Hope for Homeowners

By Melissa Abramovitz

Steve and Jan* live in Roseville with their three children, ages 8, 5 and 3. The kids’ toys fill their upscale home, along with the other sights and sounds of a busy, happy family life. At first glance, it’s hard to imagine the pressure this couple is under, but like so many families in Greater Sacramento, Steve and Jan now worry that they might lose their home.

When sales at their family-owned business started to decline last year, Steve and Jan watched their income fall too. Eventually, they were forced to stop making mortgage payments on their house. “We’ve been trying to work something out with the bank, so we can keep our home, but they don’t seem eager to help us,” says Steve with evident frustration. They are dealing with Wells Fargo Bank, which will not comment on individual cases. “It is so annoying,” Steve continues, “to try to deal with a huge company that doesn’t seem to care one way or another.”

The couple tried hiring a loan negotiator they found on the Internet, but, Steve says, “This didn’t resolve the problem.” Now they are hoping that the federal government’s Help for Homeowners program can help them negotiate a new loan.

Like Steve and Jan, many homeowners in the Sacramento area are faced with foreclosure due to steep declines in income, job loss, or due to rising payments from adjustable mortgages. Fortunately, not all lenders are reluctant to renegotiate loans.

“The last thing we want to do is foreclose,” says Chris Vargas, Mortgage Department Manager at Chase Home Finance in Roseville. “We want to help borrowers work something out, so we don’t lose a lot of money and they don’t lose their home.”

Chase, in fact, has a home preservation department that borrowers can call (and soon will be able to visit locally). Their Homeownership Preservation Office allows borrowers to work out a loan modification, which can involve a reduction in the principal amount or interest rate, or modification to other terms of the loan, depending on the customer’s needs.

Borrower Beware

Attorney Sarah Litchney, of Litchney Law in Roseville, specializes in bankruptcy and foreclosure prevention services. Litchney advises that homeowners facing foreclosure start by talking to their lender about renegotiating their loan. In fact, Litchney’s firm often serves as a professional negotiator, helping distressed borrowers do just that.

“It definitely helps to use a law firm with experience and knowledge about the current situation and also the laws regarding the situation,” says Litchney, adding, “lenders are more responsive when a law firm is involved.” But she cautions against hiring one of the many “professional negotiators” that have suddenly set up shop on the Internet or with local or toll-free numbers. “Homeowners need to be careful [of] all of the scams that are going on out there and should be wary of using companies that are not law firms or those that claim to be ‘attorney-backed’ but they never meet with or speak with an attorney.”

Besides averting foreclosure using loan modifications or repayment plans, firms like Litchney’s can assist clients in selling their house, obtaining a deed in lieu of foreclosure, or, as a last resort, filing for bankruptcy. In the current market of falling real estate values, selling the house often involves a short sale. In a short sale, the borrower (or a representative) negotiates with the bank’s loss mitigation department to discount the loan balance. In other words, the bank agrees to accept less money than the total balance of the loan, upon sale of the property. This process can take many months, but it is a viable option for some. With a deed in lieu of foreclosure, the mortgagor conveys all interest in the property to the lender without the credit damage that goes along with foreclosure. This is advantageous for the lender as well since it reduces the time and money involved in repossessing the house.

Although efforts to avoid foreclosure do not work for everyone, Litchney emphasizes that it is definitely worth trying, either by talking directly with the lender, using the services of a qualified attorney or negotiator, or going through the government’s Help for Homeowners program (offered through the Federal Housing Administration under The Department of Housing and Urban Development). For families facing foreclosure, this last option is a ray of hope in an otherwise dark and dismal situation. “I hope this program can help us,” says Steve, “because the prospect of losing our home is a bit overwhelming right now.” He continues, “I guess we could try to get a smaller rental house or apartment, but with three children, that would shake up our lives.”

If you’d like more information about HUD programs, including the Help for Homeowners initiative, visit www.hud.gov, and type “Help for Homeowners” in the search bar, or contact the Sacramento Field Office at (916) 498-5220.

Melissa Abramovitz is a freelance writer living in Roseville. She is the mother of two grown sons and the grandmother of two toddlers.

* The couple interviewed for this story requested we not use their real names.