Experts: Tackle foreclosure threat quickly
By Kevin Kelley
Westlake
Published Feb. 6, 2008

If you have even the slightest concern about your ability to make your monthly mortgage payments, contact your lender immediately to work out an amended payment plan.

That point was hammered home again and again Thursday evening during a pre-foreclosure seminar held at the Westlake Recreation Center. About 45 people attended the event, which was sponsored by Keller Williams Realty.

The worst thing a homeowner in danger of foreclosure can do is ignore payment notices, panelists at the seminar said.

“Contact your lender as soon as you think you might have a problem,” said Tom Fraser, vice president for residential lending at First Federal Of Lakewood Bank.

“You need to be your own advocate and take ownership of your situation whether you suspect something bad is about to happen or whether you have a serious problem,” Fraser said. “Many people avoid calling lenders and banks because we’re embarrassed about talking about money and about our problems with other people. Well I’ve got news for you. The banks are generally embarrassed about their situation right now, and many of them have problems in their balance sheets. So we’ve got two groups that have problems that need to talk to each other.”

The good news, according to Fraser and others, is that lenders are willing, even eager, to work with borrowers who are in trouble. That’s because the cost and hassle to foreclose on a mortgage is prohibitive to the lender, he said.

“The bank doesn’t want to own property,” Fraser said.

The foreclosure problem has become so bad in some areas of late that banks sometimes are receiving less than 50 cents on the dollar on the properties that have gone through foreclosure.

“The banks don’t want properties in foreclosure and will do extraordinary things to work with you if possible,” he said.

Fraser offered the following advice to homeowners dealing with the threat of foreclosure:

• Document all communications with the lender, using certified mail if dealing with an out-of-state institution.

• Know specifically who owns the mortgage and who services the mortgage.

• Keep detailed records of every payment.

Avoiding foreclosure requires patience, he added.

“Expect this to take time to work through,” he said.

Fraser also warned against dealing with companies that promise a quick fix to a lending problem.

Manbir Sandhu, a foreclosure attorney, said that troubled borrowers need to be persistent in contacting lenders about existing or potential payment problems.

“You’ve got to bug the heck out of them,” he said.

Possible remedies lenders may be willing to offer, Sandhu said, are a repayment plan, a loan modification (where the adjustable interest rate is changed to a fixed rate), or a reduction in fees.

In cases where the borrower has no hope of catching up on payments, a deed in lieu of foreclosure may be considered, Sandhu said. That’s where the borrower signs over the title of the property and the lender agrees to cancel the mortgage.

Cuyahoga County Treasurer Jim Rokakis

Cuyahoga County Treasurer Jim Rokakis said the current foreclosure problem is the biggest housing market crisis since the Great Depression.

When predatory lending began about seven years ago, the city councils of Cleveland, Dayton and Toledo passed ordinances to ban such practices. In response, the state legislature pre-empted the right of city governments to regulate predatory lending. But the state government did not address the issue for four years, Rokakis said.

And national real estate companies and lenders viewed the emerging foreclosure problem as a Cleveland/Detroit problem.

“They were able to blow us off,” Rokakis said.

About 10 years, ago, Cuyahoga County averaged 3,000 to 3,500 private bank foreclosures. By 2006, that number jumped to 13,500, split evenly between Cleveland and the county’s suburbs, Rokakis said.

“It has devastated Cleveland,” Rokakis said, adding that there are more than 10,000 vacant properties in the city.

In addition, 50,000 residents have moved out of Cuyahoga County over the past five years, he said. The only other counties in the nation with such steep population losses were those affected by Hurricane Katrina, he said.

“Property values are plummeting throughout the county,” Rokakis said. This has lead to a domino effect where people can’t afford to buy a new home because they can’t sell their current home, he said.

The housing bubble burst in 2006, Rokakis said, and the problem has reached California, where one out of 21 mortgages are in foreclosure in some cities. In Cleveland, the rate is one in 50, he said.

A great amount of fraud was committed to get us in this situation, he said.

“There are not enough jails to put everyone away,” he said.

In an attempt to remedy the crisis, the county has established a $1 million fund to give homeowners zero-interest loans of $3,000 to cover shortfalls so they can avoid foreclosures, Rokakis said.

Rokakis also suggested homeowners in trouble appeal to the county for a tax reappraisal. The deadline for appeals is March 31.

Westlake Finance Director Anne Fritz said even well-off communities like Westlake have been affected by the foreclosure crisis.

Currently 50 properties, ranging from condominiums to upscale houses, are up for sheriff’s sale, Fritz said.

Abandoned houses create problems for the city’s  police and fire departments and create property maintenance issues when no one can be found locally to keep up the lawn care, Fritz said. Ninety percent of lawn maintenance problems in Westlake last year were from foreclosed properties, she noted.

“The neighbors are very concerned when they’re next door to an abandoned home because they are worried about the effects from rubbish left outside, such as rodents or other problem,” Fritz said.

Property taxes often go unpaid while a house is in foreclosure, Fritz said. In addition, the resulting drop in home prices means less revenue for the city government.

The result of properties depreciating is that the effective rate of taxes such as school levies can increase, she said, something Rokakis also said is a possibility.

Another speaker, Jay Seaton of the Consumer Credit Counseling Services of Northeastern Ohio, urged people to pay down credit card debt due to its high interest rate. More information about that organization can be found online at www.cccservices.com.

Several speakers urged troubled borrowers to call 2-1-1, Cuyahoga County’s First Call For Help line for health and social services issues, to get referrals to debt counseling services.