Up To Bat In The Foreclosure Game

The Record ( — Sunday, February 8, 2009


Michael Esposito of Elmwood Park fell behind on his mortgage payments after he quit his job when an injury left him legally blind in one eye.

He and his wife, Marta, were in danger of losing their two-family home until Judy Brzuskiewicz, a counselor at the non-profit New Jersey Citizen Action, got their lender to accept $7,500 to wipe out a $65,000 second mortgage.

The lenders’ employees "really weren’t giving me any options until Judy got involved," Esposito said. "She really went to bat for me."

Counselors like Brzuskiewicz are stepping up to bat a lot these days, as a wave of foreclosure actions hit homeowners who put their houses on the line and piled up debt during the housing boom.

The federal government recently added $360 million in funding for foreclosure prevention counseling to its regular $50 million annual housing counseling budget.

Citizen Action, which has seven loan counselors, hopes to expand that number to about a dozen this year as the housing crisis continues. The non-profit has been certified by HUD to offer housing counseling for 13 years. A few years ago, that meant helping people buy homes with affordable interest rates. But now, most of the counselors spend their days trying to head off foreclosures. And the organization expects even more homeowners to seek help this year.

Citizen Action head Phyllis Salowe-Kaye said homeowners get into trouble for a number of reasons, including job losses, health problems and divorce. Many simply got mortgages or home equity loans that they should never have gotten.

"There’s the economy and there’s the loan and then there’s their personal situation," she said.

In the best scenario, the loan counselor can renegotiate the mortgage to obtain a lower interest rate or even have some of the principal payments forgiven or added to the end of the mortgage payback period.

But in more than half of cases, the housing counselors can’t help the homeowners keep their homes, Salowe-Kaye said. The houses end up being turned over to the lender or sold to cover the mortgage debt — sometimes in a short sale, for less than is owed to the lender. Many end up in foreclosure.

A recent afternoon at Citizen Action’s office in Newark revealed how the counselors try to guide distressed homeowners and negotiate with lenders.

In one room, counselor Michael Thurston sat across the desk from Daniel Biggs and Denise Vines, who bought their Irvington house in 2005 with no money down and two high-rate mortgages. They fell behind on their monthly payments after Biggs, a truck driver, found himself driving fewer miles when the economy slowed and gas prices soared in 2008.

"The money just wasn’t there to be made," he said. In good years, he can earn $45,000 or more, but now is making about $40,000.

Thurston, a genial man with a shaved head, told the couple they need to write a hardship letter to their lender, explaining the reason for their troubles and "how you propose to correct the situation."

"We also need to work on that budget," he said. "We’ve found out that a lot of people are still living with their wants instead of their needs. You know what your needs are; put your needs first."

Thurston has clients figure out their income and spending so he knows what they can realistically afford to pay for housing. Only then can he ask a lender to cut them a break.

Thurston said he planned to call Biggs’ and Vines’ lender and try to negotiate a lower interest rate, a stretched-out loan or some other solution that "both parties can live with," he said. The couple’s first mortgage is for 7.5 percent and their second mortgage is for 12.5 percent.

"Many times I ask for an interest rate reduction," Thurston said. "You ask for everything; you take what you can get."

Many of his clients, he said, have lost their jobs or are underemployed. Those are difficult cases, because simply asking for a lower interest rate or restructured mortgage usually isn’t enough.

"If you’re unemployed, regardless of what your interest rate is or whether it’s an adjustable-rate mortgage, you can’t pay it," Thurston said.

"It’s extremely difficult to negotiate with a mortgage company when you have no means of repayment."

In the office next door, Brzuskiewicz was advising a young woman to get her ex-boyfriend’s name off the deed before she does anything else to try to salvage her condo.

The woman, who asked that her name not be printed, tried unsuccessfully to sell the condo after the breakup, and then fell behind on mortgage payments.

Brzuskiewicz warned her that having her ex listed as a part owner of the property could leave her at risk of losing it if, for example, the ex is sued after an auto accident.

After that is taken care of, the counselor said, she can ask the lender to reduce the interest rate from 6 percent to 5 percent, at least temporarily.

"It might not be for the life of the loan," Brzuskiewicz warned the client. "It might be three years, but that might be enough to ride out this economy and get some equity in the home."

Back in Thurston’s office, Biggs and Vines had departed. Welder Manuel Couras, 54, was describing the job loss that put his two-family Linden house in jeopardy. He also lost rental income when he decided to renovate one of the units.

As Thurston led him through a budget worksheet, he asked: "Any doctor visits?"

"I can’t afford doctors," Couras said. "I had a heart attack and two catheterizations … I can’t afford medicine. You’ve got to die sometime."

"Yeah, but you don’t want to jump in front of a bus, either," Thurston told him.

Although Couras has gotten another job after being laid off, the new job pays less, he said. He asked his lender to give him a four-month break from paying the mortgage while he finished the home renovations, but the lender didn’t agree.

He is more than a year behind on his mortgage payments and has stopped renovating the house because he doesn’t want to do a lot of work if he is going to lose it. As a result, he can’t rent out the apartment.

Thurston urged Couras to return with a completed budget and "every piece of paper you have" related to his foreclosure issues.

"That’s going to give me a pretty clear picture of what’s going on here," Thurston said.

Couras scheduled a time to return for more help. As he got ready to leave the Citizen Action office, he said, "Let’s see what the man can do."

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