Seek Help Early

The story goes something like this: a middle-aged woman lost her job because she could no longer perform the physical labor. Her unemployment benefits ran out and, try as she might, she could not find another job. She was late with her house payment and the bank foreclosed on her property.

Never before have I received as many phone calls related to foreclosures as this past week. The stories follow the same line: health problems, job loss and foreclosure.

In my efforts to help constituents I spoke with a woman at Western Dairyland Community Action Agency who knew a lot about foreclosures. Two years ago the agency started a foreclosure intervention project and last month received federal money to keep the program going.

Even through Western Wisconsin unemployment rates are not as severe and lending practices in Wisconsin did not follow the reckless practices of other parts of the country, the number of clients seeking help with foreclosure intervention has tripled in the second half of 2010.

Sometimes property isn’t worth half of what people paid for it. Experts tell me they are concerned about “strategic defaults” or “walk aways” - when people make a decision to abandon property that is not worth the mortgage still owed on the property.

Foreclosures hurt all of us. Land sold through a sheriff’s sale or in a foreclosure may bring surrounding property values down. Homes left vacant and untended invite mischief and crime. Unkempt property makes a neighborhood less desirable.

Foreclosure intervention helps people stay in their homes. Limited money can help pay back taxes or missed mortgage payments but most intervention money goes to preventing foreclosure. Renegotiating loan terms and refinancing are important tools.

But finding with whom to negotiate can be a challenge. In today’s world of large financial institutions, many times the big banks sell the ‘servicing’ of the loan - or the work with the home owner - to another company. The loan ‘servicer’ may have no knowledge of banking and no ability to negotiate.

One of the foreclosure intervention experts told me about her phone conversation with a loan servicer worker who was in a very noisy area. “Where are you?” she asked. “In California,” was the answer. “No,” she said, “I mean where are you sitting?” “In prison,” was the response.

The inmate had access to mortgage information, including social security numbers, names, addresses and phone numbers. This experience would make anyone uneasy about the loan servicing business.

It is important for those facing foreclosure to get help early in the process. People don’t seek help early because they are embarrassed or ashamed. They don’t want neighbors to know about their financial troubles. But waiting to get help often means limited options.

Local courts are helping resolve foreclosure problems. In some Western Wisconsin counties, when homeowners are served foreclosure papers, they must also receive a letter describing the mediation process.

Although voluntary for the homeowner, the mediation process requires the lender to sit down with the homeowner to negotiate. The process often results in changes to the loan terms based on the homeowner’s new financial situation. Sometimes the mediation process helps homeowners resolve the foreclosure more to their financial advantage even if they cannot stay in their home.

Getting help through the mediation process is often more effective than trying to get help on your own - especially given the problems homeowners and counselors alike have with unscrupulous mortgage ‘servicers’.

If someone you know is having trouble making their mortgage urge them to seek help immediately. Often help with budgeting and controlling spending can make a difference. Other times having an advocate negotiate new terms with the lender can make all the difference. Navigating lending bureaucracy is not for the faint of heart, so get expert advice.

As always, don’t hesitate to give me a call. I will put you in touch with the experts I’ve found. I can be reached toll free at 877-763-6636 or at sen.vinehout@legis.wisconsin.gov.