Wayne County Foreclosure Prevention to Expand

When the Wayne County Mortgage Foreclosure Prevention Program started in July 2008, Linda Johnson had no idea she would soon join a team that is guiding expansion to neighboring Oakland, Washtenaw and Macomb counties.

"Actually first I was a client, the sixth client in the program's history," says Johnson, a retired elementary school principal. "They helped to save our home from foreclosure, and then I came on staff as the outreach coordinator.

"I'm excited to see the program expand because there are pockets of difficulty all over our region, beyond Wayne County," she explains. "I was part of the first wave, people who were victims of bad loans and predatory loans, and many of those properties have either been foreclosed or had their loans modified. Now we are in the second wave, people who have lost their jobs and can't keep up payments, and that hits everywhere across our region."

An expansion of the Wayne County Mortgage Foreclosure Program and the launch of a news media blitz will take place this spring.

Two summers ago, Johnson pursued assistance through Wayne County Executive Robert A. Ficano's Web-based project, FightMortgageForeclosure.com, which has served as a national model for communities that strive to help constituents keep their homes.

"We are excited about expansion to Oakland, Washtenaw and Macomb counties because we believe that regional cooperation is important to address the woes of southeastern Michigan," Ficano says.

Foreclosure Prevention Program Director Jamele Hage says the city of Detroit remains the "epicenter" of housing hardship, with one of every 12 houses in foreclosure.

Still, Hage says an ongoing "foreclosure crisis" requires a wider approach. In all of Wayne County, even with prosperous areas included, the foreclosure ratio is one of every 20 houses.

Foreclosures across all of the larger Detroit area are "like waves moving out" to Washtenaw, Oakland, Macomb and other counties, Hage says.

Hage says she will report in the upcoming media blitz that the Foreclosure Prevention Program has attained opportunity for growth by assembling 49 mortgage counselors to assist more than 2,000 clients, uniting 14 partner nonprofit agencies. She will explain how the counselors, free of charge, strive to help renegotiate affordable home loan terms with lenders and mortgage companies. She will note that United Way agencies are on hand to assist with basic needs such as food, clothing and utilities. She will cite recognition for Wayne County's efforts, including an award from the National Association of Counties, and testimony requests from key federal and state legislative groups.

Meanwhile, Johnson will tell her personal story as a demonstration for the expansion need, describing the near loss of a two-story colonial home in northwest Detroit that the family has owned for more than 30 years.

"Our family had a good income, but I was too trusting of the lender. I'm an example that this foreclosure crisis can affect anyone," says Johnson, a married mother of an adult daughter.

"In 2005, we decided to do a refinance after our daughter was accepted at an Ivy League school," she explains. "I was told the new mortgage was a 6.5 percent fixed rate, but there were 120 pages in the closing documents and it turned out that it was really an adjustable rate. By 2007, the rate had adjusted up to 12 percent and the monthly payment had doubled, which we couldn't afford.

"I tried for a year to contact the lender and to get the rate lowered, but every time I called, I'd get put on 'music hold' for 15 or 20 minutes and then I'd get a different person. But when I found this program, within a couple of weeks they negotiated the rate back down to 6.5 percent."

Battle Against a Rising Tide

Hage says early success must be multiplied.

The count of 100 clients assisted per month represents only a tiny fraction of distressed homeowners in metropolitan Detroit, she notes.

"Wayne County alone had 27,000 foreclosures in 2007," Hage says. "That already made us first in the nation, and then in 2008 we went up to 48,000, and then in 2009 we went up to 64,000."

According to RealtyTrac Inc., a company that compiles foreclosure statistics, the national foreclosure count has soared in a similar manner, from 1.5 million in 2007 to 2.9 million in 2008, to 3.95 million in 2009.

Hage already was serving as a Wayne County assistant corporation counsel in late 2007 when Ficano asked her to start the Foreclosure Prevention Program. The first appropriation was $3,000 for a tiny office in an obscure building, and furnishings were salvaged from the basement.

By the time the first program year was completed in fiscal 2008-09, Hage had managed to amass about $600,000 from an array of public and private sources. She says this is a small sum, compared to a rough estimate of $45 million lost in annual Wayne County property tax revenue because of foreclosures and overall housing troubles. She also notes that virtually everyone pays when a foreclosure happens, not just the family that loses the home.

"When a foreclosure takes place and a home becomes vacant, the value of homes within 10 blocks drops by an average of 1.4 percent," says Hage, citing research by the Center for Responsible Lending. "Two foreclosures makes it 2.8 percent. This gradually chips away at the values of the neighboring homes, and most people nowadays don't have a lot of home equity in the first place. If they lose much more value, then they're underwater."

For program efficiency's sake starting in 2008, Hage rounded up the partner agencies and also pushed for an online application process. Struggling homeowners who visit FightMortgageForeclosure.com may enter information on their computer screens. Those who lack tech savvy may seek the aid of a program staffer at either the main program site at 640 Temple St. in Detroit, or at 15100 Northline Road in Southfield. Relatives, friends or public librarians also may help.

Residents still will receive a prompt personal response from staff via telephone, Hage says, but the online entry eliminates initial clutter and speeds emergency action if a foreclosure is imminent. Walk-ins still are accepted at headquarters, 640 Temple St., and phone numbers are 313-833-2948 or toll-free 877-693-6119.

Citizens who seek information, but not mortgage counseling, will discover that the Web site contains an extensive question-and-answer section.

In on the Ground Floor

The Foreclosure Prevention Program started in summer 2008 with two mortgage counselors, and Randy Thomas was one of them.

His background was in the mortgage real estate business, starting in the late 1980s. He built his investment to 12 multi-unit rental properties. He says he reaped a high level of financial success during the 1990s and into the new millennium, when the advent of the so-called housing bubble caused steep increases in value.

Then, around 2005 the bubble started to burst.

"Eventually I had negative equity, and at the same time people were slow to pay rent in the bad economy, and so I had to liquidate," Thomas says.

He decided to enter mortgage counseling, a field of growing need. After a year on his own, he enlisted with a nonprofit program and eventually joined the Wayne County startup. His training came through the federal NeighborWorks project and the Michigan State Housing Development Authority.

"When we started, the program was so new and the need was so great that here we were, two counselors, and we would have as many as 50 people in the office at once," Thomas recalls. "We would show up for work, and we would have more than 100 voice mails. Every day, we were just flooded."

Gradually, the burden was eased through staffing additions and partner recruitments.

Thomas says his training, his official affiliation with Wayne County and his relations with lenders "give me more leverage to help the homeowner."

With a typical client, he says he begins by "hearing their hardship." This entails the immediate situation of how many months the homeowner has fallen behind, and current income.

Next, he explores long-term causes. Perhaps the homeowner has encountered a job loss or reduced hours. On the other hand, possibly the homeowner has become reckless with credit. Some circumstances are beyond the client's control, he notes, but others are not. He recommends such basic "budget crisis" actions as cutting back on cable television, renting movies instead of visiting theaters and eating at home rather than eating out.

Thomas examines the loan arrangements. If he sees evidence of illegal predatory lending through fraud or deception, he will call legal and regulatory authorities. If he sees potential to renegotiate, he will contact the lender, which often involves switching a rising adjustable rate back to a fixed rate. Responsible lenders also are harmed by foreclosures, he explains, and so usually they are willing to work out a deal.

Still, Thomas and Hage note that the Foreclosure Prevention Program's rate of keeping clients in their homes is about 40 percent. This rate impressively exceeds the national average of 29 percent, according to the Center for Responsible Lending, but it still means that hundreds of clients will ultimately lose their version of the American Dream.

"In these cases, we pursue what is known in our trade as a 'dignified exit strategy,'" Thomas says. "The property may be placed on the market for a short sale, in which the lender will accept less than market value. Lenders also are willing to pay for the homeowner in default to move out, in exchange for a guarantee that the house will be left in good shape. Often I ask the lender to cover the family's cost for first month and last month rent to find an apartment, and for moving and storage costs. All of this usually adds to up somewhere between $2,000 and $5,000."

Home mortgages can be complicated, says Thomas, but homeowners who have fallen behind often stumble over a simple point.

"They give up, and they don't open their mail," he notes.

This practice is especially self-destructive, Thomas says, in light of last summer's enactment of the Michigan Home Foreclosure Prevention Act. A homeowner who received a foreclosure notice has newfound rights to receive a 90-day extension and to demand a face-to-face meeting with the lender with a mortgage counselor present. However, the homeowner must respond to the letter within 14 days. When mail remains unopened, the opportunity is missed.

Making a Commitment

One of the first clients to visit Randy Thomas in July 2008 was Linda Johnson. When Johnson's family home was rescued through Thomas' efforts, she says she wanted to offer a gesture in return. She called to thank him, but the voice mail was jammed as usual back then. Therefore, she visited the office and volunteered to clear the voice mail. Eventually, she became part of the staff.

Johnson still jokes with staff and visitors alike by quoting an old Hair Club for Men commercial: "I'm not only the president; I'm also a client."

At the same time, she says she never will forget the distress of potential home foreclosure, and she aims to help others avoid the hardship she encountered.

"When you get into that situation, it's very depressing," Johnson says. "A lot of people who go into foreclosure never even call their lender. They just give up. I was ready to give up, until I found this program."

Sources:

http://fightmortgageforeclosure.com/

http://www.realtytrac.com/states/Michigan/Wayne-County.html

http://www.stopmichiganforeclosure.com/blog/michigan-governor-signs-home-foreclosure-preventionact-into-law/

http://www.responsiblelending.org/

http://www.hairclub.com/inthenews_article1.php