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N: Carol FIN-egan provides free loan and legal counseling to Brooklyn residents who are facing foreclosure. On a recent Sunday in Brooklyn, she was assisting mortgage borrowers with their loans.
[AMBI Background noise fades up, Finegan saying: How you doing?
Man: not too bad
Finegan: that's good. How's your mortgage?
AMBI fades out.]
N: Finegan says that some of the homeowners who talked to her that day have been behind on mortgage payments for month. One man who approached her table was three months behind on his house, and six months behind on the one that he rented out. Finegan says he has known about her organization for awhile, but was reluctant to ask for help earlier. She says his reasons are typical of many borrowers she counsels.
AX Finegan 1: You're ashamed, you're embarrassed, you're depressed, and you don't know if anybody really can help you. And you don't want to tell people all your personal business.
N: These are the reasons why some of the 800,000 families contacted by the national campaign have not reached out for help. And the longer borrowers wait, the worse their situations get. Every missed payment lowers a homeowner's credit score. And usually, as your credit score plunges, it's more difficult to negotiate a lower monthly payment with the bank.
But to get help, borrowers have to share intimate details of their day to day lives: their income, their debts, the fact that they're living in the dark because their electricity has been shut off, or that they've been buying groceries with a credit card.
In addition to feeling ashamed, borrowers begin to deny the problems right in front of them.
AX Finegan 2: you're gaining weight, you don't get on a scale. And a lot of people, theyre getting behind on their bills, they don't open their mail. I've had ppl come in with envelopes full of mail they haven't opened for two or three months. That I've sat and helped them open to see what's going on, that they don't even really know what the status of their mortgage is.
N: But even when homeowners contact their lenders, they are often met with roadblocks. The first people borrowers talk to at their banks is the collections department, who only has one mission—to get borrowers to pay up.
Philip, a 53 years old homeowner from Staten Island, knows how inflexible collections departments can be. He has talked to his lender nearly 80 times in the last two and a half years.
AX: And every time I made that phone call, the answer was always no no no no.
N: Philip doesn't want to use his last name because he works in the financial industry and fears his customers would learn about his personal mortgage problems. He's on the brink of losing his house because of his newborn son who needed surgery in 2005. Philip spent the family savings and cashed in his 401Ks to pay for it. But it wasn't enough, so he refinanced his mortgage in 2006. That doubled his monthly payment. Half a year in, he knew he was in trouble. He called his bank for help imagining the worst.
Covello 2: What am I going to do with my wife? And my three little kids that I have? Where are we going to go?
N: Philip's interest rate reset in January last year. The monthly payment was almost as much as his entire income after taxes. To pay his mortgage, he began to fall behind in everything else. After a couple months, he stopped sending in his mortgage checks because it was the only thing he could think to do.
AX: Covello 3: I was able to make my car payment, I was able to pay my electricity. I was able to pay my gas. I was able to at least bring myself on that part of my life back to normal. But the house was going. I would have some light bulbs and some heat, but no house. Live in a fantasy world. [0:14]
N: Increasingly, banks are willing to work more with borrowers like Philip. As the foreclosure crisis worsens, lenders are eager to keep borrowers out of foreclosure. Banks don't want to own houses. They have to maintain the homes they DO repossess, and are likely to lose money on any homes they sell.
This trend has already helped Philip. His house was up for auction a couple weeks ago. He and his wife started talking about moving into a rental. But the day before the sale of his house, Philip met a representaive from his bank face to face. The lender halted the sale of his house, and has promised to meet with Philip next week about how to salvage his mortgage.
Annie Lok, Columbia Radio News.