Foreclosure fever
Charitable resources challenged by current wave
Robert Delaney of The Michigan Catholic
Published August 10, 2007
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Robert Delaney | The Michigan Catholic
Bill Roberts, president of the Mount Clemens District Council of the Society of St. Vincent de Paul, stands in front of a Shelby Township house that was subject to a foreclosure. |
Detroit Economic hardships are causing a wave of mortgage foreclosures that has hit the Detroit area the hardest of any major metropolitan area in the country, as many local families can no longer meet the terms of the mortgage they took out to finance the purchase of their home.
Faced with the prospect of losing their house, some turn to their parish or Catholic charitable agencies for assistance, but by the time foreclosures become imminent it may be too late to help them very much.
Foreclosed properties are further depressing an already-slumping residential real estate market, making it difficult for many families to find buyers willing to pay what is still owed.
"This is not just about money and houses selling, it's affecting people's lives," says Freda Peteuil, of Warren, a real estate agent with Prudential Cranbrook in Troy.
Sometimes, the cause is loss of a well-paying job and failure to find a good new one; sometimes a person might still have a job, but is no longer getting overtime.
Or perhaps higher payments on an adjustable-rate mortgage have become too difficult to make.
With the slump in housing prices, a person who needs to sell might find the equity he or she thought was there has completely evaporated.
"I've talked to people who have found a new job in another town, but can't take the new job because they can't walk away from their house here without taking a loss," says Peteuill, a member of St. Louise de Marillac Parish in Warren.
For those at risk of losing their house, seeking help early is strongly advised, as Church-related agencies may sometimes be able to provide some emergency aid as well as helping link people with other sources of assistance.
Avoiding foreclosure
Some of the key recommendations of sources interviewed by The Michigan Catholic:
Don't get hooked by mortgage terms that can only be met if housing prices rise.
Don't consider an adjustable-rate mortgage unless large pay increases can be confidently expected (as with young doctors).
Try to obtain a mortgage through a bank (or other firm) that will retain the mortgage rather than sell it to someone else.
Seek help early sometimes alternative payment arrangements can be worked out, or other assistance may be available.
There can be advantages in seeking a voluntary foreclosure rather than being forced into one. | Calls for help
Valerie Guenther, president of the Detroit West District Council of the Society of St. Vincent de Paul, says they now get as many as 15 people calling a week facing foreclosures, up from one a week just a year ago. But with homeowners typically at least three months behind in their payments before it gets to that point, Guenther says the amount of money the callers need to stave off foreclosure usually $1,000 to $1,800 "could wipe out an entire conference treasury." Vincentians tell people to talk to their mortgage companies sometimes they can work out payment arrangements and refer them to other agencies. Guenther, a member of St. Mary of Redford Parish in northwest Detroit, also points out that homeowners might get help from the state or from mortgage assistance services run by their city or county.
But she says stop-gap measures are not for everyone because changes in people's circumstances or in the payments required may mean a homeowner simply does not have the income to bear mortgage payments that once were manageable: "Sometimes it's just impossible."
Advice, referrals
For those who have already lost their residence, SSVdP conferences can refer them to an Internet site that helps link people to affordable rental housing. And, of course, Vincentians can also help with furniture from their stores, as well as helping with food.
And even though the amount needed to forestall a foreclosure might be too much for the typical SSVdP conference to handle, Vincentians might be able to chip in some and find some other sources of funds, says Bill Roberts, president of the SSVdP's Mount Clemens District Council, which covers Macomb County.
Roberts says his parish, St. Isaac Jogues in St. Clair Shores, has helped three parishioners facing foreclosures so far this year, but he knows of other Macomb parishes that have worked with twice that many or more.
"Our reserves aren't all that vast, but we get involved with other agencies to make our money stretch," he continues.
"And we urge them to explore their options legally through Legal Aid services," he adds.
Roberts says an older St. Isaac Jogues parishioner returned home from Mass one Sunday to find a foreclosure notice tacked to her door. Vicentians got involved and were able to help the woman save her house, but Roberts says the mortgage company was unwilling to cut the woman any leeway: "We had to overnight them the money."
But he agrees that sometimes it doesn't make any sense to try to prevent a foreclosure. "In some cases the house has declined in value about 20 percent over the past five years. People just figure they should walk away from it."
Thomas Reed, executive director of Catholic Services of Macomb, says his agency is getting about 30 foreclosure-related calls a month, mostly referrals from parishes. CSM provides intake screening and analyzes the person's situation, so it can then refer them to various other sources of assistance, he says. CSM also has other resources when pregnant women or children are involved, Reed adds.
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Robert Delaney | The Michigan Catholic
In areas such as southwest Detroit, vandalism of foreclosed houses adds to blight. |
Subprime brokers
Roberts lays a lot of the blame on the "predatory practices" of "subprime" mortgage brokers those who made it possible for people who ordinarily would not have qualified for a mortgage to get one.
Many subprime mortgages are now going into foreclosure, and "the result is just reverberating around the community."
Bob Corbett, of Century 21 Campbell Realtors in Madison Heights, faults the practice in recent years of waiving long-established credit standards.
And he says ARMs were never meant to be an option for ordinary homebuyers. "Adjustable rate mortgages are appropriate if you are on a career path where you are relatively assured of getting regular advances like young doctors just beginning their residencies or young lawyers who have just been hired by a prestigious law firm," explains Corbett, a member of St. Louise de Marillac in Warren.
For others, an ARM is "a timebomb waiting to go off," in Corbett's view.
"They were able to get away with it when the market was booming and that people were counting on the increase in the value of their homes," he adds.
Corbett recommends people in difficulties try to talk with their mortgage company, but acknowledges many mortgages are "bundled" and sold to investors, leaving the originator no discretion.
But when the lender holds the mortgage, some accommodation might be reached.
"Sometimes it's possible to negotiate with the banks for a 'short sale,' where the bank accepts less than what they're owed as payment in full. Say you owe $100,000, but the best offer you can get is $95,000. They used to make you agree to pay the difference over five years, but now as a practical matter, however things stand at the closing table, it's over," Corbett says.
Where to turn for help
Families facing a crisis in their housing situation can find help from various sources, among them:
For help with food, clothing or other emergency needs, call parish Christian Service coordinators or St. Vincent de Paul conferences; reached through local parishes.
To find affordable rental housing, check the Michigan Low-Income Housing site.
Catholic Social Services agencies may be sources of assistance when pregnant women or small children are involved. Catholic Services of Macomb provides screening and referrals to various agencies; call (586) 416-2300.
Some cities and counties offer assistance programs to residents facing foreclosures; check Internet sites or local telephone directories. | Declining values
Joe Trecola, whose Troy-based TREA Corp. does much of its residential appraisal work in Detroit, said that in some city neighborhoods as many as 60 percent of all houses on the market are foreclosures.
"Houses that were selling in the 140 or 150s ($140,000 to $150,000-plus) three years ago are now, as bank-owned properties, selling in the 40s or 50s," says Trecola, who attends St. Thomas More Parish in Troy.
"Of course, part of that is the banks usually aren't able to secure them, so they've had their copper plumbing and their kitchens and bathrooms ripped out. But even if you put in new kitchens and bathrooms, they're still not going to be worth more than $70,000 to $80,000," he adds.
Even renters affected
As Christian Service coordinator for three southwest Detroit parishes, Servite Sr. Eileen Lantzy sees a side of the problem that gets scant attention. "We've been seeing a surge of people who have lost their housing not so much homeowners, but renters who have been paying their rent in good faith, but their landlords haven't been paying their bills and have been foreclosed on," she says.
Scott says she has encountered similar situations in Pontiac.
And she says she sees the results of foreclosures in all the boarded-up and vandalized houses in the area: "I think the banks are being real short-sighted by foreclosing rather than working with people, because the houses get vandalized and the value goes down to zip."
Affluent areas
Reed, of CSM, says many people would probably be surprised to learn the foreclosure problem is so prevalent in affluent communities, such as Shelby Township. Corbett, however, while acknowledging "we're even seeing them in West Bloomfield," says he believes the problem is still the greatest in traditionally blue-collar communities.
Mary Allman, Christian Service coordinator at St. Perpetua Parish in Waterford Township, says, "I was at the Oakland County courthouse last week, and there is this wall as you enter that is completely covered with foreclosure notices."
Jane Scott, president of the SSVdP conference at St. Perpetua, says they try to help people in such circumstances get square with the utility companies, "because that follows you." She says her SSVdP conference gets one or two calls a week about housing assistance.
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