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.

‘Families and friends’ good for social support, not housing advice

By Pam Bailey, communications writer for NeighborWorks America

It’s been five years since the full force of the Great Recession hit the United States, with a combination of risky mortgages and declining housing prices forcing approximately 4.6 million families into foreclosure. While more than 13 million households are still underwater, saddled with homes worth less than their mortgage loans, the crisis is losing steam. Foreclosures fell 3 percent in 2012, according to RealtyTrac, and this year is looking even better. In October, foreclosure filings were 28 percent lower than the same month in 2012.

Still, many families are still struggling, and making smart choices will continue to be critical for both the next wave of new house buyers and existing owners working to hold on to their homes. In the aftermath of the crisis, are people now equipped with the information they need to negotiate the right mortgage, as well as to make other pivotal choices? If not, do they know where to go to get help that can be trusted?

To learn the answers to those and related questions, NeighborWorks America commissioned a nationally representative survey of 1,000 adults, which was conducted by Widmeyer Communications, a Finn Partners company, Sept. 23-26.  Among the many findings: Seventy-five percent of adults describe the the home-buying process as "complicated," and a quarter (24 percent) admitted to not being knowledgeable about the different kinds of mortgages.

So where, then, do they turn for advice when buying a house or avoiding foreclosure – a decision that is usually among the biggest financial choices they will make in their lifetimes? More than any other source, “family and friends” are relied upon most often.

When respondents who said they are considering buying a house were asked where they go to first for advice, more than a third (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).

The patterns for seeking information on foreclosure prevention are similar.  Individuals are most likely to turn to family, friends and co-workers (30 percent), followed by the Internet (27 percent), real estate agents (26 percent) or mortgage lenders (23 percent). Just 17 percent of respondents reported they are “very likely” to consult with a housing counselor. The reliance on friends, family and co-workers is especially seen among adults under 55 (37 percent) – particularly women.

Advantages of nonprofit housing counselors

There is nothing wrong, of course, with calling upon your social network. In fact, much research has documented the importance of family and friends in helping individuals cope with all sorts of stress. However, rarely are they professionals in the field of housing or banking, and even when they have gone through the process of home buying or loan modification themselves, each family’s financial situation is unique, not to mention the fact that rules vary depending on the lender and the timing.

“Having a supportive family is wonderful, and the Internet offers a wealth of information,” says Rose Marie Roberts, an advisor with the NeighborWorks Homeownership Center in Utica, NY. “But I wouldn’t go from there to action.” For example, when trying to prevent foreclosure, she notes, “rules and available programs, plus the related legal aspects, change almost daily. It’s a challenge to stay on top of them. But that’s the job of a housing counselor.” (Roberts talks about foreclosure counseling in a NeighborWorks America video.)

With the Government Accountability Office reporting that complaints about fraudulent “foreclosure rescue” schemes jumped from 9,000 in 2009 to more than 18,000 in 2012, it’s critical to have a professional advocate on your side. (Since 2007, NeighborWorks America has managed, at the request of Congress, the National Foreclosure Mitigation Counseling program. It funds more than 1,700 agencies that have assisted nearly 1.6 million homeowners struggling to stay in their houses – without charging a fee. In fact, one sure sign of a scam is an individual or program that attempts to charge for this service. Yet, the survey found that slightly more than a third – 33 percent – of people think that free help is not as good as counsel that you pay to receive.)

A nonprofit housing counselor can help head off
trouble during the complicated home-buying process.

While realtors and mortgage lenders are essential advisors as well, housing counselors with nonprofit organizations such as those that are supported by NeighborWorks America take a holistic approach to each client’s situation – helping them evaluate far more than how much a particular house is worth, which mortgage they can afford or whether they are eligible for re-financing.

“For example, some of the residents in our community are attracted to the less-expensive homes one county over,” recounts Letty Plasencia, a counselor with NeighborWorks Orange County (CA). “But you have to look at more than the sales price. How much time and money will it take to commute to your job, for instance?”

There is hard data showing that pre-purchase counseling by a trained counselor works. A study conducted of 75,000 loans originated between October 2007 and September 2009 showed that clients receiving pre-purchase counseling and education from NeighborWorks organizations were one-third less likely to fall behind on their payments during  the two years after receiving their mortgage.

It’s not surprising that most people don’t think first of turning to a nonprofit housing counselor. Most local organizations do not have the budget for extensive public education. (One of the most successful national campaigns was the “Nothing is worse than doing nothing” campaign launched by NeighborWorks America and the Ad Council, centered on a series of public service announcements for broadcast. Another is the Loan Modification Scam Alert website and hotline.) Instead, local organizations typically rely on referrals and word-of-mouth. The good news is that clients do spread the word to friends and family. And many states and organizations, such as unions, have institutionalized referrals to housing counselors for residents or employees who find themselves underwater.

“In New York, lenders are required to notify homeowners in trouble,” says Roberts. “The problem is that they often don’t trust the lender by that point, or they assume they are a lost cause and no one can help them. I’d say 75 percent of the time, we get these individuals late in the game, from a lawyer or Supreme Court judge who handles settlements.”

The challenge for housing organizations is to build and better leverage relationships with a diverse array of other community stakeholders, such as schools and health clinics, to spread the word about their services to people before they need it. (And of course, expanded demand would require increased staff.) It is clear, counselors agree, that the best time to see a housing adviser is early on, prior to any critical decision-making.

Kevin Washington, a counselor with Neighborhood Housing Services of New York City (NHS-NYC) who specializes in foreclosure intervention, gives this example: “By the time people get to me, they often have gotten advice from a neighbor down the block who has been through foreclosure before, and they end up getting further in trouble. For example, sometimes these clients close all of their accounts down to pay off their debts, but that’s very bad for their credit scores. Plus, you’ll need some money to cover down payment and closing costs (to buy a more affordable house). You don’t need to pay off your debts; you just need to make the required payments. If they get to us too late, and they’ve already made mistakes, they have to wait even longer (to buy) so they can build their assets back up again.”

But perhaps Ruth Pena, another counselor with NHS-NYC, sums up the value of a housing counselor the best: “We create an action plan, and then hold (our clients’) hands through the entire process. Who else will do that?”

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!

The Challenges of a Hot Market - An Interview with Neighborhood Housing Services of the Inland Empire

This blog is reposted from StableCommunities.org.

Often we hear about long term vacancies as the consequence of the foreclosure crisis, but in some areas, the speedy return of the market has resulted in other problems for those in need of affordable housing. The Stable Communities Initiative recently sat down with Dawn Lee and Beena Khakhria of Neighborhood Housing Services of the Inland Empire to hear how the return of the housing market is impacting San Bernardino and Riverside Counties in California.

Stable Communities: How has the real estate market in the Inland Empire changed over the past few years?

Dawn Lee, Executive Director and Chief Executive Officer: We were a market hard hit, harder than most, with the foreclosure crisis.

Before the crash, people came to the Inland Empire for affordability. During the boom years, they were building in the area like crazy. With the building boom we also saw rising prices, sometimes tripling over short periods. And people were buying because they felt like “I’ve got to buy a house now because prices are going to keep rising.” Then the housing crash came as well as a failing economy and a high level of unemployment.

Beena Khakhria, Director of Real Estate: In 2007, we saw a huge decline in home values which led to a lot of foreclosures and people walking away from their homes. It crippled our counties. A lot of neighborhoods were like ghost towns. There were squatter issues, people destroying homes, it was really bad. As we saw the market go down, we saw investors come out of the woodwork. The crash had made investment in real estate even more palatable for investors. It wetted their appetite and they devoured.

Around 2010 and 2011, we started to see a lot of REOs come onto the market, but without adequate systems to in place to handle REO sales. While systems to handle REOs were being mastered short sales came on and many realtors jumped on the short sale bandwagon.

SC: Was there a moment when the market hit equilibrium before tipping to the sellers’ advantage?

Beena: There was a short period of time when buyers were able to get into the market and purchase homes, from December 2011 to April or June of 2012. That was a buyers’ market, but it lasted less than six months. After that, our buyers quickly lost out. If you were coming in with 3 percent down and asking for a contingency period and inspections then you were going to lose in the bidding process.

SC: What is the current climate of your housing market?

Beena: Now it’s a seller’s market. Inventory is low. In some places where we want to penetrate there just aren’t any homes.

Dawn: It is very much a seller’s market right now. For some buyers who come to us, this is the 20th or 30th house they have bid on. But the sellers are going after cash offers where the money will be a sure thing for them. That leaves our buyers stuck.

For us, we offer homes to first time buyers and “move-up buyers” with incomes in the low to moderate range. While others working in this space may have properties sitting, we don’t. We’ll list a house and we will get offers in a matter of hours or days. Recently, a home that we were selling appraised at $275,000, the buyer had some delays in their financing and by the time the deal was complete their house had increased in value to $289,000.

At the same time, rents are going up and often rents are more expensive than buying.

SC: Can you share the story of a family you have been working with?

Beena: One family, Maria and George*, started their search with NHSIE Realty in July of 2012. As a young family, they faced the challenges of finding housing that accommodated the needs of their four children; ages in 12, 10, 7 years and 6 months. Maria was pre-approved at a purchase price of $165,000, solely on her income. Her father had gifted them closing costs and partial down payment. George had been unemployed due to a work injury and was going through physical therapy to re-enter the workforce. They had also completed an 8-hour pre purchase class and were going to utilize our down payment assistance.

By the end of October they had submitted at least 25 offers. The rapid decline in available inventory and increasing home prices began to push them out of neighborhoods they had chosen. The agents and sellers were not prepared to work with first time homebuyers utilizing FHA or any city/county down payment assistance programs. Their offers were bid out by investors each time.

SC: What is NHSIE doing to respond to the shifting market and help families like these?

Dawn: As an organization, we have taken advantage of the REOs where we could and have made those homes available to prospective buyers.

A strategy that works for us, and we wish we could expand, is the purchase of homes through First Look programs. If there is a pool of houses that are available for a period of time exclusively to nonprofits, we have a better chance of securing them for first time home buyers who will be owner-occupants.

Another program we have is Opening the Door to Home Ownership, a fee based service for people who are struggling the most. To qualify, you have to have been looking and submitting offers unsuccessfully for three or more months. We match houses from the First Look programs with a buyer’s needs and get the buyer out of the highly competitive market. We renovate the home with the intention of selling the house to the prospective, pre-selected buyer. The program comes with lots of one-on-one coaching and education to ensure the buyers are making good choices and will be sustainable homeowners.

For all our programs, we screen our families and cross qualify to ensure the property is a good fit. We provide one on one coaching, pre-purchase education and home maintenance class.

Beena: We strongly believe that buying a home is a stressful period, and when the buyer feels they are competing with others, it can become a bad situation in their personal lives. We are able to be patient with buyers and allow them to complete the purchase process. We currently have two clients who have struggled with securing financing for up to 5 months. Going through normal channels, they would have had to cancel their contract well within the negotiated contract periods.

SC: How have the key housing challenges in these counties changed over time?

Beena: We are seeing challenges in securing portfolio. We are finding that when we are buying from the First Look programs, the margins we want aren’t there. It hasn’t been easy to find the right deals that make the strategy feasible for us to purchase these homes.

SC: How have you and your staff adapted in the face of market changes? What have you learned from these rapid shifts?

Dawn: We have learned to be flexible. Before, if you were in the foreclosure department, that’s all you did. If you were in the homeownership department, that’s all you did. We have made changes that allow us to be more responsive, now all of our staff are cross trained and cross certified. We are all housing advisors, not foreclosure or homeownership counselors.

We have also trained or hired more broadly skilled staff. We will always maintain foreclosure prevention services, but we see in response to the market that we need people who can offer a variety of services to the same client.

SC: What advice would you give to other organizations trying to monitor their housing markets and adapt to shifting challenges?

Beena: Watch your market. Be very attentive to the trends and understand the challenges your buyers are facing.

Dawn: Be flexible. Evaluate what is out there and always look for new opportunities. Even if you have developed a policy or plan that is focused, don’t be afraid to adjust. Use the data you find. Listen to your market. None of this will last forever but think about how you can be impactful right now. Treat every client as if they are a member of your family.

One of the biggest challenges is visibility. As a nonprofit we are strapped to market our organization. People don’t know we are here. Most people don’t see themselves as people who need the assistance. We want them to know that we are here and we can add value to the process.

Beena: Do a lot of marketing, customers need to know who you are and the value added services you provide.

SC: Any final words of wisdom?

Dawn: This is a unique moment in time. It will be a shame if we can’t do more at this moment, and we know we’ll get back to a point when the market is flooded.

* These names have been changed to respect the family's privacy.

Foreclosure Filings Down but Help Still Needed

By Douglas Robinson, media relations manager, NeighborWorks America

Housing counselors at NeighborWorks
affiliate Wyoming Housing Network helped
this couple save their home from foreclosure

RealtyTrac recently reported that new foreclosure filings in January 2013 dropped to the lowest level since April 2007, and that's a big deal and a good sign that many homeowners' financial positions are stabilizing. But the news from RealtyTrac also showed that more than 150,000 new foreclosure related notices were filed in January. These notices are on top of the nearly 1.5 million households who received a foreclosure notice in 2012.

These families need to be directed to the right kind of help and that's where trained housing counselors come in. According to data from the National Foreclosure Mitigation Counseling (NFMC) program, homeowners who receive help from a counseling agency that is a part of the NFMC program are more likely to obtain a mortgage modification, and get a better new mortgage rate if their loan is modified.

This week, the NeighborWorks Training Institute will convene in Atlanta and dozens of nonprofit professionals will take courses in foreclosure mediation, while dozens more will attend courses toward certification in homebuyer education. Homebuyer education prior to making the home purchase helps ensure that homebuyers know the full financial responsibilities of homeownership. NeighborWorks America believes that if more homeowners had the opportunity to work with a homeownership counselor prior to the housing crisis, the crisis would be much less severe.

More information about the National Foreclosure Mitigation Counseling program can be found at: www.nw.or/nfmc. The full report to Congress on the NFMC program is available on the NeighborWorks America website. 

Information about NeighborWorks homeownership programs can be found at: www.nw.org/homeownership

Will the Foreclosure Crisis be With Us Another Two Years?

By Marietta Rodriguez
Director, National
Homeownership
Programs & Lending

With signs of a turnaround in housing appearing in various industry reports such as those from the National Association of Realtors for pending home sales, and from the National Association of Home Builders via its new home sales index, it’s not difficult to think that the foreclosure crisis is behind us. But it isn’t.

Recently I was on a panel at the National Association of Real Estate Editors spring meeting discussing the housing market alongside representatives from Bank of America and FNC, Inc., and we agreed that the foreclosure crisis won’t end for another two years – according to the most positive forecasts.

Mortgage rates are likely to remain very low for the foreseeable future and that’s good for housing and for ending the foreclosure crisis. However, what we really need to do in order to find the end more quickly is make it easier for qualified buyers to purchase homes and for homeowners in distress to find solutions that don’t end in foreclosure.

Neighborhood Housing Service of
South Florida educates a potential homebuyer

On the purchase side, NeighborWorks America supports efforts to make homeownership as accessible as possible without creating undue risk in the system. We support the availability of low down payment mortgages which enable homebuyers who are already saving to purchase a home more quickly. Additionally, we support underwriting that keep loans within the reach of deserving buyers. Finally, we think that homebuyer education is a critical piece of the process. Education is what prepares people for the true costs of homeownership, and helps them make sustainable choices.

Family outside their home
in Great Falls, Montana

On the foreclosure front, we’ve established partnerships that connect homeowners to the help that they need to find an alternative to foreclosure. For example, by partnering with local governments we are able to direct our efforts into neighborhoods that are at the greatest risk of foreclosures, and making those resident aware of options for assistance. We are also facilitating better homeowner communication with servicers through the HOPE Loan Port, which tracks individual requests for loan modifications. Servicer outreach centers are another key tool for stemming foreclosure, because they allow homebuyers to receive in-person advice on how they might keep their home. However, as I told the audience at the National Association of Real Estate Editors conference, all servicers could do more.

The housing market won’t rebound until the foreclosure crisis is behind us. However, by improving the availability of mortgage credit and homebuyer education, we can minimize the impacts of the crisis and make sure it ends within two years.