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Dec 11, 2008

By Julie Satow and George Spelvin

Soaring unemployment, resetting mortgages and credit problems are pushing more Americans into delinquency, default and foreclosure. One in ten borrowers is in trouble. It’s not yet the Depression, when half of all homeowners defaulted, but for those caught up in the crisis, the pain is every bit as real. 

“Tenants who aren’t homeowners have no security…What do people like us do when we’re not at fault?” Watch FLYP’s short documentary on Deb Manuma’s foreclosure story.

Deb Manuma
Seattle, Washington

Manuma lived in a house with her daughter, sister and nieces for six years before finding out she was being evicted.
Her home had been safe until her landlord sold the property, but by the beginning of 2008 the buyer was on the verge of foreclosure. She trusted his assurances that the situation was just an accounting mix-up, so that by the time official notice of foreclosure arrived, Deb and her family had only a few weeks to vacate.

“I felt I was being disgraced and was really stressed out. I was doing everything I could to pay the mortgage.” Watch FLYP’s short documentary on Ani Ynigeus’s foreclosure story.

Al Ynigeus
Apple Valley, Minnesota

A lifelong renter, Ynigeus was convinced by a mortgage lender to buy a place of his own. He purchased his first house with an adjustable-rate mortgage. After the first two years, the $1,645 monthly payment began adjusting every six months, ballooning to $2,400 by the start of 2008.
After negotiating that down to $1,765 a month, Ynigeus, a guitar teacher, was able to save his house. But the bad economy has cost him students. “Right now, I’m just sort of floating, hoping things will turn around by the start of next year.”

“The mortgage wiped away everything I had…If I didn’t find any more money, we wouldn’t have any place to live.” Watch FLYP’s short documentary on Sharon Brown’s foreclosure story.

Sharon Brown
Waldorf, Maryland

To buy a new house for her husband and family, Brown got a no-down-payment mortgage that came with a $4,500 monthly payment. It was more than she could afford, but she claims she was advised she could quickly refinance into a mortgage that would require a substantially lower premium. When that fell through, she quickly fell behind on her payments. After being forced out, the best she could do was an apartment in a low-income high-rise. “I cried when I got there. There were rats, roaches. I just knew what we were in for.”

“The American dream should not become the American nightmare.” Watch FLYP’s short documentary on Hakan Aksun’s foreclosure story.

Hakan Aksu
Miami, Florida

Aksu took on two mortgages to buy his house. Both required no down payments, but came with high, adjustable interest rates. Reluctant to sign at first, he was told these were the only terms possible now, but that he could refinance later. “They didn’t really trick me, because I said ‘yes.’ Still, they encouraged me to take the loan.”
In fact, he could not refinance, and Aksu now wishes he had done more research. “I went to friends for financial help, and I came to find out they’re in almost the same situation. It’s a collective mess.”

“You work your whole life to be able to buy a house.  And then you have it taken away from you.” Watch FLYP’s short documentary on Patty’s foreclosure story.


Ft. Lauderdale, Florida
After losing her job, Patty was unable to pay back her loan. She called her mortgage company to let them know she might not make future payments. Within 48 hours, she received a letter saying her loan was being accelerated.
After going through her savings and 401(k), she is still pursuing every option to put off foreclosure proceedings.
She says there are 127 homes for sale in her area; “houses comparable to mine have been selling in the $125,000 range. My note is $304,000.”

When Delay Does Not Pay

By Julie Satow
When President-elect Barack Obama said recently on NBC’s “Meet The Press” that his economic team was weighing the option of instituting a three-month moratorium on foreclosures, he was not alone.
Several governors, from New Jersey’s Jon Corzine to Florida’s Charlie Crist to California’s Arnold Schwarzenegger, have voiced similar opinions. However, such a freeze on foreclosures is just a temporary solution—a way for homeowners to buy time to find solutions with their banks—and may actually cause more damage to the already crippled housing market.
“These moratoriums don’t get at the root of the issue; it’s just politicians hoping to delay what in most cases will be inevitable,” comments Richard Moody, chief economist at Austin, Texas-based Mission Residential.
What began with Fannie Mae and Freddie Mac—the federally owned housing authorities that halted foreclosures on some 16,000 owner-occupied homes between November 26 and January 9—has spread to Maryland, Massachusetts, New York and some other states. As these moratoriums unwind, the result is a mounting backlog of foreclosures unleashed on court systems that are unable to cope.
“If I was sitting in his shoes as governor, I would probably say ‘Hey, let’s let everybody have a good holiday season,’” Elmer Tabor, chairman of the board of Florida-based Riverside Bank, told a local television station there, referring to Gov. Crist’s recent implementation of a 45-day foreclosure moratorium. “But it’s not going to help us down here.”
Commercial banks are also thinking about freezing foreclosures. Citigroup, Bank of America, JP Morgan Chase, ING and other banks have launched loan modification programs. Of course, a large portion of the housing loans that originated in these banks (especially the subprime loans) were securitized and sold—and, hence, can’t be modified by the original lenders.
Nevertheless, Citi, for example, is targeting 130,000 borrowers facing foreclosure whose mortgages total $20 billion. The bank will allow these borrowers to stay in their homes if it is their primary residence, while they work with the bank to renegotiate their loans. Citi says it is reaching out to an additional 500,000 homeowners who have yet to default, but are at risk of doing so.
The problem with moratoriums is that they end. When that happens, foreclosure rates can soar if workouts have not taken place. In Massachusetts, for example, a three-month freeze on foreclosures instituted in May resulted in a 456 percent increase in cases filed between August and September, according to the Web site RealtyTrac. Maryland saw a similar surge.
The next state to see its three-month moratorium wind down is New York. In August, Gov. David A. Paterson signed into law a housing bill with a 90-day moratorium beginning September 1. It slowed foreclosure filings: the 258 foreclosures in November were roughly unchanged from the level the last year, according to real estate research firm PropertyShark.com. In fact, every part of New York City except for Queens saw foreclosures drop over the past 12 months.
However, this is likely to change. “Once the three-month waiting period ends, we are expecting to see a surge in foreclosures,” says Tracy Catapano Fox, a clerk at the Queens Supreme Court, although that probably won’t happen until after the holidays. “Unfortunately, we are not in a position to increase our staffing because of the fiscal crisis…It is a big drain for us, because we do have a whole court house to run,” she comments.
Other states have also recently implemented moratoriums. In Florida—one of the hardest hit states with 90,300 foreclosure starts in the third quarter—Gov. Crist spearheaded a 45-day foreclosure freeze during the holidays. California, where 93,000 foreclosure proceedings were begun in the third quarter (the nation’s highest), is considering a moratorium, after the legislators had already extended the foreclosure process.

Read an additional story on the process of foreclosure.

The housing slump has been kinder to Connecticut, where sales of single-family homes were down a relatively modest 17 percent in October compared with the same period last year, according to The Warren Group, a Boston-based research firm. Still, Gov. M. Jodi Rell isn’t taking any chances, and has asked for a six-month stop on all foreclosure filings.
New Jersey’s Gov. Corzine is taking a similar approach, having said recently that he would support a six-month ban. “We need a bottom up approach to modifying mortgages one home at a time,” he said at a Washington, D.C. meeting hosted by the Office of Thrift Supervision.
Despite all the support for this strategy, critics say the plan is flawed. Aside from delaying the inevitable, it also isn’t clear if the extra time these moratoriums provide make much of a difference for homeowners.

In FLYP Media’s interactive infographic, see how new data show the failing rates of mortgages made in the first and second quarter of the year.

“If people can’t make their payments today, unless their circumstances change significantly in the next 45 days, it’s just adding another 45 days of interest owed,” Charlie Green, a county clerk in Lee County, Fla., said in a television interview.
And even if a few months respite is sufficient time for a homeowner to modify a mortgage, it doesn’t ensure that the borrower won’t end up back in foreclosure.
John C. Dugan, comptroller of the currency, recently had his staff look at the performance of loans modified during the first half of this year. He was surprised by the conclusion: over half of mortgage modifications seemed to not be working after just six months. 
“I have seen so many mortgages that go into foreclosure that were already modified,” says Jessica Davis, president of NYForeclosures.com, which tracks court filings in New York. “So a year or year-and-a-half after a homeowner modified his or her loan, they still can’t meet their obligations and are back in court.”

Check out FLYP’s interactive map of the United States, which details the different rates of the drop in housing prices, percent delinquent on their loans, percent of homes in foreclosure and the percent of homes that have been returned to the bank.

L.A. Stories
Troubled homeowners look for help…and find hope.
By George Spelvin
Los Angeles is one of the cities at the epicenter of the housing crisis. Housing values have dropped precipitously, and tens of thousands of families are delinquent, in default or have lost their houses.
To help homeowners cope with the crisis, Hope Now provides free foreclosure prevention assistance, drawing on a nationwide network of counseling agents, mortgage servicers, investors and other market participants. “Our goal is to provide homeowner assistance, whether it’s talking to counselors or to their mortgage service lenders or meeting face to face,” says Larry Gilmore, deputy director of Hope Now.
Gilmore recently participated in a home ownership preservation workshop in Los Angeles, organized by Hope Now and Los Angeles Neighborhood Housing Services. On a Saturday in December, counselors and other industry professionals met with nearly 2,000 Angelenos who are at risk of losing their houses.
The counseling is very practical, aimed at helping borrowers solve specific credit and debt problems. In some cases, the workshop is able to provide homeowners with the tools they need to save their houses.
For Karina Torres from Colton, Calif., the workshop produced an even more valuable benefit. She said she learned that “you can save your house. I’m walking out of here today knowing there is still a lot of hope.”

Watch two short documentaries: one of a counselor from Hope Now, a homeowner assistance organization, and another of those who visited one of Hope Now’s workshops, looking for help with their mortgages.

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