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August 17, 2007 10:45 pm
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Photos
Angie Beaulieu/Eagle-Tribune
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Editor's notes: ethomeauction.jpg, box on what to do if you get behind on payments at bottom of story
Closing doors:
All over the country, homeowners are getting caught in the adjustable-rate mortgage bind. In many cases, they lose their homes to the mortgage companies that once so freely loaned them money with the lure of low initial interest rates that would start rising after a couple of years.
By Bill Kirk
CNHI News Service
LAWRENCE, Mass. — Steven Calheta, an auctioneer from Irving Shectman of Pawtucket, R.I., stood outside 26-28 Washington St. on Wednesday, reading from a legal document that announced the foreclosure sale of the house behind him.
The only person to show up was a representative of Wells Fargo Bank, which holds the mortgage. Bank agent Bob Scanlon bid $308,466.24, and the house was sold — back to Wells Fargo.
Calheta and Scanlon got back into their cars and drove away from the empty, two-family home, once occupied by a father and his children as well as a tenant on the second floor.
Across the street, Guadalupe Martinez sat on the front steps of her ranch-style home as her children scampered around, chasing their kitten that had somehow gotten outside.
Four years ago, Martinez, a manager at a local Wendy’s, refinanced her $345,000 mortgage with Ameriquest. She got an adjustable-rate loan on her property, which has an attached, three-unit apartment building. Her monthly payments started out at $1,900 a month and most of that was covered by the $1,700 monthly rent she got from her tenants.
Then reality struck — and the rates started to rise. Two years ago, her monthly mortgage payment began going up in $300 increments. Her most recent bill was for $3,300 a month.
“There’s no way I’m going to make that payment,” said Martinez.
All over the country, homeowners are getting caught in the adjustable-rate mortgage bind. In many cases, they lose their homes to the mortgage companies that once so freely loaned them money with the lure of low initial interest rates that would start rising after a couple of years.
In some cases, people are able to work with their lenders to prevent the loss of their homes, but as credit tightens up, that option is disappearing for many borrowers. For some, the best option is just to turn the keys over the bank and walk away from the house.
That may be the best option for Martinez, a single mother from Mexico who has three children of her own and cares for a fourth. Her job pays $22,000 a year, and she can’t find tenants for two of her apartments. Meanwhile, she said, she gets no child-support payments from the father of her children, and her partner is unable to help out, either.
“I talked to Ameriquest, but they’re so mean. They have no interest in helping people,” she said.
“Maybe next month, I’ll have to move out.”
Flurry of foreclosures
Martinez and her former neighbor across the street are just two examples of the problem sweeping the state. The foreclosure rate across the state is skyrocketing. In Essex County alone, the number of properties that face foreclosure auctions rose nearly 200 percent in the first six months of 2007 compared to the first six months of 2006. In that time period, 313 properties were up for auction in 2006. In 2007, the number rose to 920, according to statistics compiled by the Boston-based Warren Group, which publishes Banker & Tradesman among other financial publications.
But there is hope for some people facing foreclosure, according to local banking and housing experts.
Of the 920 homes facing foreclosure in the first six months of 2007, only 397 were actually sold at a streetside auction.
The reason is that the owners of some of those homes were able to work out other arrangements before the auctioneer showed up.
“We are seeing a range of things happening,” said Andrea Ryan, the housing manager in the Lawrence Community Development Department. “Some are able to stop the process — they have gone to Division of Banks and filed forms that they are victims of predatory lending.”
Those forms kick off a process that delays the sale of the property until an investigation is completed.
Other people do a short sale — working with the bank to sell the property through a Realtor for less than it’s worth but enough to pay off the mortgage.
“They say, ‘Get rid of it for me so I can get out,’” Ryan said.
Still others do work-outs — that is, they negotiate with a lender for different mortgage terms. And still others refinance their mortgage, get money from a relative, or find a tenant to help make their payments.
“Who knows what,” she said. “It’s all over the map.”
Alan Pasnick, an analyst with the Warren Group, agreed.
“Foreclosures get resolved in lots of ways,” he said. Another option, he said, is to do what’s known as a “deed-in-lieu-of-foreclosure,” in which the owner hands the deed of his or her house over to the mortgage company or the bank, which then takes ownership and sells it.
Bill Kirk writes for The Eagle-Tribune of North Andover, Mass.
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What to do if you get behind on payments
Contact your lender immediately.
Help can come in a variety of ways:
r A repayment plan is a common solution. One is chosen to fit a customer’s budget.
r Customers in default may also be given an option to modify their loan. A loan modification adds delinquent interest, taxes and/or insurance payments to the unpaid balance.
r For some customers who have loans insured by HUD or a private mortgage insurance company, a partial claim or claim advance may also be an option. In this situation, the insurer would advance money to reinstate all or part of the past due payments and the customer would sign a note. The note would sometimes be secured by a subordinate lien on the home. The borrower would then resume the regular payments on the first loan and would be responsible for repayment of the note directly to the insurer.
r A short sale can be considered for borrowers who wish to sell their home (using the proceeds to pay off the mortgage), when market conditions place the home value at an amount less than the total amount owed.
r In extreme circumstances, lenders may provide a moratorium to ease the burden of a mortgage payment for customers facing a temporary financial hardship. Mortgage payments can be suspended for a period of time and a plan established to address the suspended payments. Many times, a moratorium may be combined with other options such as repayment plans or modifications to address the suspended payments.
— Source: Wells Fargo Home Mortgage
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