The key to real estate is timing. Buy the right property, at the right time, and you can make a lot of money.
“We bought at the worst time possible,” David Moser said, with a rueful laugh. “February 2006. Right when it was at the peak, and then -- chooo -- downhill from there.”
Moser sat with his wife, Rawan, outside the Joslyn Senior Center in Escondido to attend a Saturday HOME clinic (Home Owners Mobile Education clinic), sponsored by the Housing Opportunities Collaborative, a non-profit housing advocacy organization. The HOC holds free HOME clinics across San Diego County, providing homeowners one-on-one sessions with experts like housing counselors, mortgage counselors and real estate and bankruptcy attorneys.
The Mosers drove down from Menifee in Riverside County to see what could be done to prevent them from possibly losing their home. Despite the potentially tense information they were getting, Moser and his wife hadn’t lost their sense of humor. When asked if the midday heat outside the center was bothering him, Moser -- who served in the U.S. Navy for 15 years, including four tours in the Persian Gulf -- said he’d been hotter.
“I got the house at what I thought was a pretty good price -- $375,000. - Especially compared to San Diego where you buy a 50-year-old shack for $400,000 at that time. So getting a brand new house for that price was pretty good. And the only way I could get into it was to make interest-only payments, the ARM,” Moser said.
“I was planning on refinancing once I got in and things got better, but obviously the economy got worse and lenders didn’t want anything to do with refinancing.”
Soon after the couple got married, Rawan, who graduated from CSU San Marcos in December 2006, was laid off from her job as a secretary -- a position that had taken her months to find.
Meanwhile, the monthly note on the 1,900-square-foot, three-bedroom home grew from $1,700 to a high of $2,400.
“Payments were getting expensive, everything was getting expensive, and we were still getting the same pay. His same pay, loss of pay,” Rawan said, pointing to herself. “I’m trying to go to school (for a teaching credential) so we can get better pay, but it’s still hard, really hard, and we’re barely making ends meet. Just like everybody else.”
Now Rawan said she earns “well less” than $2,000 a month. All luxuries have been eliminated the past few months so they can maintain their current house payment of $2,100. With David’s pay, housing allowance and whatever she can bring in, the couple is still coming up short about $500 a month. Savings are tapped, but the Mosers consider themselves “maintaining.”
“Our situation is a lot better than a lot of people, but right now we’re just kind of making sure we’re not going to sink,” the Navy hull technician said.
The Housing Opportunities Collaborative, which started as a small, informal entity in 1997 and became a 501(c)3 non-profit in 2006 has seen roughly 6,000 families the past two years in San Diego and Imperial Counties.
“We have families that come to the home clinic that are not only in distress, but who also see a crisis coming to them maybe five months from now, six months from now, so they want to be prepared when the crisis hits them,” said Vino Pajanor, Housing Opportunities Collaborative executive director.
“We believe in giving them more than the solution. Giving (home owners) the options and education is the crux. Because people don’t have the information that is necessary for them to make an educated decision as to what is right for them,” he said. “Most the other organizations around the country think you have to give solutions. No. It’s about educating them, empowering the home owner with the information, so that when the time comes for them to make the decision, whether to have their home or let it go, that the options are there, they know about it.”
The group consists of members of more than 54 housing-related groups, both non- and for-profit, who volunteer their services on Saturday to help homeowners. The location of each HOME clinic is different. Some sites are equipped with bone-chilling air conditioning. Others are outside, with counselors sitting under small tents. This year alone the HOC will do more than 20 clinics in and around San Diego and Imperial counties. The clinic held at the Joslyn Senior Center was the group’s 45th.
While waiting for their case number to be called, clients sit in the center’s main hall, under a dormant disco ball and unlit bingo numbers, and listen to one of the rotating lectures on a variety of housing issues, like foreclosure options, avoiding loan scams and homeowner rights.
Questions are asked to be kept general because individual specifics will be handled one-on-one. All files are given a number for privacy purposes and confidentiality is guaranteed.
In one room of the center, couples and individuals meet with HUD-approved housing counselors to go over specific questions on foreclosure options. In another, bankruptcy attorneys huddle over case folders with clients, discussing the legal implications of foreclosure, bankruptcy and other options like forbearance or deed-in-lieu arrangements. Down the hall, mortgage counselors agents relate details about the business sense of loan modification.
The HOC spends almost nothing on marketing the HOME clinics, because the HOC feels that the best way -- and cheapest -- to advertise is by helping people.
“(Today) there were about 50 families enrolled,” said Francisco Gonzalez, an HOC volunteer and the Foreclosure Prevention Center coordinator at Community Housing Works. “Usually through word of mouth, that number doubles, so we’re looking at about 100 people in this immediate area. There’s been places like Encanto or El Centro, where we had maybe 70 people enrolled and 300 families showed.
“The problem that we have here in San Diego is a lot of people aren’t educated. They don’t have the support system in place to better themselves, to know there are other options to them. That’s why, in our opinion, there’s a lot of problems with the foreclosures because people didn’t know that there’s someone they can go to for help. They think that they’re by themselves and that if the bank’s telling them that they’re going to foreclose there’s no option, when, in fact, there are.”
Pajanor said attendance of the home clinics have mirrored the foreclosure rate. March and May were the only months were attendance lagged a bit. He also noted that since the last quarter in 2008 there was a hold on foreclosures by the lenders for various reasons, best known to them. He considers it a momentary lull and hopes efforts made by the government, lenders and housing advocates can stave off yet another wave.
“We’re seeing that the government-based organizations, like Fannie Mae and Freddie Mac are able to do more loan modifications than others. Of course there are other lenders, there are the good and the bad, I don’t want to name them, but some of the lenders are able to work with homeowners, some of them are not,” Pajanor said.
Foreclosure filings surpassed 3 million in 2008, up 81 percent from 2007 and 225 percent from 2006, according to reports from RealtyTrac. During the first six months of 2009, a record 1.53 million properties were in the foreclosure process -- default notices, auction sale notices and bank repossessions. That was 9 percent more than the previous six months and 15 percent more than the same period of 2008, according to the report.
“By the end of this year, there are projections that the prime and the option ARMs and the Alt-As are going to come in. We hope some kind of legislation is done before that in order to prevent another re-do of 2008, the third quarter of 2008, we don’t want that to happen again. But the trend is, right now, we haven’t seen anything happening positively to stop the repeat of history of 2008. And when that happens, we want to be prepared -- if it happens, God forbid -- to help the homeowners,” he said. “There’s no foreclosures actively pursued right now but that could change overnight.”
Jonathan Bellomo sees how hard people are trying to save their home every day. As vice president of operations with HOEM Asset Disposition Management, he deals with both sides of the equation -- the home-owners and the banks.
“If you don’t have a job, pretty much none of the lenders will consider unemployment as income,” he said. “People are forced to find two or three jobs, which is very hard in this economy, and are doing whatever they can to save their home.
“All of our clients tried to do it themselves, most tried before they were in trouble but the banks ignored them, or gave them the runaround or offered them repayment plans which actually kept everything the same and actually ended up raising the monthly payments. They consider the (repayment plan) a loan-modification and these usually end up defaulting three, or six months down the line and they end up in the same spot.”
Bellomo said the only sure-fire way to save one’s home is by paying as much as you can and working with the lender to reduce the note.
“People need to save money, save every dime, put as much money away as they can. They also need to be prepared to be on the phone a long time and basically not back down.
“There are so many scams out there. The biggest hurdle now is convincing people we’re for real. You struggle with the client up-front and battle with the bank along the way, but when you help someone who needs it, it’s a pretty good feeling.”
Bellomo said the Making Home Affordable loan modification program came well short of fulfilling the number of loan modifications projected. He feels that was partially due to the banks -- whether purposefully or not -- delaying the loan modification process.
The Obama administration crafted the program this year to help as many as 4 million borrowers save their homes. Last month the White House announced that more than 200,000 trial loan modifications had begun, and a goal of starting at least 500,000 by Nov. 1. is set.
The Making Home Affordable program requires banks that received federal aid from the Treasury’s Troubled Asset Relief Program, or TARP, as well as mortgage-finance companies Fannie Mae and Freddie Mac to lower the monthly payments for borrowers at “imminent risk” of default. Banks can lengthen repayment terms, lower interest rates to as low as 2 percent and forbear outstanding principal, among other methods.
Bellomo admits there are probably a large number of loan modification applications waiting attention, but compares it to the time required for a well-qualified person to get a loan -- about 30 days. Modifying a loans, he said, can take months.
“And you can lose more money in foreclosure than in loan-modification, but the banks don’t really follow that logic,” he said.
According to data compiled from California's county records in 2008, 241,093 properties were foreclosed on with combined loan value of $103.9 billion -- averaging $464,270 each. The average California home in 2008 sold at $283,624, which translates to lenders realizing a 38.9 percent loss through each foreclosure -- $43.5 billion in total losses. If only 45 percent of these foreclosures were prevented with loan modification, lenders could have saved more than $19.5 billion in California alone.
“Now all the banks have gotten their money from the government and are back on solid ground. Dealing with the banks every day and knowing all the taxpayer money they got, the banks should be doing more,” he said.
According to a recent report from Bloomberg media, some of the largest U.S. mortgage servicers may rank among the worst performers in modifying loans when the U.S. Treasury reveals how much assistance banks have offered to distressed homeowners.
Among the 31 companies participating in $75 billion loan modification program are big-hitters like players as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. Citigroup and Bank of America each received about $45 billion from TARP, while Wells Fargo took $25 billion.
Chase spokesman Gary Kishner said his company had approved 171,000 trial modifications since April 6. He wouldn’t reveal how many applicants JPMorgan Chase & Co. had received, but said the company —which received $25 billion in TARP funds — was reviewing an additional 164,000 applications for modified loans.
Bank of America modified 150,000 loans through other programs in the first half, a spokesman for the Charlotte, North Carolina-based company.
“Our efforts have been going on since 2007 and since that time we’ve committed to keeping 650,000 families out of foreclosure,” Kishner said. “It’s not a new thing to us. We’ve worked with the Obama administration hand-in-hand to make recommendations with programs and provide them information from the field.”
He said besides adding more than 3,500 employees to handle loan modifications, Chase has created 27 mortgage centers nationwide, including one in La Mesa. There, homeowners can eliminate handling their case over the phone and get individual attention. Additionally, he said, Chase promises to report back to mortgage center customers within 14 business days whether or not their loan modification was approved.
“Our goal is to put people as quickly through the process as possible. I hope people understand that we’re doing everything in our power and that there are a lot of people in need of help. We’re doing what we can, but it’s not just a blanket process. Each case is looked at individually and that can take time,” Kishner said.
“We have no incentive to keep someone’s house. We’re not in the homeownership business; we try to keep people in their homes.”
After the HOC home clinic, the Mosers said they felt encouraged. They had discussed several options with housing counselors and actually learned about some potential solutions they hadn’t heard of.
The main thing, they learned, was work directly with the lender. “Apparently that’s one of the biggest things people don’t do is work directly with the lender, find out what the lender can do for them,” David said. “A lot of people just lose their homes because they think the lender’s after them. They don’t think they’re willing to work with them.”
Soon after the clinic, the Mosers prepared a loan modification proposal for their lender, Aurora Loan Services. In it was a hardship letter, outlining the events which have caused the difficulty, their financial statements, pay check stubs, W2 forms, tax returns and bank statements. At first, Rawan said, it the lender gave her the runaround -- saying the packet was incomplete initially -- but finally a date and time were set to discuss the Mosers’ proposal.
It was over the phone the couple learned that Aurora -- who has received $798 million in TARP funding -- had rejected their plan.
“They said our financial future looked too uncertain,” Rawan said, adding Aurora had given them permission to seek a short sale.
Undaunted, Rawan said she and Dave will head back to the Housing Opportunities Collaborative’s next session with the new information. “We’re not giving up that easy,” she said.
