For many sick, unemployed, and otherwise cash-strapped homeowners, the prospect of losing one's home feels like the end of the world. But there is light at the end of the tunnel say housing counselors, and in most instances, a much better life can come after the foreclosure. "I think the emotional and mental aspects of foreclosure are the hardest for people to bounce back from because their sense of self is tied to their home," said Meredith Mishaga, coordinator, Baltimore Homeownership Preservation Coalition (BHPC).
BHPC is a group of more than 50 non-profit, governmental and professional associations working to prevent or mitigate the effects of foreclosure on Baltimore families and neighborhoods through a variety of proactive and data-driven strategies. "Most housing counselors will do whatever they can to avoid a situation of foreclosure and bring about a soft landing, i.e., a short sale or deed in lieu of foreclosure. But there must be an acknowledgement that your home doesn't make you, and there's life after foreclosure," said Mishaga.
When viewed from a broad perspective, the housing foreclosures in Maryland are up by almost 35 percent from a year ago, according to recent data from the Maryland Department of Housing and Community Development (DHCD), despite a decline in foreclosure activity during the first quarter of 2014. Maryland now ranks fourth in foreclosures, behind Wyoming, New Jersey and Connecticut.
Homeownership and upward mobility are extolled as the epitome of the American Dream. The Clinton and Bush Administrations both pushed for ways to get lenders to give mortgage loans to first-time buyers. Because of these efforts, each administration belongs on the list of those who deserve a share of the blame for the housing bubble and bust.
In 2008, Wall Street bank CEOs were grilled by Congressional committees about their role in the housing crisis that brought the nation's financial system to the brink. The legislative hearings revealed an elite group of Ivy Leaguers that encouraged a casino culture of greed and gambling, collected billions in bailouts and compensation packages, and claimed no responsibility for predatory lending practices and subprime mortgages that wrecked lives.
Lenders issued sub-prime loans to people unable to qualify for traditional loans. People qualifying for traditional loans were encouraged to purchase too much house through variable rate loans featuring lower interest rates and lowered payments on the front end with balloon payments set to explode like land mines later.
The foreclosure crisis has been an ordeal for homeowners, and has caused enormous problems for tenants living in foreclosed homes. According to Matt Hill, an attorney with the Public Justice Center, tenants have rights to certain notifications throughout the foreclosure process.
A bona fide tenant is anyone who is not the parent, child, or spouse of a mortgagee, but who pays fair market rent and received a rental/lease agreement as a result of an arm's length transaction. When the bank forecloses, it must take back the property subject to the tenant's existing lease. The "Protecting Tenants at Foreclosure Act" provides most renters with certain rights during foreclosure, namely, that most leases will survive foreclosure and the foreclosure sale purchaser becomes the new landlord.
Most renters have the right to continue renting the property for the rest of their lease term, or at least to receive a 90-day notice to vacate after the foreclosure process is complete. "As long as folks know their rights, it works out," Hill said, noting that deceptive notices from purchasers sometimes request that tenants provide the last six months of rent receipts. "But this isn't the law."
Sometimes real estate agents will offer a "Cash for Keys" deal in which a tenant receives a cash payment in exchange for moving out. "Sometimes this is okay, but it can also be a major problem," said Hill, "because tenant rights extend beyond this."
Up close and personal in peoples' lives, foreclosure activity is often a pile of unopened mail, unanswered phone calls from lenders, debilitating shame, depression, and a long list of stress-related ailments. Claudia Wilson, Director of Housing Counseling and Operations at the Southeast Community Development Corporation in Baltimore City, said that once the crisis ends, "a lot of wreckage will be left behind. People will have lost their homes, health, and livelihoods.
Given all that people are dealing with, you really can't blame anyone for not opening their mail."
Wilson recalls a 79-year-old woman who worked full time, with a heart condition that led to a long-term hospitalization. "She was too far behind, and there was no number for her that would work because of her ARM [Adjustable Rate Mortgage], which clearly was not the best loan option for someone in her situation," said Wilson.
"Many people are ill, and they may never be able to pay their mortgage again. As housing counselors, we must sometimes negotiate with a lender just so that a person can continue to get their cancer treatments," she said.
Wilson believes the foreclosure crisis is a multi-layered problem resulting from the collision of many issues at the same time. The housing fallout has been exacerbated by high unemployment and the Great Recession which left increased income inequality and wealth loss that disproportionately affected African Americans and other minority groups.
"I resent the notion that somehow you're a lesser person because you don't own a home," said Wilson, who points to stable rental markets in Chicago, New York and other cities. "We're not in a pretty place today. We have to dial it back. Homeownership is not a sustainable option for everyone.
"We had a myth of wealth. What [we] thought we had is not what we had. What is critical is that someone can live with dignity and get help with dignity. Our job is to help them know their options."
Call the HOPE Hotline at 877-462-7555 as soon as you start having any trouble paying for your home.