REAL Solutions_Foreclosures in America_2009


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This handout is made available courtesy of the Illinois Credit Union League, a REAL Solutions state league partner.

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REAL Solutions_Foreclosures in America_2009

  1. 1. Foreclosures in America An Update Mark Lynch, REAL Solutions Field Coach In this presentation The causes of the problem The magnitude of the problem The impact on communities Identifying the impact in your area The need to be proactive Identifying members and potential members who need help Assisting members and potential members to know what to do if they are faced with a problem
  2. 2. The Cause of the Problem Those related to sub-prime issues Those related to the economic downturn Diverse reasons for foreclosures – important to separate the fact from the fiction, the speculator from homeowner, the sub-prime from the job loss Foreclosure affects us all irrespective of the cause The Magnitude of the Problem 1 out of every 200 homes will be foreclosed upon. For a city like Washington, D.C., that translates to 3,000 Washingtonians losing their homes to foreclosure each year. – Mortgage Bankers Association
  3. 3. The Magnitude of the Problem Every three months, 250,000 new families enter into foreclosure. – Mortgage Bankers Association The Impact on Communities Forty-four percent of all homeowners will likely feel the ripple effect of foreclosures from subprime loans, with affected homeowners expected to lose nearly $9,000 on average from declining property values. - Pew Center on the States, 4/08
  4. 4. The Impact on Communities One child in every classroom in America is at risk of losing his/her home because their parents are unable to pay their mortgage. – Based on information from the Mortgage Bankers Association The Impact on Communities Homes in foreclosure that become vacant provide sites for crime or other neighborhood problems. One foreclosure can impose up to $34,000 in direct costs on local government agencies, including inspections, court actions, police and fire department efforts, potential demolition, unpaid water and sewage, and trash removal. – William C. Apgar, Mark Duda, and Rochelle Nawrocki Gorey, “The Municipal Cost of Foreclosures: A Chicago Case Study,” February 27, 2005, p. 2.
  5. 5. The Impact on Communities One foreclosure can result in as much as an additional $220,000 in reduced property value and home equity for nearby homes. – William C. Apgar and Mark Duda, “Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom,” May 11, 2005, p. 4. The Impact on Communities Political activity (voting, civic participation) is higher among homeowners than renters. High level of neighborhood homeownership enhances property values. – Robert D. Dietz, “The Social Consequences of Homeownership,” June 18, 2003, p.2, 4
  6. 6. The Impact on Communities Homeowners are more satisfied with their lives and are happier. Homeownership is positively associated with physical, mental and emotional health. – Robert D. Dietz, “The Social Consequences of Homeownership,” June 18, 2003, p.2, The Impact on Communities Children of homeowners are likely to perform higher on academic achievement test and are more likely to finish high school. They also have fewer behavioral problems in school and are less likely to become pregnant as teenagers. – Robert D. Dietz, “The Social Consequences of Homeownership,” June 18, 2003, p.2, 4
  7. 7. The Impact in Your Area Regularly monitor and assess the impact and trends in your area Foreclosure Data is available from several sources – most data updates monthly
  8. 8. Foreclosure Data Sources Website Impact on Credit Union Members An increasing number of credit union members have or will lose their job An increasing number of members will suffer stress related health issues even if they retain their job
  9. 9. No Time To Waste Some credit union members and staff have already fallen behind on mortgage & other payments on non-credit union loans to abusive or predatory lenders Some members and staff will fall behind on payments as soon as they lose their job Some members will have sufficient savings to last a only few months at most Many homeowners are already at the financial edge • 43% of American households spend more than they earn each year. – Homeownership Preservation Foundation data of 60,000 homeowners • 52% of employees live paycheck to paycheck. – The MetLife Study of Employee Benefit Trends: Findings from the 2003 National Survey of Employers and Employees, November 2003. • Nearly 42% of all American households do not have enough in liquid financial assets to support themselves for at least three months. • 46% of American households have less than $5,000 in liquid assets, including IRAs. - Asena Caner and Edward N. Wolff, “Asset Poverty in the United States: Its Persistence in an Expansionary Economy,” Levy Economics Institute of Bard College, 2004.
  10. 10. Tipping points that put homeowners over the edge • 32% experience a job loss • 25% experience a health crisis • 85% have already missed one mortgage payment • 50% have already missed two payments • Most have no savings, no available credit, and their extended families have limited resources • Most have first-time loans, and most loans are less than three years old • They may have already refinanced two or three times – Homeownership Preservation Foundation data of 60,000 homeowners How will members react when faced with possible foreclosure?
  11. 11. Homeowners Facing Foreclosure If home foreclosure were likely for you, what best describes how you would feel? •38% Scared •35% Depressed •9% Angry •8% Embarrassed •9% None of these – Harris Interactive poll of 1,334 U.S. homeowners, conducted October 5-7, 2005. Homeowners Facing Foreclosure Six in 10 homeowners wish they understood the terms and details of their mortgage better. – Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.
  12. 12. Homeowners Facing Foreclosure More than 6 in 10 homeowners delinquent in their mortgage payments are not aware of services that mortgage lenders can offer to individuals having trouble with their mortgage. – Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005. Homeowners Facing Foreclosure Homeowners fail to contact their lender because they are embarrassed, don’t believe the lender can help, and/or believe it would cause them to lose their home more quickly. – Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.
  13. 13. Credit Unions Need to be Proactive Members who are depressed, scared or embarrassed are likely to do nothing Credit Unions need to inform and educate members about their mortgage and their options before foreclosure becomes an issue Credit unions may be seen by members as trusted advisors, even if they received their mortgage loan from another lender The Benefits of being Proactive Low- and moderate-income borrowers who enter a repayment plan are 68% less likely to lose their homes. – Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82
  14. 14. Foreclosure - Everyone loses Lenders and investors do not make money on foreclosures. Losses range from 20 cents to 60 cents on the dollar. Lenders typically lose $50,000 or more on one foreclosure. – Craig Focardi, CMB, Research Director, TowerGroup’s consumer lending division, cited by Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82. Information Think about how you inform your staff and members now All members don’t get information the same way and not all members are or will be affected in the same way Now might be a good time to expand your information sharing program And remember – FOCUS!
  15. 15. Begin at Home Members who trust their credit union may ask any one of your staff for help or advice Some of your staff may be facing problems themselves. For both of these reasons: Make sure all of your staff understand the basic information Make sure all of your staff are able to provide members with basic, accurate information FOCUS! Members and staff who have a mortgage with your credit union Members and staff who have a mortgage with someone else Members and staff who are renting Members and staff who might be willing to help spread the word
  16. 16. Members with Credit Union Loans Members with CU Mortgage will face problems Members with other CU loans will face problems Credit Unions need to develop policies to help members keep their homes Credit Unions mustn’t forget staff may face problems as well Ways to inform – written! Newsletters Statement stuffers Brochures for staff to distribute Posters for lobby notice boards
  17. 17. Ways to inform – electronic! Website E-mails Text messages Social media Ways to inform – Community Partnerships! Identify community organizations that have a vested interest in helping minimize foreclosures and their impact Partner with them to convey information to members and potential members
  18. 18. Possible Community Partners! HUD-approved Housing Counseling Agencies More on this in a few minutes… Churches Social Welfare Organizations Service Clubs e.g. Rotary, Lions Chambers of Commerce Community Actions Groups Possible Community Partners! Social Welfare Agencies Local Government Agencies Chambers of Commerce VFWs Seniors Organizations
  19. 19. Benefits of Community Partnerships! Good way to communicate with existing members Great way to introduce yourself to potential members Gaining members in times of adversity creates long term loyal membership If you are a mortgage lender, great way to get your loan products known – certified counseling agencies also do pre-purchase counseling and refer clients to lenders. What sort of Information? Keep it basic and simple Contact your credit union if you are in the following circumstances etc Use the “Do’s and Don’ts” and “Questions & Answers” approach Tell members how to avoid scams Stress - contact your credit union before you do anything! Tell members to act – not procrastinate!
  20. 20. One-on-One Counseling One key part of information and education is to encourage “at risk” members to seek one-on-one counseling AT THE RIGHT TIME Counseling should only be undertaken by trained professionals Knowing where to send your members to get counseling is vital Education Encourage “at risk” members to attend education workshops Refer members to agencies that have education programs aimed at avoiding foreclosure and keeping their home (HUD accredited) If agencies are not available, use pre- packaged courses and videos
  21. 21. Homeowner Affordability and Stability Plan Why The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates. Homeowner Affordability and Stability Plan Why • Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure. • Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as 9 percent
  22. 22. Homeowner Affordability and Stability Plan The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. The key components of the Homeowner Affordability and Stability Plan Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From falling Home Prices Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affordable
  23. 23. The key components of the Homeowner Affordability and Stability Plan $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. The key components of the Homeowner Affordability and Stability Plan Supporting Low Mortgage Rates, Strengthening Confidence in Fannie Mae and Freddie Mac Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly.
  24. 24. Homeowner Affordability and Stability Plan For more information log on to: Federation’s HUD Housing Counseling Program Program transferred from NCUF 14 Credit Unions in 9 states Last year Counseled 1185 clients Educated 1150 clients Federation’s Housing Counseling Web page - id=1463
  25. 25. Counseling Trends 80% Percentage of Total Individual Counseling Services 60% Pre-purchase 40% Delinquency/Foreclosure 20% Post-purchase Rental 0% 2005 2006 2007 2008 Year
  26. 26. HOPE NOW HOPE NOW is an alliance between counselors, servicers, investors and other mortgage market participants to prevent foreclosures through outreach to delinquent borrowers, counseling, and loan workouts based on the borrower’s ability to repay
  27. 27. Members of HOPE NOW 27 Servicers 90% subprime market, majority of prime market Investors, Federal National Mortgage Association (FNMA), HUD, Freddie Mac, American Securitization Forum (ASF) and the Securities Industry and Financial Markets Association (SIFMA) Housing Industry Trades, Insurance Companies Non Profits, HUD Counseling Intermediaries HOPE NOW Free counseling through HOPE Hotline 888-995-HOPE Homeowners connected to one of 450 counselors 24 hours/7 days a week 3,300 daily calls From July 2007 to September 2008, over 2 million homeowners avoided foreclosure through the efforts of HOPE NOW members