Homeowners in Distress: Preventing Foreclosures

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Homeowners in Distress: Preventing Foreclosures

  1. 1. Homeowners in Distress: Preventing Foreclosures Strategies to Help Homeowners J. Michael Collins & Deb Neubauer University of Wisconsin Cooperative Extension October 20, 2010
  2. 2. Overview • Current issues • Data on foreclosure • WHPE educational materials • Strategies • Dane County Case Study
  3. 3. Nationally Expecting Wave of Foreclosures Soon… CoreLogic, formerly First American Corporation, www.corelogic.com
  4. 4. Distressed Sales Rising National Home Sales by Segment CoreLogic, formerly First American Corporation, www.corelogic.com
  5. 5. Who is Affected? 2.26 6.17 7.39 3.74 4.16 White Black/Afr Amer Hisp/Latino Other All % Loan in REO by Demographics ( 2010) White Black/Afr Amer Hisp/Latino Other All
  6. 6. High Area Unemployment Correlated with REOs 1.16 5.4 5.61 11.08 4.16 <5% 5-10% 10-15% >15% All % REO by Zip Code Unemployment rate ( 2010) <5% 5-10% 10-15% >15% All
  7. 7. Data for Wisconsin • http://www.uwex.edu/ces/cced/economies/c ommunityindicators/Indicators_Links.cfm#q2_ 2010
  8. 8. Foreclosure Filings 2010 (thru June) 2009 Adams 90 171 Ashland 33 57 Barron 107 227 Bayfield 35 67 Brown 597 1097 Buffalo 10 44 Burnett 83 139 Calumet 82 160 Chippewa 145 272 Clark 69 126 Columbia 172 349 Crawford 43 58 Dane 801 1550 Dodge 232 446 Door 72 143 Douglas 115 224 Dunn 99 197 Eau Claire 172 335 Florence 11 16 Fon du Lac 188 449 Forest 18 37 Grant 50 101 Green 82 164 Green Lake 43 101 Iowa 69 101 Iron 16 33 Jackson 36 72 Jefferson 209 399 Juneau 84 193 Kenosha 628 1238 Kewaunee 46 95 La Crosse 156 339 Lafayette 33 78 Langlade 60 105 Lincoln 57 142 Filings by County 2010 (thru June) 2009 Manitowoc 179 301 Marathon 283 505 Marinette 114 260 Marquette 51 113 Menominee 0 6 Milwaukee 3071 6323 Monroe 88 188 Oconto 125 261 Oneida 115 232 Outagamie 417 770 Ozaukee 124 266 Pepin 18 37 Pierce 121 254 Polk 180 408 Portage 0 Price 33 64 Racine 630 1221 Richland 45 64 Rock 532 1165 Rusk 37 62 Sauk 176 381 Sawyer 59 122 Shawano 114 213 Sheboygan 278 547 St. Croix 353 753 Taylor 38 78 Trempealeau 32 100 Vernon 47 81 Vilas 85 159 Walworth 404 726 Washburn 57 118 Washington 270 552 Waukesha 783 1335 Waupaca 160 338 Waushara 79 158 Winnebago 382 787 Wood 118 259 Wisconsin (sans Portage) 14341 27967
  9. 9. Common Themes of Interviews with People in Foreclosure Process • School aged kids – minimize disruption • Relationship issues • Pride management with family & peers • Lack of trust in institutions – Some exceptions for ‘helpful’ counselors / agencies • Communication / Education is challenge – Lack internet, limited phone, time constrained – Interest in budgeting (reformed spendthrifts)
  10. 10. Financially Strapped “I am on unemployment and I am about ready to declare bankruptcy. I can’t do consumer credit counseling b/c I am not employed. All my unemployment checks go toward paying my two mortgages. I am $19k in debt. I would like to save but I need to work in order to save.” - married woman in 40s By late delinquency (180+ days) • Tapped out family • Cashed in / borrowed from 401k • Austerity budgeting
  11. 11. Emotional Toll “I had a job where I could work overtime when I wanted. So I bought a lot of toys (motorcycle, trucks, etc.). Then they got repossessed. I found it devastating. It was so embarrassing. Now I have one vehicle – the one that is most practical – and it is hard. I did not realize my unemployment would be so long. I did not think it would happen to me.” – male in 50s • Unwilling to reveal extent of needs • Not seeking advice in community
  12. 12. Hard to Reach / Not Accessing Information “I have access to the internet through the library. I simply cannot afford it at home. There is a lot of waiting and stuff so it makes it difficult. I do have an internet account at work but limited so I can’t really do a search at work.” - Single mother in 30s • Reaching people – phone, mail, web – all limited
  13. 13. When during the month are people looking for help? 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 Week 1 Week 2 Week 3 Week 4 September 2010, Referrals by Week Source: MortgageKeeper.org, September 2010 Referrals by Counselors
  14. 14. Most Common: Food, Job, Utilities Food Assistance Programs 19% Job Training 18% Heating/Utility Costs 18% National Hotlines 11% Legal Services 9% Pharmaceutical Costs 7% Home Repair 3% Unemployment Assistance 3% Senior Citizen Services 3% Childcare 2% Other 7% Services Referred, 2009-2010 Source: MortgageKeeper.org, 2009-2010 Referrals by Counselors
  15. 15. Typology of Consumers in Distress (Negative Trigger Events) • Income disruption, but potential to work – Job loss/cutback (relocation options) – Divorce (child support issues) – Widow/er (may have limited work options) • Disability – Chronic (DI application process) • Health crisis – Acute or ongoing expenses (medical debt management) • Investor (not all are speculators) – tenant eviction issues – subsidized units • Small business failure (non-real estate) – Sale / bankruptcy (special issues if farm) • Strategic defaulters
  16. 16. Providing Services • Prevention – People not in default, but worried • Early Intervention – Missed 1-2 payments • Late Intervention – Missed 3+ payments • Transitional Support – Short sale or foreclosure auction
  17. 17. Early Intervention is the Ideal -0.1 -0.05 0 0.05 0.1 0.15 0.2 Counseled when current Counseled at 30 days delinquent Counseled at 60 days delinquent Counseled at 90 days delinquent Effects Vary Depending on When Counseling Occurs Pr(Mod) Pr(REO) Source: Collins & Schmeiser, 2010
  18. 18. http://fyi.uwex.edu/whpe/
  19. 19. WHPE Themes • Financial Issues of Owning a Home • Physical Issues of Owning a Home • When Things Go Wrong
  20. 20. 1. Budgeting Basics The goals of this chapter are: • Understanding your situation. • The benefits of and process for creating a spending plan. • To discuss financial priorities and goals and the steps needed to achieve them.
  21. 21. 2. Making Ends Meet The goals of this chapter are: • Show resources that may be available. • Understanding benefits and assistance programs, as well as tax credits. • Address embarrassment of help seeking. • Programs can have complicated details. Be patient and take time to learn your options.
  22. 22. 3. Credit Management & Counseling The goals of this chapter are: • To overview the benefits and drawbacks of debt. • How review a credit report. • Understand credit scores • Options for managing debt. Take-away messages: • Always keep an eye on your credit—it affects more than you think. • Manage an economic hardship with the least damage to your credit record. • Check your credit score. • Bankruptcy and repayment are options but will not make your financial problems go away.
  23. 23. 4. Understanding Default & Foreclosure The goals of this chapter are: • Background into how and why default and foreclosure occur. • Alternatives to foreclosure • The legal process of foreclosure. Take-away messages: • Losing your home to foreclosure is in no one’s best interest; understand your options. • Decide if you want to stay and are committed to repaying the loan; if not look into a sale. • Talk to your lender. • Take time to learn details of programs and follow up on every detail; Don’t be derailed by paperwork. • Ask for help but be careful of anyone offering a quick fix.
  24. 24. 5. Keeping Organized The goals of this chapter are: • To help you embrace the benefits of being organized. • To provide you with the tools to make smart decisions when purchasing Insurance. • To encourage and guide you in creating your own household organizational system. • To provide advice on which records should be kept and where. Take-away messages: • Paperwork matters! • Know what to store and where to store it. • Plan for the unexpected.
  25. 25. 6. Maintaining Your Home The goals of this chapter are: • Understand the responsibilities of owning a home. • Provide tools to help budget for repairs. • Understand the costs and benefits of financing repairs and remodels. Take-away messages: • A lot goes into owning a home beyond simply choosing what color to paint the walls. • Staying on top of home maintenance is important to save money in the long run. • Energy efficiency and proper insurance can also save you money over time.
  26. 26. 7. Refinancing The goals of this chapter are: • To illustrate the hidden costs that interest adds to a mortgage payment. • To explain how refinancing can save homeowners money. • To explain some of the fees associated with refinancing. Take-away messages: • Over the course of a loan, you will pay much more than you originally borrowed. • Refinancing a loan can save you a lot of money on interest that you will not have to pay.
  27. 27. Dane County Example
  28. 28. Scope Of Problem # of Foreclosures in Dane County (2000-2008)…47% 0 200 400 600 800 1000 1200 2000 2001 2002 2003 2004 2005 2006 2007 2008
  29. 29. Scope of Problem • 2009: Increased 39% over 2008 – 10% points higher than the statewide average
  30. 30. Community Answer • Dane County Foreclosure Prevention Taskforce – Coalition of public agencies, non-profit service providers and other community partners working together to develop sustainable alternatives to foreclosure • UW Law School instrumental in the formation
  31. 31. Strategy • 3 work groups: – Prevention – Intervention – Stabilization
  32. 32. Prevention • Broad, coordinated approach to providing early outreach/ education on a community- wide basis – Created print material identifying local resources to families facing the possibility of foreclosure
  33. 33. Intervention • Effective assistance to individual homeowners at imminent risk of default, in default or in foreclosure – Community workshops-2 sessions: • Objectives – Increase homeowners’ awareness of options for mortgage help – Help homeowners to determine their next steps – Prepare homeowners for their next step by encouraging goal- setting and budgeting.
  34. 34. Intervention cont…. • Created a Wisconsin Foreclosure Timeline – Presents the basic process of foreclosure simply • Major deadlines and events to be expected in a foreclosure lawsuit – Court filing requirements, redemption period, public notice of sale, etc.. – Critical for homeowners who are overwhelmed by the court processes and deadlines
  35. 35. Intervention cont…. • Dane County Foreclosure Mediation Program (DCFMP) – Workgroup advocated for a local rule mandating that homeowners who are sued for foreclosure are notified of the mediation program • Voluntary • Both parties pay $75 • Homeowner agrees to housing counseling
  36. 36. Intervention cont… • Answer Clinic – State Bar awarded a grant to the workgroup to create a clinic to help homeowners file answers to foreclosure lawsuits. • Staffed by volunteer attorneys and volunteer law students
  37. 37. Stabilization • Objective is to identify and strengthen neighborhoods impacted by foreclosure – Purpose: find “hot spots” for foreclosed homes
  38. 38. Extension’s Role • Coordinate the key players – Attorneys, community partners, law school, HUD approved housing counseling agencies • Provide the education required for goal- setting and budgeting • Assist with the follow-up and evaluation
  39. 39. Websites • Home Ownership Preservation Foundation www.995hope.org • Wisconsin Housing and Economic Development Authority www.wisconsinforeclosureresource.com • Dane County Foreclosure Prevention Taskforce www.daneforeclosurehelp.org
  40. 40. Deb Neubauer Dane County Extension Financial Education Center Lower Level, Suite 101 2300 S Park Street Madison, WI 53713 (608) 261-5077 Fax: (608) 261-9727 deb.neubauer@ces.uwex.edu For More Information: http://fec.uwex.edu J. Michael Collins Faculty Director, Center for Financial Security University of Wisconsin-Madison 7401 Social Science, 1180 Observatory Drive Madison, WI 53706 608-616-0369 jmcollins@wisc.edu For More Information: cfs.wisc.edu

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