A few months ago, we wrote an article on how to save your home if you are in a foreclosure situation. The article had a great impact at that time since the economy was shaking at the latest reports on foreclosure numbers. Yesterday, I was browsing the Money CNN section and I came across an interesting article about a family in Cleveland that managed to dodge the bullet and save their home.
As I have mentioned before, it is always wise to talk to your lender and try to work things out, they are in a position to help you and they would rather have you keep your house than to sell it in a foreclosure auction.
Read the article, it is very inspiring.
When Darlene Stutzman visited the offices of the East Side Organizing Project, a community advocacy group in Cleveland, she didn’t know if she’d be able to keep her home.
She showed up on a Wednesday - “intake day” - when ESOP offers group and individual counseling for borrowers trapped in bad loans. With qualified borrowers, they can also try to work out a compromise with lenders. The Wednesday sessions are well-attended with as many as 150 people showing up at their peak. Cleveland has one of the highest numbers of foreclosures in the nation.
Stutzman, a young wife and mother from suburban Parma, and her husband, Michael, got in trouble when he got sick and had to take an unpaid leave from work. She found out about ESOP when she called Cleveland’s 211 government resources line. Michael, who was back at work, was unable to join her for the counseling session.
Fixing foreclosure’s ground zero
The first step Stutzman took at ESOP was to fill out a “Hot Spot Card” that asked questions such as: “Are you up to date on your loan?” “How much can you afford to pay each month?” and “Is your loan in foreclosure now?”
She and a group of five others then listened as counselors James Jones and Samantha Williams told them what ESOP could — and couldn’t — do for them.
They learned the organization has partnerships with 25 different lenders. If a home is in foreclosure, ESOP may be able to halt the process almost immediately. Jones told them how their loans might be restructured for affordability.
But the best outcome some borrowers could expect, explained Jones, would be a short-sale or deed-in-lieu, where they’d lose their home, but without the black mark of a foreclosure on their credit history.
After the group session, the clients received individual attention. With her mortgage documents in hand, Stutzman met with counselor Jenelle Dame to go over her “Hot Spot Card” and answer other questions about how and why she got behind.
Previous brushes with payment problems, including a bankruptcy, had left her and Michael with less than perfect credit when they bought their house for $119,000 in April, 2006. But Michael had a good job as a machinist, and they were able to get financing from Countrywide Financial (Charts, Fortune 500).
Their first loan was a $97,000 adjustable rate mortgage (ARM) with interest of 8.75 percent, which is fairly expensive. The second mortgage, for $24,290, was a home equity loan at 12.875 percent. The Stutzmans paid about $1,250 a month, including taxes. And then the interest on both loans was set to reset at a higher rate, which would drive their monthly payments up substantially.
Stutzman said Countrywide told them that after a year, they could combine the two mortgages and refinance into a fixed rate. But because of Michael’s health problems, he had to take an unpaid leave. The Stutzmans fell behind on their payments, and because they were in default, the lender would not make a deal.
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