FORECLOSURE PREVENTION & INTERVENTION

The April Community Resource Center Information Session featured Diane Marchioni, Senior Program Manager, Homebuyer Services, Department of Neighborhood Development, on the timely (unfortunately) topic of Foreclosure Prevention. What follows is a summary of her comments.

Mayor Thomas Menino founded the Boston Home Center in 1996 to serve as a “one-stop” homeownership resource center to help Boston residents become and remain successful homeowners. In 2006 as foreclosures began to increase in Boston, the Mayor launched the Boston Foreclosure Prevention Initiative which has two elements.

Foreclosure Prevention: helping homeowners make good financial decisions to prevent them from ever getting into foreclosure trouble and

Foreclosure Intervention: helping homeowners that find themselves in foreclosure trouble to keep their homes.
All of the Boston Home Center’s services are free.

Foreclosure Prevention
This program buys mailing lists and sends proactive mailings to those with subprime lenders. They find that many people are unaware of the details of their loans such as that the interest will adjust from a fixed rate to an adjustable rate after two years. They explain all terms and different types of loans. They also run a public awareness campaign that buys ad space on billboards and bus shelters to warn about predatory lending and inform about their services.

They also offer a first-time home-buyers class. Less than 1% of those who’ve taken this class are in foreclosure. Some interesting facts they teach in these classes that are probably news to most of us:

Foreclosure Intervention
This program doesn’t wait for those in danger of foreclosure to come to them. Lenders must give public notice before foreclosing. So the Foreclosure Intervention program outreaches to those in foreclosure proceedings.

Diane Marchioni warns that this public notice also brings out the scam artists looking to take advantage of people in crisis. One red flag homeowners should be aware of is that foreclosure intervention that guarantees to “save” the home is likely a scam.

The City has identified a group of lenders they are calling “1st Choice Lenders” who will work with those in foreclosure to refinance in cases where this would be sufficient to keep the homeowners in the home long-term. Successful refinancing applicants are those who are proactive and who have not bought more house than they can afford. But these loans still must make sense by the lenders point of view. Often by the time that homeowners have stopped paying their mortgage they have also stopped paying other bills and their credit scores are too low to qualify for refinancing.. Also with the recent declines in the housing market, the value of some homes have actually fallen and the homeowner may have no equity left in the home. So it can be difficult to refinance.

Tenant Rights
Tenants in foreclosed properties do have the same rights as tenants in non-foreclosed properties. They have the right to go through a court process, and can’t be forcibly evicted without a court order. However, it is common for lenders to offer “cash for keys”. Tenants will need to carefully weigh their options to make an informed decision. Sometimes they can even negotiate a higher cash payment so that the lender can avoid the eviction process. Tenants who need assistance should contact a different program- the City of Boston’s Rental Housing Resource Center 617-635-RENT (7368). , http://www.cityofboston.gov/rentalhousing/. Also see their very clear and informative tips sheet: What Tenants In Foreclosed Buildings Should Know.

Understanding the Problem
Anyone who is paying attention knows that there is a crisis in home foreclosures. The increase in affected homeowners is dramatic. There were 703 foreclosures in the city of Boston last year. In 2006 there were 261 and as recently as four years earlier there were only 25. Of the 703 foreclosures in 2007, 60% were new purchases, the remaining 40% were refinanced. 76% were in adjustable rate mortgages. Anecdotally many of the those were refinanced had been in a fixed-rate mortgage and didn’t understand that this was an adjustable-rate mortgage, and/or had previously been making monthly payments that included property taxes and didn’t understand that their new payments did not include property taxes. But 80% of those in adjustable-rate mortgages took place before the “re-set” date- when the interest becomes adjustable (and often results in an increased monthly mortgage payment), indicating that the mortgages were unsustainable from the start.

In Boston foreclosures are primarily found in minority neighborhoods- Mattapan, Hyde Park, Roxbury and Dorchester.

A recent study found that of those in foreclosure, 20% have experienced a decrease in income and another 20% have experienced a life event, such as major illness, death or divorce, that affects income. The remaining 60% presumably had mortgages that were simply unsustainable at their current income level.

The Massachusetts Foreclosure Process
In the Commonwealth lenders do not have to go through a judge to foreclose on a property.

Most mortgage have a 15 day Grace period at which point letters and phone calls to homeowner are generated. In Massachusetts a new law goes into effect May 1, 2008, requiring a 90 day period during which time the Lender is actively “Attempting Workout” (i.e., trying to arrange alternate payment plans, refinancing or some other alternative) before starting the foreclosure process.

Advocacy Tips
Homeowners are encouraged to contact their lenders as soon as possible and attempt to arrange a “Workout”. In the current climate lenders are much more willing than even 6 months ago to work out a payment plan if the borrower seems able to afford the property in the long-run (the homeowner has income appropriate to the property’s costs and the homeowner seems willing to work on improving their budgeting). Lenders have ended up with large numbers of properties through foreclosure in recent months. They lose 40 cents on the dollar if they foreclose- they need to maintain the property and try to sell it, in a less than favorable housing market.

Boston homeowners should contact the Boston Home Center for personalized, free advice as soon as possible (homeowners from other parts of the state should contact one of the non-profit, state sanctioned Foreclosure Intervention programs). Staff can also serve as a mediator to design a plan that is agreeable to all parties.

The full list of non-profit, state-sanctioned programs is at: http://www.mass.gov/ocabr/consumer-rights-and-resources/housing/foreclosure-resources/approved-counseling-agencies/
The Boston Home Center, 617-635-4663 or http://www.bostonhomecenter.com/.

Massachusetts’ foreclosure resource page

Regional Foreclosure Centers The Patrick Administration has awarded $1.5 million in grants to fund 11 foreclosure education centers that will cover regional areas across the Commonwealth and target communities hardest hit by the foreclosure crisis. The centers will provide outreach and assistance to homeowners in or approaching foreclosure as well as to those borrowers who have already lost their homes.

-Special thanks to Diane Marchioni for her presentation and assistance with this article.

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