Massachusetts struggles with mortgage payments
Problems reflect unemployment, lower wages, and high subprime interest rates
Tens of thousands of Massachusetts property owners are living in their homes without making mortgage payments as they fight foreclosure, plead with lenders for loan modifications, or simply take advantage of free housing while awaiting eviction.
About 36,000 borrowers statewide have not written a mortgage check in at least three months, and one-third of those borrowers are a year or more in arrears, according to the most recent data from Lender Processing Services Inc., a Florida company that collects mortgage data nationwide.
Most homeowners fail to pay their mortgages because they are out of work, have had their wages cut, or are saddled with ballooning interest rates on subprime loans, housing advocates say. Some abandon hope of ever catching up, staying put for months - sometimes years — while lenders slog through the increasingly long process that leads to foreclosure.
“We have bank tenants that have been in their foreclosures after a number of years,” said Melonie Griffiths, a community organizer with City Life/Vida Urbana, a Jamaica Plain nonprofit that works with tenants and homeowners in foreclosure. “Some people slip through the cracks.”
Housing advocates say the extended time it takes to foreclose upon a property and evict someone gives homeowners an opportunity to save their homes or put away money to rent an apartment, and prevents neighborhood blight by reducing the number of abandoned properties. But economists worry the unresolved ownership of so many properties will imperil an already fragile real estate market.
Paul S. Willen, senior economist with the Federal Reserve Bank of Boston, said a third of owners who are 60 days late on mortgage payments remain delinquent two years later. To help the housing market rebound, he said, foreclosures have to take place faster.
“There is a compelling public need for an efficient foreclosure process,” Willen said.
Kevin F. Kiley, executive vice president of the Massachusetts Bankers Association, said that the timeframe for forecloses has gotten longer as lenders grapple with new requirements meant to help troubled homeowners. The industry needs to find a way to better differentiate between borrowers who can be helped and those who won’t ever be able to afford their homes, he said.
“The process has been extraordinarily lengthy, and now it is getting longer,” Kiley said. “It continues to be a drag on the real estate market.”
At the same time, public ire about the way foreclosures are conducted has mounted following admissions by major lenders that some employees signed thousands of legal documents without reviewing the paperwork, and court rulings showing some banks unlawfully seized homes. As a result, sympathy for delinquent homeowners has increased, with more being viewed as victims of predatory lenders rather than deadbeats. Attorneys general in all 50 states are investigating allegations of sloppy or fraudulent foreclosure practices.
Some of those who are struggling to save their homes are now feeling more anger than shame about not paying their mortgage.
Richard Zombeck, 47, said he and his wife stopped making payments on their Salem home about eight months ago after a dispute with the company that services their loan. Zombeck said the company, Ocwen Financial Corp., notified them that they had been approved for a permanent loan modification but would not provide written proof. He feared that without that documentation the lender might one day seize the house they bought in 2006 for $360,000.
Ocwen representatives said they could not discuss the Zombecks’ case due to privacy reasons, but added that they work hard to help homeowners avoid foreclosure.
The Zombecks’ financial problems began more than two years ago when their interest rate was about to reset to 11 percent, making their monthly payments unmanageable. At first, Zombeck was embarrassed by his predicament, but after hearing stories about predatory lenders and foreclosure problems, he went on the offensive. Zombeck started a website, www.ShameTheBanks.org, which features stories from homeowners in trouble. He also hired an attorney and is demanding that Ocwen reduce his mortgage payments.
“The majority of people aren’t looking for a free house, they are looking for a fair deal,” he said. “You come home every day expecting to be evicted. There is not a lot of joy in this.”
In Massachusetts, it takes an average of 583 days between the time a homeowner defaults on a loan and a property seizure, according to Lender Processing Services. That’s partly because of a new state law that gives homeowners up to 150 days to resolve their financial issues before a lender can even begin a foreclosure. Homeowners can spend months negotiating for a loan modification, spending hours on the phone with various bank representatives and repeatedly filing documents that banks often claim have been lost, housing advocates say.
The number of serious delinquencies is down from a peak of about 50,000 early last year, but remains a serious problem that is not likely to be resolved soon.
“Most of the folks I know tried up to the very last minute of the foreclosure to get someone at the bank to listen to them,” said Grace Ross, coordinator of the nonprofit Massachusetts Alliance Against Predatory Lending, with offices in Worcester and Dorchester. “They have offered to pay the bank and the bank won’t take their money. It is the bizarrest thing — you have someone on the edge of tears because no one will take their money.”
Lenders say they try meet the needs of troubled homeowners, providing them alternatives to foreclosure.
“The system needs continuous improvement, but there’s never been more resources to counsel people,” said Faith Schwartz, executive director of Hope Now, a group that is made up of banks, other lenders, servicers, and nonprofits that focuses on heading off foreclosures.
“The customer experience is a big deal and it needs to get better,” Schwartz said. “We are working real hard on that.”
Some homeowners say banks actually require them to stop writing checks before they will consider renegotiating a loan. Nantucket homeowners Venessa and Richard Moore quit paying their mortgage in September after Chase Home Finance LLC told them they didn’t qualify for financial help because weren’t at least 60 days behind.
The couple sought to have their 6.8 percent interest rate reduced after Venessa’s part-time house cleaning business faltered. They wanted to refinance, but the mortgage company told them to apply for a loan modification, Venessa said. They were told in September they couldn’t get the modification because they were current on their monthly payments and had sufficient equity in their property to refinance.
They couple asserts that despite what the bank said, they have no equity. In addition, their credit is damaged because of the months of delinquency and — before that — credit card debt they accumulated while making mortgage payments.
Venessa Moore, 39, said she and her husband just want a break from Chase.
“I want the bank to work with me,” she said. “Why would they not lower my rate?”
Chase spokesman Thomas Kelly said the company is in touch with the couple through their attorney. Chase will approve a loan modification for homeowners facing a difficult financial situation even if they are not behind on their loan, he said, and does not recommend homeowners stop paying their mortgages.
Other homeowners with financial difficulties say lenders have denied their requests to temporarily make partial mortgage payments. Eugene and Yvonne Dumas of West Newbury, for instance, said they stopped paying their mortgage last year after exhausting their savings and other financial assistance after they were laid off from their jobs in 2007 and 2008. They tried unsuccessfully to persuade GMAC Mortgage LLC to modify their loan and also offered to make up several months of payments, but said they were rejected.
“They said, ‘Don’t send any money in,’” said Eugene. “There was no way you could get caught up.”
GMAC officials said the Dumases didn’t qualify for a loan modification because their income was too low to cover even reduced payments. Lenders generally shy away from partial payments if it appears unlikely a homeowner will ever be able catch up, said James Olecki, a spokesman for GMAC Mortgage, a subsidiary of Ally Financial Inc.
“If you don’t qualify for a loan modification or another workout solution, generally a partial payment would not be acceptable,” said Olecki.
Nonetheless, the Dumases are battling to keep their home while they search for new jobs in sales. They are hoping to apply for a federal program that helps unemployed homeowners. The uncertainty keeps them in a constant state of stress.
“We don’t know what is going on,” Yvonne said. “We are in limbo.”