Friday, March 12, 2010

Foreclosed

A familiar sign in Michigan is the signs, overt or more subtle, of a foreclosed house.  No neighborhood is immune.  Yahoo! Real Estate found me 267 foreclosures in Jackson, Michigan today.  And it found 365 in Ann Arbor, a city we think of as more immune to the economic problems of Michigan, because of the presence of the University of Michigan.  Even there, and even in upscale neighborhoods, the signs of foreclosure are evident.  DSNews.com says, "RealtyTrac reported that Michigan posted the fifth highest number of foreclosures among states in January, with 17,574 properties receiving a foreclosure filing."  Foreclosure might be a more workable option in many cases, except that most people facing foreclosure in Michigan are in the situation where they owe more on their mortgage than the home is worth.  Therefore, if you go into foreclosure you not only lose your home, you can still be pursued by the bank for the balance of the money. 

I recently had the opportunity to work with a family facing foreclosure, and learned a few things about the process.  There's a tremendous amount of shame that people with economic troubles feel in our society.  Our American mythos of pulling ourselves up by our bootstraps, the Emersonian radical individualism we espouse, tells us that this our fault, and our fault alone.  And it also tell us it's shameful--adulthood, personhood, parenthood--our sense of success as people is tied to our ability to provide a good living and a good home.  But of course, this is not all that is valuable or important, and the truth is that a good amount of the factors are out of our hands.  Most of us don't control the means of our own production, and as corporations close down around us and others downsize their operations, the employment cuts have reached every sector of employment.  Such was the situation with the family I worked with--unemployment and underemployment led to an inability to pay the mortgage.  This happens easily without even factoring in the unconventional mortgages some people had from the predatory lending practices.  This is affecting middle-class and white-collar workers with conventional mortgages that just become too expensive.  Most of the middle class is only a couple of paychecks away from bankruptcy. 

But the most important thing to do is to get help, first of all, despite these feelings. And there are a lot of programs that are out there to help.  The family had another person with community connections working on this, as well, and we divided up the work and communicated back and forth on this. I started with dialing our local 2-1-1, which is a non-emergency information hotline.  2-1-1 was enormously helpful, and gave me a list of foreclosure agencies and lawyer information.  Another place to find a good list is the Michigan State Housing Development Authority (MSHDA), and their lists by county can be found here, or the U.S. Department of Housing and Urban Development (HUD), which has a Michigan list here.  In Jackson, MSHDA lists only the Community Action Agency (CAA) and the Jackson Affordable Housing Corp.  Both are good to contact for counseling and financial assistance.  However, they are not the only options for residents.  HUD lists many more, including the one we eventually recommended.  The Community Action Agency recommended this agency as well: Community Foreclosure Coalition.  2-1-1 recommended a number of agencies including CAA and Jackson Affordable Housing, but also  Hold On To Your Home, which has some good resources, including a timeline of foreclosure. Foreclosure Detroit has a similar helpful timeline and information on the Michigan foreclosure process, but I found Hold On To Your Home less Detroit-specific, so therefore more useful.  One well-known agency that has branches in Michigan, although not in Jackson, is ACORN, but they don't have as much helpful information online as Hold On To Your Home or Foreclosure Detroit, which are both good sites to go to for web-based information.  After checking out these sites and learning a lot, we merged the lists given to us by 211, CAA, MSHDA and HUD.  The next step was to take that list of agencies and check out their websites and make calls to them to find out which ones seemed the most knowledgeable, and which seemed best for this individual family's situation, given ages, income levels, and other factors.  The one that ended up at the top of our lists was Green Path Debt Solutions.  They're licensed, HUD-approved, free, and can do the counseling over the phone.  However, it doesn't matter so much which agency you choose, as long as you choose one.  It might seem like they might have different offers that they can make, so you should shop around.  In reality the opposite is true.  They're all going to be working to get you in to the same federal TARP program, so it doesn't matter which one you go with, as long as they're a reputable agency and HUD-approved. 

One of the most important reasons to get help right away is when you hit the point where you are 45-60 days behind with mortgage payments, the bank will contact you telling you that you are in foreclosure and that your home will be shortly put up for auction if you do not immediately pay back the entire amount of your mortgage.  In Michigan, by law, once you contact a foreclosure agency and they begin the paper trail, the bank will give you an automatic 90-day window before doing anything further.  This is an important window of time to have, and working with one of these agencies gets you this time you need immediately and automatically.  Then, during this window, the agency can work to get you into a program where hopefully the end result will be that you will not lose your home.

After getting in touch with one of these agencies and starting the process that will lead to, hopefully, negotiations with the bank, it's a good idea to contact a lawyer.  Legal Aid will provide free lawyers for low-income people and people over the age of 60.  Our branch here is Legal Services of South Central Michigan.  I was also told by 211 that there is a state bar lawyer referral hotline (1-800-968-0738) which will provide a list of lawyers who will provide free or low-cost consultations.  And I called a laywer I know personally for recommendations, as did the family--it's always good to have personal connections.  In Jackson, however, most roads lead back to Legal Aid, so I would recommend starting there if you meet their eligibility requirements, which our family in question did.

The lawyers and debt counseling agencies can help you find out if you're eligible for the programs out there, first and most namely the federal TARP program, Making Home Affordable.  Some of the eligibility requirements for the Making Home Affordable program are that the house in question is your primary residence; that you owe less than $720,750; and that your mortgage payment is more than 31% of your income.  Their goal is going to be to get you back on track and get your mortgage payment under 31% of your income.

In the case of the family I was working with, with the help of Green Path, they learned that they were eligible for Making Home Affordable, and the bank offered to reduce their interest rate to bring the mortgage payment to under 31% of their income, and tack on the missed payments to the end of  the mortgage.  This is a several-month trial period, and if there are no missed or late payments, at the end the bank can (and presumably will) choose to make the offer permanent.  Crisis averted--for  now.

------------------------------

Just because I want to try out this new Amazon Associates/Blogspot connection, here are some links to some books on the subject.  I know nothing about any of these books, and am not particularly recommending them.  But should you buy them or anything else after clicking from here, my church will get a small percentage of the sale.

1 comment:

Anonymous said...

The real question facing many people, however, is "Is it really best to fight the foreclosure in today's situation in Michigan? Or, economically speaking, are you better off letting go of your self-esteem, your sense of morality, and your house?"

In a recent article in the Detroit Free Press, Dennis Capozza, professor of finance and Dykema Professor of Business Administration at the University of Michigan, and others spoke about why it might not be in the home owner's best interest to fight foreclosure and stay in the home. In Michigan -- where home prices have dropped more than 35% from their 2005 peak -- home values are expected to fall another 22% statewide over the next five years. In the same period, they're forecast to drop 30% in metro Detroit.

I don't say that this is what a homeowner should do - let go of the home - but I ask the question for inquiring minds to analyze and to give serious consideration, i.e. to think about it.

Thoughts?