Helping Those At-Risk of Foreclosure

On January 16th, I asked Bob Credle, Housing Counselor at Urban Edge Development Corporation, one of United Way of Mass Bay and Merrimack Valley's partner agencies a few questions about home foreclosures. Below is a transcript of that interview.

Me: Tell me about the work and Mission of Urban Edge.

BC: Urban Edge’s Mission is to develop and sustain stable, healthy and diverse communities. This is achieved through dual initiatives. The first is property development and management with a focus on affordable housing and to a lesser extent; business support and development. The second is to support and facilitate the human resources, the people in these communities through several programs and processes including,

• Development and support of a Resident Leadership Team
• Summer and after school employment for teenagers
• Foreclosure Prevention Programs
• First Time Home Buyer Classes
• Financial Fitness Classes
• Post Purchase Classes
• De-Leading Grants and Loans
• Rehab Loans
• Section 8 to First Time Home Buyer Mortgages
• Support to Main Streets
• Management of Revolving Loans to Main Streets Businesses
• And other programs

Me: Can you describe the work and role Housing Counselors play?

BC: The role of the housing counselors is to advise and assist residents who wish to purchase their first home or to maintain their existing home. Services include education regarding the home purchase process, the home maintenance process, assistance with financing programs such as first mortgages, soft second mortgages, rehab and de-leading loans and forgivable grants. Our foreclosure prevention counselors help homeowners avoid foreclosure by assisting them in negotiating workout arrangements with their lenders. When foreclosure is inevitable the counselor provides mitigation assistance, rental information and sources for transitional assistance.

Me: Will you describe the specific work that you do.

BC: I manage the Community Programs Department of Urban Edge. In this capacity I manage four counselors who provide the services detailed in questions 1 and 2. I represent Urban Edge in many of its external affairs. I also research and develop new opportunities for Urban Edge.

Me: Why has home foreclosure become such a prevalent issue?

BC: Foreclosures have become a major issue because of the policies that were pursued following the 9-11 disaster. After 9-11-2001 the federal funds rate was lowered to 1% and the prime rate was lowered to 3%. This presented opportunities for some mortgage brokers and financial institutions to structure loan products that were sold to people who did not have the income or the discipline to buy and maintain a home. At this time the availability of low cost money caused the prices for homes to escalate exponentially. In this environment home owners were led to believe that they could always refinance or sell their way out of trouble. It also enabled people who were in good, fixed rate loans to swap out of those loans in order to take cash out of their homes.

The period from 2001 to 2005 was a time when greed, unscrupulous marketing and borderline illegal dealings enabled financiers to take money out of the home ownership market by packaging these adjustable-rate, collateralized debt obligations with good loans and to sell them in the secondary finance market. Once they were sold then these same people were able to repeat this process by refinancing, packaging and reselling more bad loans into the secondary finance market. This pyramid scheme continued at an escalating rate until 2006 when a critical mass of these bad loans became due causing mortgages to default and the financial system started to break down. The fallout of these events has affected homeowners and neighborhoods across the country, with Massachusetts and the population served by Urban Edge to be especially hard hit.

Me: How do home foreclosures affect the health and well being of the larger community?

BC: The results of policies described ...above are:

• Many financial institutions have gone out of business.
• Many strong financial institutions that bought debt collateralized by residential homes have lost so much money that they cannot loan new money unless the build up their reserves.
• Many good people have lost their homes.
• Many communities have empty, foreclosed houses, because the owners could not pay the mortgages because the payments kept getting larger as the rates adjusted upwards.
• Housing values have declined sharply, impacting not only homes in foreclosure but all neighboring properties and communities at large.
• With loss of equity the home equity loan market has declined, resulting in less consumer spending, which has a ripple effect throughout local and regional economies.
• Cities and towns have an eroding residential tax base.

Me: How has your workload been affected by the dramatic increase in foreclosure filings?

BC: Until we learned to manage our intake process we became overwhelmed with the number of people who signed up for services. It materially took away from the other work for which we are responsible. We are now back on track and we are providing foreclosure prevention services to people we were not able to serve in the past. We have almost completely eliminated our backlog of cases and we will soon develop a strategy to increase the number of new cases we can take in.

Me: What kinds of cases have you seen lately?

BC: Most of our cases are with good people who were enticed to take out bad loans which they would not be able to afford in the future. Now the future is here and the loan payments have significantly increased and they cannot make the payments. We have been successful in many cases in getting the mortgage companies to modify the terms of these loans to payments that the homeowners can afford.

Other cases we get are those where innocent people are victims of fraud and scams. These are very difficult to resolve.

We also have several cases where unforeseen life events have caused people to be unable to afford their mortgage--loss of employment, death of a spouse, etc. Many of these cases can receive assistance which results in successful outcomes that avoid foreclosure.

Me: What tools and strategies do you use in assisting homeowners?

BC: We assist the homeowner to negotiate with their mortgage holder to:

• Develop repayment plans
• Temporarily reduce the size of the mortgage payments for a predetermined period of time and then resume full payments after the homeowner gets back on their feet
• Get the mortgage payments completely suspended for a predetermined period of time
• Modify the remaining terms of the loan
• Refinance homeowners into a new fixed rate loan
• Help people through the foreclosure process

Me: What barriers or resource deficits are you struggling with (if any) in assisting homeowners?

BC: The greatest barrier is getting through the maze of the mortgage servicing personnel to find the right person who can negotiate a workout. We simply do not have the staff needed to assist clients and so many people in need cannot receive assistance.

Me: What advice would you give future homebuyers looking to secure financing and to purchase a home?

BC:

• To attend a first time home buyer class.
• To work with a local bank to get a 30 or 40 year fixed rate mortgage and if possible a soft second mortgage. If they cannot obtain this type of financing then they should work with a housing counselor to improve their financial readiness so they can qualify for a prime rate mortgage.

Me: What advice would you give a homeowner at-risk of foreclosure?

BC: They should call their lender immediately and negotiate for relief. If this is not possible they should contact a nonprofit foreclosure prevention counselor through the City of Boston or the officials of the town in which they live. They should avoid for profit foreclosure prevention ads.

Me: Where can people go to get help or learn more?

They can call the City of Boston Home Center Hot Line (617) 635-HOME or the NeighborWorks® national hotline (888) 995-HOPE

If you have any questions or thoughts for Bob please leave them below.