For millions of American homeowners, the banks are still knocking at the door
This article first appeared in the St. Louis Beacon, Feb. 9, 2010 - An estimated 3 million American homes will be caught in the foreclosure process this year, and Chris and Kelly Green of Lake St. Charles are fighting hard to keep their house from being one of them.
But the Greens, both Missouri National Guard soldiers who served in Iraq, have grown weary of their home-front battle. So far, they’ve held on to the 1,300-square-foot house they bought in September 2008, but life’s mortars just keep coming their way.
The Greens knew going in that the 40-year-old property would need costly repairs, but they were prepared to handle them. When Chris Green lost his job of nine years, he was able to find a new one. But when he totaled his car on an icy road last winter while driving to work, the couple was faced with more unexpected expenses and medical bills.
The Greens, who met while serving in Iraq, have three dependents – one child from his previous marriage, plus their 3-year-old son and a newborn. After her baby was born, Kelly Green had to cut the hours she was working at a part-time job.
To ease the family’s increasing financial pressures, Kelly Green said she spent long and frustrating hours negotiating with their lender. She finally got a temporary deal: For four months, they were allowed to make half-payments of their mortgage. But in retrospect, Green said, the temporary reprieve may have made matters worse because now they must make up the difference. For 11 months, they will be paying about one-and-a-half times their mortgage – about $1,500 a month.
Green said the family has cut expenses to the bone, selling a second car and her husband’s motorcycle. Even with that, there is often little money to buy groceries.
“You do what you have to do for your family and to keep a roof over your head, but it’s hard,” she said. “It seems like it just never ends.”
Their holidays were saved because a local company held a Christmas party for military families and provided gifts for the children.
“It was so amazing because we did not think we were going to have a Christmas this year," Green said.
An Ongoing Crisis
And so it goes in this fifth year of the U.S. mortgage crisis, a far-reaching, deep-cutting economic disaster that started with the failure of subprime mortgages among over-extended buyers in both poorer neighborhoods and boom markets and then took hold in communities across the land.
In 2006, online foreclosure tracker RealtyTrac reported 1.2 million foreclosure filings -- and new records have been set every year since. In 2009, just under 4 million foreclosure filings were recorded on 2.8 million U.S. properties, and RealtyTrac projects another banner year for 2010: about 3 million homes in foreclosure.
Although the pace of foreclosures has slowed in the St. Louis area, nearly 20,000 local properties received some type of foreclosure notice in 2009, and local housing counselors who counsel financially troubled homeowners see another tough year ahead.
“Clearly, nothing is going to get better until people are working again,” said Karen Wallensak, executive director of the Catholic Charities Housing Resource Center. “Without jobs being generated, without income, the foreclosure crisis is simply going to hang with us for an untold period of time. We just see so many people who are exhausted financially, and they really don’t have anything to give the lender any motivation to modify their loan.”
Although the national unemployment rate dipped unexpectedly to 9.7 percent in January, 8.4 million jobs have been lost since the recession began in December 2007, according to the latest numbers released by the U.S. Department of Labor.
“It’s just kind of miserable right now for everybody,’’ Wallensak said. “We’re seeing more tenants needing help than ever. We have landlords calling who are looking for tenants who can make their rental payments because they’ve had to evict so many people. And, of course, the people on the bottom of the rung, and who have never been stably housed, are pushed even further down.”
As the foreclosure crisis has dragged on, Wallensak said the numbers of clients seeking free advice from the HUD-certified counselors at her agency have not ebbed, but there is no such thing as an “average client” anymore.
“Three or four years ago, our average client was a single mother making $22,000 or $23,000 a year who bought a home and maybe had to stretch to afford that home. And then something happened -- a loss of hours at work, car repair, unexpected home repair -- some crisis precipitated missing a mortgage payment,” Wallensak said. “Today, we see people from all walks of life.”
In addition to single parents and homeowners with modest incomes, Wallensak said Catholic Charities now helps formerly affluent people from communities like Ladue, Frontenac, Ellisville and Kirkwood.
“We are seeing many people with rather sophisticated problems. We see people who have 401ks and they don’t know how much to bleed those off. They had very good jobs, and are now working -- if they’re working -- at jobs that pay a lot less. And you’re dealing with people who are not used to accessing a system like ours and who have waited until the last possible minute to ask for help,” Wallensak said.
At least half of the cases now involve what used to be considered “good loans” -- conventional 30-year fixed mortgages with 6- to 8-percent interest rates. But even good loans are unaffordable if the homeowners have lost their means to pay, she said.
Deal or No Deal
Wallensak points to two telling factors about foreclosures that she says have not changed: Only about one-fourth of troubled homeowners who seek help from local housing counselors are actually able save their homes. And the biggest stumbling blocks remain lenders and servicers who either will not work with homeowners to modify loans or who drag out the process so long that a workout is no longer feasible.
“The same problem that existed before with lenders and servicers exists today,’’ Wallensak said. “And the only conclusion I can reach is that the financial motivations to save a home are not strong enough, and, in fact, sometimes servicers actually yield more money by foreclosing. By and large, despite all the national posturing, they are really not any better at responding to their customers’ needs.”
It has been nearly one year since President Barack Obama announced the Home Affordable Modification Plan -- known as HAMP -- to alleviate the housing crisis. The program, launched by the U.S. Treasury Department in March 2009 offered financial incentives to lenders who would modify the mortgages of struggling homeowners. Participating lenders were required to reduce monthly mortgage payments to no more than 31 percent of a borrower’s income.
In announcing the program, Obama said that it could enable 3 million to 4 million American homeowners to modify their mortgages. But by the end of December, the Treasury department reported that only 66,465 permanent modifications had been made.
Critics say that a major failing of HAMP is its lack of teeth: Participation is voluntary for lenders.
“There have to be mandatory rather than voluntary loan modifications,’’ said Kathleen Day of the Center for Responsible Lending. “At the end of the day, what sparked this crisis were massive foreclosures and, of course, that begets unemployment -- and that begets more foreclosures. We’re now in a reverse bubble that has to be short-circuited. And the only way to do that is to find a way to significantly reduce foreclosures. However we do that has to be mandatory.”