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.
Categories: The foreclosure mess
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Comments
hahaha there is no way they can pass a bill requiring the new deed information to be recorded in 60 days. They'd have to hire more people for the courts, the courts are sooo far behind. The State Dept of Assessment & Taxation is really behind too. It was 6 months before my name showed up. I follow foreclosures & in some cases it takes months to get a sale ratified & each county is different procedure wise. Besides I've seen foreclosure cases dismissed or the report of sale withdrawn after the ratification, that is a recording nightmare.
I think thats great if the first poll shows 60% of the owners are still owning their home, but it doesn't show how this was accomplished. Two jobs, 3 extra roommates, bankrutpcy? That would really be the telling sign of the program.
Posted by: Pigtown girl | June 29, 2011 8:32 AM
It's clear that St. Ambrose is a committed bunch and doing a good job--the fact they did a follow-up analysis shows they care about their work. These days, that's rare. So good on them for that, seems like a good contributor to the community.
On the other hand, if the average purchase was in 2002 for 68k, then this is about what you'd expect. What's the monthly mortgage payment on a 68k house? Even with insurances and tax, it's probably around 750-800 dollars. So these people aren't likely to be as affected by the loss of a job. You could make enough money to pay that sum with a very modest job or even with 2 people working minimum wage jobs.
These houses are probably smallish, with reasonable utility bills. Again, this is different from the truly troubled foreclosures higher up the food chain. It's a lot harder to save a 500k house with 2500 sq ft from foreclosure after a job loss and the economy going sour... Making those payments requires a good job, which is hard to find in a bad economy and which may requiring moving... which the homeowner can't do if he/she can't sell... so things really start snowballing
Posted by: chappy10 | June 29, 2011 12:25 PM
It's good to see St. Ambrose helping people to help themselves.
I would add that there IS a control group: it's the vast majority of homeowners who have not had any problems paying their mortgage. Maybe Jamie could find out the percentage of mortgage-holders in Maryland who have had not problems meeting their obligations.
I was frugal and didn't do a 6-figure cash-out-refi when the going was good in the mid-2000s. As a result, I have a low mortgage and had no problem meeting it even when I wasn't working full-time.
Posted by: Anonymous | June 29, 2011 1:40 PM
Hi, Anon -- remember that the control group St. Ambrose would need, if they want to figure out whether housing counseling helps people in trouble avoid foreclosure, is ... people in trouble, but those who didn't seek counseling. People who didn't get into trouble -- whether through frugality or good luck -- are a different group altogether.
But studies looking at what typifies these various groups would be interesting, too.
Posted by: Jamie Smith Hopkins | June 29, 2011 1:51 PM
The point still remains that these houses were bought before no-doc, no downpayment, and "teaser" or "negative amortiation" loans were in vogue. In the middle of the decade, these mortgages became a big chunk of the market. Also, prices increased a lot between 2002 and 2005/6/7.
Permit me to give an example using round numbers...
If you paid 100k for a house in 2002, it was probably "worth" 150k in 2007 and hence worth doing whatever extreme measures were needed to save it.
By contrast, if you bought that same house in 2007, you likely paid 150k for it and made the purchase with little or no money down. Therefore, you had much less to lose by walking away AND it also made much less sense to keep paying the mortgage on a house that was now worth way less than you owe.
The other fact you have to remember is that people often took additional steps to re-fi their houses and pull out equity... so you had homeowners who had lived in a home for 5 years, probably didn't truly have the income they stated on their mortgage app, and who re-fi'd once or twice to take money for vacations, etc. Likely carried credit card balances and had loans for their automobiles... many of these people were irresponsibly taking risks. And even if they weren't, they were so far underwater and possibly had lost a job, so even if they wanted to fix things, they'd be unable.
Basically, mid-2000s created a completely different type of irresponsibility than had been seen in the housing market in our lifetimes.
Posted by: chappy10 | June 30, 2011 3:00 AM
Sure, chappy10 -- I wasn't arguing with your earlier comment. (I hope that was clear.)
By the way, St. Ambrose didn't give a figure for the purchase price (or date) of borrowers who are still in their homes, just those who sold or fell into one of the foreclosure-related categories. That would also be interesting to know.
Posted by: Jamie Smith Hopkins | June 30, 2011 9:13 AM