,” recalls Hawthorne. “But I couldn’t show it. At home, I had two kids to look out for, a daughter going on 15 and a 6-year-old son. I had to keep up a good front so their life was as normal as possible, and they could concentrate at school. I didn’t want them to worry about what was going on.”

In April 2012, a county mediation service referred Hawthorne to the South Side Community Federal Credit Union, where counselor Wilane Boone reviewed and improved her application for a loan modification. Unfortunately, Hawthorne failed to meet Federal Housing Administration guidelines for her debt-to-income ratio, and a summary judgment was issued authorizing foreclosure. Nevertheless, Hawthorne credits Boone for helping her navigate through the confusing and jarring process.

“Wilane was very insightful, and was always very straightforward and honest with me,” says Hawthorne. “She explained everything to me step by step and kept track of all of the paperwork so it wouldn’t get lost in the system. I never felt in the dark – which was huge for me.”

There is a happy ending to this story, however. Despite declaring personal bankruptcy in July 2013, she is now renting a new home, with hopes of purchasing it one day, just 15 minutes from the house she lost. Her children didn’t even have to change school districts.

“I learned that sometimes you have to just let go, and rely on your inner strength,” says Hawthorne, adding that for her, that strength came from a re-discovered faith in God. “Once I did, I felt a calm come over me.”

Winifred Octave, Massachusetts

Unemployment, or a significant reduction in pay, is the trigger for more than 60 percent of families who seek help from advisers who receive support from Neighborworks’ National Foreclosure Mitigation Counseling program. “Winnie” Octave, a single mother of three, brings that statistic to life.

Octave bought her rehabbed home in Worcester, MA, in 2001 from a local community development corporation. All was fine until she suffered a serious break in her arm and could not work at her job as an administrative assistant with the city’s bankruptcy court. Octave was replaced, and now unemployed, she struggled to pay her mortgage.

“I called my bank before I stopped paying, but they told me I had to fall behind before they would talk to me! It’s like a trap,” remembers Octave. “So I paid my overdue credit card bills instead. When I couldn’t pay the mortgage any longer, the bank gave me six months forbearance. But when the time was up, I still hadn’t been able to get a job.”

Winnie Octave (second from right) and (from left) her
daughter Danielle; son Rohan; nephew Juddah; and
son Tarik. 

In 2010, when she had fallen behind on her mortgage for nearly two years, Octave attended a community-education forum at a local high school and heard someone speak from the Oak Hill Community Development Corporation.

 “It was the best thing that ever happened to me,” says Octave. “I’d been submitting and submitting paperwork, and getting nowhere. Thinking about it now is like torture!”

Janice St. Amand, a foreclosure counselor at the Oak Hill CDC, says that even today, many clients tell her they are advised, wrongly, to deliberately fall behind on their mortgages, and then are unable to catch up when they are turned down for a modification.

“What’s key is to determine your priorities,” says St. Amand, who describes Octave as her first “complicated” client. “For Winnie, it was very clear: She wanted to save her house, and that meant putting aside money for her mortgage before anything else so she could show her intent. Winnie is a wonderful listener. I told her that we had to work as a team; that we don’t work for our clients, but with them. She understood what was needed and followed through.”

Meanwhile, Octave had landed a part-time job, allowing her to save more money, supplemented by a letter from a tenant she had taken on as a renter as well as another from her oldest son, who moved in to help her financially after returning from a military deployment in Iraq. She also leveraged her community connections as a very engaged resident, appealing to her state representative. In October of 2011, Octave was granted her loan modification, and her home was saved.

A survey from NeighborWorks America shows
many Americans are like Octave and do not
have emergency savings. 

It hasn’t been easy since then. Octave was forced to file for personal bankruptcy to get out from under her crushing credit card debt, and today, she is once again unemployed. However, this time she is optimistic, confident she is in her home to stay.  Her family has come together in support and she is “working” her wealth of community connections – an asset that is a benefit of being an involved citizen.

“This experience has brought my whole family so much closer together,” she says. “My middle daughter, for instance, used to act only for herself. But now, she is my best friend and she takes me out for treats like a manicure. Even my youngest son in college sends me money once in a while.”

In turn, Octave wants to help other people in her situation, perhaps by going after absentee owners who neglect their property or cleaning up neighborhoods – but also by sharing what she has learned.

“One of my biggest lessons was to budget!” says Octave, who participated in the Oak Hill CDC’s financial-education classes. “I always paid my bills, but I didn’t put any away for emergencies. I didn’t think about what could go wrong. Today, I find a way to save some money every month, instead of going out to dinner, for instance, and I’ve got $10,000 put away now.”

Octave is not alone. A new, national survey commissioned by NeighborWorks America found that almost a third of adults have no emergency savings, and another 21 percent have only enough to tide them over for a month. The problem is particularly pronounced among African-Americans, Hispanics and households earning less than $40,000 a year.

Why is homeownership still important to Octave, despite the stresses?

“My house is important because it’s mine; it’s what I can leave my kids,” she explains. “If I rent, it’s like I am giving other people a part of me. I am not giving up my home for anything.”

Next post: Eddie’s story – ending one chapter to start another. To receive it in your inbox, subscribe in the box in the right margin.

‘Fixer-upper’ to foreclosure: Walter and Dorothy’s story

By Pam Bailey, NeighborWorks America blogger

Below is the story of a couple who sought help from a professional participating in NeighborWorks’ National Foreclosure Mitigation Counseling (NFMC) program – ultimately losing their house, but already laying the groundwork to become homeowners once again, with a bit more wisdom. The five stories told in this series offer a flavor of both the trauma that foreclosure inflicts on families, and the ability of the human spirit – aided by the practical support of a trusted advisor – to bounce back. Read the first post here.

When she and her husband first set eyes on their soon-to-be home on Oct. 25, 1995, “the house looked like a nightmare from hell,” says Dorothy James. With the house in Roxbury, MA, damaged by fire, the original owner no longer wanted to invest money or time in the structure.  However, with her flair for interior decorating, she saw a labor of love, and Dorothy and Walter James made it their own.

With a couple of re-financings and a healthy income from her job as a property manager and Walter’s in telecommunications, they were able to remodel the home in three phases. The couple ran into trouble, however, when James lost her job. The initially low interest rate on their last “creative” financing deal ballooned, and now that she was out of work, no one would offer a fixed rate.

Dorothy and Walter James with their son, Nathaniel (far left)

“Our mortgage payment jumped from $1,488 a month to more than $4,000,” James recalls. “There’s no way we could have afforded that. I looked for a job desperately, while I dipped into my 401k. We got a small modification that dropped the payment by about $1,000, but we were flat broke at that point and it wasn’t enough.”

In September of 2009, Walter James lost his job as well. It didn’t take long -- Dec. 2 to be exact -- for the bank to inform them that it was foreclosing on their home. By the following July, just two days after their 37th wedding anniversary, they were forced to leave. With no other recourse, James and her husband rented a room in the house of her sister-in-law, hitting rock bottom when she was diagnosed with breast cancer the same month.

“It was one of the most terrible experiences of our lifetimes, almost as bad as when one of our daughters died,” recalls James. “We went from a 10-room house into which we had poured our hearts and souls, to one room and having to tell our own son, who had been away at college, that he couldn’t come home. Everything we had saved was gone in a year.”

Over the course of the next year, James finally got a new job as a case manager in a drug-rehabilitation program, and they could begin to think about renting their own place.  However, the cost of paying lingering, past-due utility bills, moving costs for their furniture (then in storage), deposit on an apartment, etc. was still prohibitive. That’s when James’ mother, who was seeking her own mortgage modification at the time, told them about the nonprofit that was helping her -- Urban Edge.

“We were administering a fund to assist people who lost their homes and needed assistance getting back on their feet,” explained Bob Credle, director of community programs for the community development corporation who began working with the couple in June of 2011. “We paid to release their furniture from storage, moved it to their new apartment, put down the first month’s rent and took care of their past-due gas bill.”

A survey commissioned by NeighborWorks
America found an widespread lack of
savings.

The total grant from Urban Edge was about $7,000 – just enough to get the couple over the hump that had prevented them from moving out on their own again. “We couldn’t have done it without Bob and Urban Edge,” James says.

Today, James has completed her cancer treatment and is back in her original profession, working as an assistant property manager and rebuilding their savings. Her husband has returned to work as well, although with an inconsistent schedule. They continue to rent a three-bedroom apartment, which they share with their son, who has since graduated from college. He will move out, but James is relieved that it will be on his own timing, when he is ready.

“The experience of going through all this has changed me to be more compassionate to others,” says James. “When you hear about people who hit hard times, it’s easy to assume they were on drugs or doing something else irresponsible. But maybe they had health problems or some other challenge. Don’t be so quick to judge; find out how they got there. That could be you one day.”

Do they want to return to being homeowners? Yes, when the time is right.

“We will definitely own our own home again someday. In an apartment, we don’t have a yard for our grandchildren to play in, to have cookouts,” James says. “I’ve learned from this whole experience, and it won’t stop us. I’m not going to let anything be taken from us again.”

Next post: Preserving ‘home’ after break-up and illness: Angela’s and Winnie’s story. To receive it in your inbox, subscribe in the box in the right margin.

Life after foreclosure: re-discovering the meaning of ‘home’

By Pam Bailey, NeighborWorks America blogger

We all know the story in numbers. A total of 4.9 million homes were foreclosed in the wake of the Great Recession and even today, close to 1.9 million mortgages are in serious delinquency. In February alone, 43,000 families lost their homes – albeit down 15 percent from the same month the year before. Then there are the more than a million other families who barely saved their homes, but typically after months of emotional turmoil. What the media don’t report, however, is how these families are coping a year or more later. Are they in better financial shape today? What lasting effects did their crisis have? What lessons learned would they share with others?

Every individual is different, of course. But the stories of five persons who sought help from  professionals participating in NeighborWorks’ National Foreclosure Mitigation Counseling (NFMC) program offer a flavor of both the trauma that even a near-miss inflicts on families, and the ability of the human spirit – aided by the practical support of a trusted advisor – to bounce back.

Patricia Brown, Florida

Brown’s story is emblematic of many individuals and families who became victims of the Great Recession. One crisis has a nasty habit of being followed by others, and in Brown’s case it started with her divorce in 2011. Not too long after, she was laid off from her job as a nursing supervisor at an assisted-living facility, immediately causing her income to plummet. (She’s not alone. A loss of – or a significant reduction in – employment income was reported by 64 percent of persons seeking NFMC services.) Adding to the financial burden, her 43-year-old daughter became ill and moved in.

Persons seeking help from NeighborWorks America's
NFMC program often are struggling to cope with crises.

“The divorce wasn’t really a big deal, since I had always been the main breadwinner,” recalls Brown, who had lived in her North Lauderdale home for 17 years. “The biggest blow was the unemployment.  I was able to get some work as a private-duty nurse, but the pay just wasn’t enough and I fell behind on my mortgage payments.”

For a year, Brown tried to work with the mortgage company herself to negotiate a loan modification, but says she either received no response or kept getting the same forms to complete with no action. It didn’t help that her original lender sold her mortgage to another financial institution midstream. With foreclosure threats a daily worry, she remembers, “I was ready to just throw up my hands. I can’t even begin to tell you how stressed out I was.”

Then she was referred to Neighborhood Housing Services of South Florida (NHSSF) by the county legal aid service.  And that’s when she says she “turned an emotional corner.” Olga Cuadra, the homeownership preservation counselor assigned to her at NHSSF, recalls that Brown had no knowledge of the foreclosure process or what lenders look for when reviewing requests for modifications. “Many people under-estimate the value of their assets and over-estimate their expenses,” explains Cuadra. “A big way in which we were able to help Patricia was to paint a better picture (on her application) of her ability to satisfy the terms of a modified loan.”

Brown was approved last September for a loan modification, which will lower her payments by more than $500 a month once she secures new mortgage insurance – enough of a difference to allow her to remain in her home. Although her daughter is still unable to work, and she herself is now hindered by a combination of health problems, they receive disability payments that they supplement with income from renting two rooms. It’s enough to keep up with Brown’s new, lowered payments.

“I never want to go through that again,” says Brown. “I don’t think I could have without the support of Olga and her organization. I’d come into her office a wreck, and I’d leave feeling much calmer. I learned not to give up on yourself; now I know that you can get through just about anything. And I learned to ask questions – and for help – if you’re in trouble!”

Has she held on to her belief in the value of homeownership, despite the stress of the past and the uncertainties of the future? Unquestionably, yes.

“This house is everything to my family. It’s home to us and we want to hang on to it. I may not know what the future holds, but it was worth the fight and if I had to do it all over again, I would.”

Next post: From ‘fixer-upper’ to foreclosure: Walter and Dorothy’s story. To receive it in your inbox, subscribe in the box in the right margin.

Continuing need for foreclosure counseling is sign of still-ailing economy

There’s good news and bad news in the report to Congress this week on the National Foreclosure Mitigation Counseling (NFMC) program, which NeighborWorks America launched in 2008.
First, the good news: Nearly 1.6 million homeowners have received help to date from the NFMC program -- 124,512 in just the 12-month period ending on May 31, 2013. (We know the counseling helps. A 2011 Urban Institute analysis showed that individuals who take advantage of the program are more successful in obtaining mortgage modifications, and are able to negotiate larger monthly savings, than those who do not.)

Pam Bailey, new
blogger for
NeighborWorks
America

It’s also an improvement that in the last year, the ratio of people seeking help who have mortgages with fixed interest rates of 8 percent or less increased to nearly two-thirds (59 percent) – up from just 30 percent in October 2008. Clearly, the disastrous era of destructive “sub-prime” loans – with interest rates that soar higher over time – is on the wane.

The Great Recession and ‘jobless recovery’ take their toll

Why, then, are so many individuals still needing help to avoid foreclosure? An answer can be found in a couple of other statistics in the NFMC report: For example, when they first entered the program, nearly 37 percent of the individuals counseled in the last year were spending half of their income or more on mortgage-related costs – well above the maximum recommended 31 percent. Nearly one in five were spending more than 75 percent of their income on principal, interest, taxes and insurance – a rate that has held steady since 2008.

Housing costs have grown to be such a drag on household budgets primarily due to loss of – or a significant reduction in – employment income (reported by 64 percent of persons seeking NFMC services).   As noted in The New York Times recently, “the consequences of job loss go far beyond the spell of joblessness. Research shows that layoffs can worsen earnings, health and even mortality rates for up to 20 years after the initial displacement. Not to mention home ownership.”

This chart from the NFMC report shows that most
"Level Four" individuals (who have a debt-to-income
ratio of 55%) who seek counseling are aged 45-64.

There are two groups of people who seem to be struggling the most: recent graduates and older workers. A report from The Opportunity Nation released just this week documented that almost 15 percent of individuals between the ages of 16 and 24 (that’s almost 6 million young people) cannot find jobs once they have completed school. However, according to the U.S. Labor Department, while unemployment rates for newly graduated students are higher, older workers who have been laid off have a much harder time finding work. Over the last year, the average duration of unemployment for older people was 53 weeks, compared with 19 weeks for teenagers and young adults. (The NFMC report reflects this trend. Slightly more than half – 53.9 percent – of individuals seeking counseling through the program who have debt-to-income ratios of 55 percent or higher are between the ages of 45 and 64.)

This is a subject that hits close to home for me. After living overseas for three years, I returned home in late 2011 to the Great Recession and a forbidding job market.  I found my way to several LinkedIn forums and discovered large communities of mostly over-50 professionals who had been laid off and just could not find new positions. And the longer they were out of work, the harder it seemed to be to get interviews – a discrimination against the long-term unemployed confirmed by recent research.

Chronic unemployment becomes vicious cycle

A study conducted by Rand Ghayad, a visiting scholar at the Boston Fed, and William Dickens, a professor of economics at Northeastern University, found that as long as you've been out of work for less than six months, you can get called by companies for interviews even if you don't have experience. But after you've been unemployed for six months, it doesn't matter what experience you have. Quite literally.

“There's a new cliff in town, and it's much scarier than the fiscal cliff,” wrote Matthew O’Brien in The Atlantic in December. “It doesn't have anything to do with expiring tax cuts or sequesters. It has to do with people who have been out of work for six months or longer. It's the worst cliff of them all: the Unemployment Cliff.”

My new LinkedIn connections soon got to the point when they felt lucky to be offered any job, even at administrative levels and salaries far below what they once earned. Many a story was posted about having to give up homes and move in with others, whether friends or adult children. And those were perhaps the lucky ones; they had people who would take them in. I didn’t have a house to pay for, fortunately, but rents are high in the DC area, and as I started my job search, I felt their fear. (You can read some of their gut-wrenching stories on the website, "Over 50 and Out of Work.")

Indeed, says Vivien King, a senior manager at NeighborWorks America who works with the NFMC program, although the service has been able to help thousands of families stay in their homes, it is not always possible. “Sometimes a successful outcome is transition out of their home,” she says.

Mr. Chavez (far left)and his daughter with Gerber DeLeón -- a
homeownership preservation specialist with
NeighborWorks member Select Milwaukee.

Consider the Chavez family, who like 19 percent of NFMC clients, are Hispanic (a segment that is just 8 percent of the overall U.S. population and thus is over-represented among those seeking help from the program, along with African-Americans). In 2001, the couple and their four children had moved into a small duplex, followed by purchase of their first single-family home in 2007. They held onto their duplex, renting it out for additional income. Then their world turned upside down. In November of 2011, Ms. Chavez was let go from her full-time job, and the loss of the second income strained the family’s finances so much that they fell behind on their mortgage.  They tried to re-negotiate the terms, but by that time their financial condition was too shaky to allow them to qualify.

Their lender referred them to a NeighborWorks organization, where a Spanish-speaking counselor was able to provide the trusted advice they so desperately needed.  With Ms. Chavez still out of work and no offers on their house after several months on the market, the organization’s counselor helped guide the couple through a deed-in-lieu agreement with the lender, avoiding foreclosure.  Fortunately for the Chavez family, they had a fall-back -- the duplex they had rented out. Today, they live in the duplex, and although they had to give up both their single-family home and the down payment they had invested, they report an overwhelming sense of relief, free of the burden of struggling to make ends meet – and losing.

The Chavez family is relatively fortunate. They had a back-up option. Many others do not, and need assistance in finding new housing that is more affordable. This is why I am so glad to have joined the staff of NeighborWorks America. I can’t find jobs that pay a decent salary for all of those hard-working individuals I met on LinkedIn. But now I can do my part to help make sure they at least can find or keep an affordable place in a good community to call home.

Written by Pam Bailey, communications writer for NeighborWorks America. She would love for you to post your own stories and comments!

Additional Funding for Foreclosure Mitigation Counseling Program

By Jeanne Fekade-Sellassie
director, NeighborWorks America National Foreclosure Mitigation Counseling Program

Today, NeighborWorks America announced that $70.1 million has been awarded to 30 state housing finance agencies (HFAs), 17 HUD-approved housing counseling intermediaries, and 72 community-based NeighborWorks organizations to provide counseling to families and individuals facing the threat of foreclosure.  Just one month after the seventh round of National Foreclosure Mitigation Counseling (NFMC) Program funds were appropriated, communities across our country will be able to put the funds to immediate use.

At a time when foreclosures continue to affect communities around the country and unemployment rates remain high, the need for the NFMC funding is critical.  Demand for these funds far exceeded the amount of funding available; eligible applicants requested over $105 million in NFMC grant funds.



In total, more than 1,200 nonprofit counseling agencies and local NeighborWorks organizations across the country are expected to be engaged in the NFMC Program as a result of these awards.  These organizations provide invaluable, free assistance to families at risk of losing their homes, determine client eligibility for the Making Home Affordable programs, help clients understand the complex foreclosure process, and identify possible courses of action so their clients can make informed decisions and take action.

To date, more than 1,560,000 families in all 50 states, Puerto Rico and Guam have received foreclosure counseling through the NFMC Program.  It is estimated that 193,000 families facing the threat of foreclosure will be directly assisted with this seventh round of funding.

In addition to the grant funding, the NFMC appropriations provide funding to train foreclosure counselors and to administer the program.  With these funds, NeighborWorks has conducted over 156 local, regional, and national trainings and has provided over 12,100 training scholarships and over 23,000 course completion certificates to individuals attending these trainings.  Nearly 5,800 participants have completed one or more of the three foreclosure e-learning courses developed with NFMC funds: Foreclosure Basics, Understanding and Applying Loss-Mitigation Tools, and Using Effective Practices to Improve your Foreclosure Counseling Program.  NeighborWorks expects to train 2,000 counselors with the seventh round of NFMC funding.

Learn more at http://nw.org/network/foreclosure/nfmcp/round7.asp 

NeighborWorks America Announces that the National Foreclosure Mitigation Counseling Program Has Served 1.5 Million Homeowners

1.5 million homeowners have received foreclosure prevention counseling by local nonprofits, national intermediaries and state housing finance agencies participating in the National Foreclosure Mitigation Counseling (NFMC) program administered by NeighborWorks America, one of the nation’s largest community development corporations. The latest report on the NFMC program also found the program has helped save local governments, lenders, and homeowners approximately $920 million.

Watch this inspirational video about the compassionate NFMC-backed foreclosure counselors who are making a difference in the lives of individuals and families. 

 

Also notable in the report, NFMC clients who received a mortgage modification lowered their monthly mortgage payment, on average, $176 more per month than non-NFMC clients which represents $372 million in annual savings to NFMC-counseled homeowners. With more fixed-rate mortgages and lower interest rates, mortgage terms are becoming more favorable for homeowners. The percentage of clients that reported having fixed-rate mortgages with interest rates at or below 8 percent increased from 30 percent in October 2008 to 57 percent in August 2012. Nearly 69 percent of NFMC program clients report holding fixed-rate mortgages.

Jane Sokolowski Receives
Counselor of the Year Award
from Chuck Wehrwein,
NeighborWorks America COO

On December 13 NeighborWorks America and the NFMC program sponsored the inaugural NeighborWorks National Foreclosure Mitigation Counseling (NFMC) Program Counselor Awards, which recognize the contributions of counselors whose tireless efforts help homeowners maintain homeownership and transition to suitable housing. The winners are the following: Jane Sokolowski - Catholic Charities (NY) for the Counselor of the Year Award; Betsy Carvajal - CredAbility (GA) for the Excellence in Counseling Award; Ali Tarzi - Community HousingWorks (CA) for the Excellence in Outreach & Professional Development Award; Amanda Diaz and Diego Tapia – Hispanic Association of Contractors and Enterprises (HACE) (PA) for the Excellence in Personal Achievement Award; and Rose Marie Roberts – Utica Neighborhood Housing Services NeighborWorks HomeOwnership Center (NY) for the Counselor Perseverance Award. More information about the award winners is available here.

To view photos from the event, visit our Flickr page.

What Are Reverse Mortgages Anyway?

This article was jointly produced by the NeighborWorks America National Foreclosure Mitigation Counseling team and the Home Equity Conversion Mortgage (HECM) program team.

We hear a lot about reverse mortgages in the media, but there is a good deal of confusion about what they are and how they work. To begin with, many people refer to “reverse mortgages” in general, when they really mean to speak about those loans offered specifically by the Federal Housing Authority (FHA). This post focuses on these FHA reverse mortgages, also called home equity conversion mortgages, or “HECM” loans.

The idea behind a HECM loan is that many older borrowers are house-rich, but cash poor. Imagine, for example, an elderly retired couple that has long since paid off their home, but lacks the money needed for daily expenses like medicine, gas and food. A HECM loan would allow the couple to use their home’s equity as a form of income. They would borrow against the market value of their home and get cash in return.  To pay off the loan, they or their heirs might sell their home some years in the future or repay with other means.

Advantages of a reverse mortgage include the fact that the homeowner can stay in their home and does not repay the loan until he moves or sells the property, or passes away. At that time, the borrower owes the lesser of the loan balance or the value of the property.  A HECM loan thus differs from a home equity loan in that the borrower doesn’t need to make any payments during the life of the loan. Furthermore, there are no traditional income or credit requirements. To qualify for a HECM loan, a homeowner must be at least 62 years old and own their home free and clear or be able to pay off all existing mortgage debt with HECM loan funds. The homeowner must also talk with a HUD-approved HECM counselor.

An illustration of a successful HECM loan situation might be a family where an aging father wishes to remain in his family home, but lacks savings to be able to pay for all his regular bills. Instead of having to sell his house, the father can stay where he is and continue to be around the people and places that have meant so much to him throughout his life. His children may not be able to keep the family home if the loan is not repaid, but during the father’s life, he may be able to maintain a greater degree of financial independence.

However, HECM mortgages are certainly not for everyone. One big challenge is that they encumber the borrower’s property with debt, which is not in alignment with all cultural values and may complicate or preclude the borrower’s ability to pass the home on to his or her heirs. If the borrower’s heirs are unaware of how the HECM loan works, they may be unpleasantly surprised to find a large debt owed on the property. It’s also possible that an elderly borrower might be alive, but have health issues that prevent him or her from continuing to live in the home. Should the borrower move out, say to a nursing home or to live with family, someone would need to assume responsibility for closing out the HECM loan.  Repayment options include selling the home, repaying the loan or refinancing the loan.

In recent years, some foreclosure counselors have recommended HECM loans as a way for older clients to pay off their debt and remain in place. In these cases, a borrower would take out a lump sum HECM loan, and use it to pay off the balance of their conventional mortgage debt. This would buy the borrower time, but it might not leave the borrower with any extra cash, meaning that they would still need to find a way to pay for their day-to-day living.  Another source of income would be needed — which could be a problem if, for example, the foreclosure was the result of multiple family members losing their jobs.

In all cases, homeowners considering a reverse mortgage should carefully explore whether it is the most appropriate means of achieving their financial ends.  Housing counselors help homeowners clarify their objective and whether a reverse mortgage best fits that goal.  Counselors also ensure homeowners take all fees and charges into account, walk homeowners through the rules to confirm the borrowers understand completely the unique mechanics and risks of this loan type, and help homeowners avoid scams. However, counselors are no substitute for evaluating personal values or talking to family members. Borrowers should think carefully about what choice is best for them, their family and their legacy.

For a list of HUD-approved HECM counselors, visit https://entp.hud.gov/idapp/html/hecm_agency_look.cfm

HECM counselors can also visit www.hecmcounselors.org for more information on HECM Counselor training and technical assistance available from NeighborWorks America.

NextGenCD: Evolving Definitions

In honor of the upcoming NeighborWorks America Young Professionals symposium, we have collected several blog posts from those under 35 asking their feelings on the meaning of community development. Share your comments on Twitter using #NextGenCD.
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Dani Rosen, NeighborWorks America
community scholar intern
NFMC Quality Control and Compliance

At each stage of my academic and professional life, “community development" has emerged as a different issue, program, or agenda. My interest in community development started at the local level – while I was working as an AmeriCorps VISTA member in Hudson County, New Jersey. While there, I saw community development as an effort to increase access to resources for families and individuals in need. This definition broadened while I studied as a Master of Urban Planning student at New York University (NYU). In the classroom, I learned about community development as neighborhood organizing. For example, the way Jane Jacobs fought to preserve the local character of homes and shops in Greenwich Village, New York.

Unfortunately though, I also came to understand that in many areas the phrase "community development" is used as a disguise for potentially unwanted change in a community in transition. Developers and city officials use the term to smooth over the introduction of out-of-context buildings or large commercial developments that could alter the nature of a specific neighborhood.

I currently understand community development as an investment in a specific area. The investment can be financial, political, or social and the area specified can be a block, a neighborhood, or a metro-area. With the right motives and support community development can make a substantial impact.  The strength of community development can best be seen in the depth and breadth of projects and programs available.

Image courtesy of Creative Commons

Community gardens are a great example of what community development can achieve at the local level. Community gardens have become incredibly popular in urban areas in the past few years. They come in all shapes and sizes and bring many different advantages to an area. Community gardens are social and financial investments that provide both education and opportunity for social interactions. They provide fresh produce, often to those who lack other access to fruits and vegetables. They also reinforce the connection to local land as residents work to transform patches of dirt into small, but beautiful natural spaces.

At the state level, community development has the potential to benefit a much larger audience. NJ After 3 is an initiative to provide quality after school programming for school-aged children in New Jersey.  The program goals include reducing gang involvement and increasing scholastic enrichment so that all members of the community have the opportunity for a better future. NJ After 3, and similar programs, fill a gap by giving working parents more structured time for their children when parents cannot be at home.

There are countless additional examples of community development addressing other issues at multiple levels of focus.  The value of each program rests in the benefits that are brought to the individuals and families involved.  Community development has the potential to be a “catch all” phrase but I think that is one of the most important strengths of the field. Because community development includes many different types of investments in a range of geographic sizes, successes are magnified and can be celebrated by the entire field.