A window into what happened to borrowers who got into trouble in '07
St. Ambrose Housing Aid Center in Baltimore saw more than 1,000 homeowners trying to avoid foreclosure in 2007, the first year of the long-running crisis. What has become of them since then, staffers wondered?
It's not at all an easy question to answer. Some borrowers came for advice but opted to work with their lenders on their own. Others disappeared mid-stream without explanation. Still others got loan modifications or other help through counselors' efforts, but St. Ambrose didn't know if those resolutions were really the end of the story -- a lot can change in a few years.
Leaders at the nonprofit housing-counseling group decided to sift through public records to try to figure out what happened. They were buoyed by the results, announced a few days ago.
Land records suggest that 60 percent of St. Ambrose's '07 class of struggling borrowers still owned their homes as of December, the nonprofit says. An additional 10 percent sold their homes for more than they paid, which St. Ambrose also counted as a win compared with foreclosure.
Twenty-four percent fell into categories St. Ambrose counted as negatives -- foreclosure, short sales and deeds-in-lieu of foreclosure. (Short sales and deeds-in-lieu are often characterized as better than foreclosure for borrowers, but the nonprofit thinks the main beneficiary is the mortgage holder.)
Data errors prevented St. Ambrose from determining the state of the remaining 6 percent of properties.
Mark Benson, special assistant to the executive director at St. Ambrose, thinks that's a good track record and a sign that foreclosure-prevention counseling helps borrowers. But he's quick to acknowledge two issues that make it harder to draw absolute conclusions from the study.
St. Ambrose determined property ownership by property records -- the state Department of Assessments and Taxation's searchable database. That ought to be just fine, but one of the challenges of foreclosure is that the bank (or mortgage-backed-security investor) doesn't necessary show up as the new owner soon after repossessing the house.
At least sometimes, their mortgage servicer doesn't actually record the deed showing the property's REO status until the point that it's passing into the hands of a new, non-bank owner. (State Sen. Richard F. Colburn, a Republican from the Eastern Shore, sponsored a bill last session requiring deed recordation within 60 days of foreclosure ratification to address that issue. But the bill didn't make it out of the Senate.)
Now, if a homeowner was foreclosed on in 2007 -- or 2008 or 2009, for that matter -- the odds would seem pretty good that the deed would have been recorded by December of 2010. Benson said St. Ambrose staffers spot-checked the data, visiting 25 homes in one ZIP code to see if they were still owned by clients as the land records suggested, and were able to connect with the people or find clear signs of owner-occupation in every case except one.
But he said deed recordation delays certainly could "mask" ownership.
The other issue? Without a control group of people who didn't seek counseling help, it's difficult to say how St. Ambrose's clients might have fared if they went it alone. But Benson said another study comparing loan modifications found that homeowners working with counselors had better odds of landing a lower payment than homeowners without, so he doesn't think it's a stretch to conclude that St. Ambrose had an impact.
"I think it just supports the concept that housing counseling plays a role in helping people stay in their house," he said.
Either way, sometimes homeowners get help, get back on track and get walloped anew. Benson said one of the borrowers from 2007 explained that she was in financial difficulty again after two operations and the need to take in her daughter, who had been laid off.
"She was going to come back and talk with a counselor again," he said.
Some other findings of the study:
St. Ambrose clients who owned homes in the city were more likely to avoid foreclosure, a deed-in-lieu or short sale than homeowners outside the city.
Clients who lost their homes to foreclosure typically bought in 2006, near the peak of home prices. The median price they'd paid: almost $140,000.
Homeowners who were able to sell for more than their purchase price bought before things got particularly bubbly -- not surprisingly. The typical client in that situation purchased in 2002 for $68,000.