October 26, 2011

Help is on the way … out

Louisville’s foreclosure problem persists and support for homeowners dwindles

George Eklund grabs a packet of flyers, the keys to his 1992 Volvo and a list of a dozen homeowners who face foreclosure.

 

“Ready for awkward conversations?” he jokes as we head out on a sunny, summer afternoon.

For almost two years, Eklund has served as an outreach worker for the Foreclosure Conciliation Project, an effort to curb the hemorrhaging of homes being lost to foreclosure by arranging court-held conferences between lenders and struggling homeowners, the goal being loan modification.

In 2000, about 900 Jefferson County homes went into foreclosure. By 2010, that number shot up to more than 5,000.

Eklund, an affable, bearded, twenty-something, is one of five outreach workers going door-to-door with information for homeowners about free foreclosure clinics, as well as the process of modifying an existing home loan.

“A lot of people are scared when we come to the door,” he says as he drives toward Okolona. “They think you’re there to tell them you’ve lost the home completely.”

Some shoo him away. Others invite him in for coffee and send him off with hugs.

Eklund’s tires crunch the gravel driveway of his first home. A sleepy man opens the door.

“Hi, I’m George. I’m a volunteer for the circuit court,” he begins.

Eklund is meeting fewer victims of risky, adjustable-rate mortgages. Instead, he’s seeing financially strapped families in the midst of divorce, illness or unemployment.

Back in the car, an intersection catches his attention. He looks out the passenger window at a trilogy of modest brick homes.

“I feel like I’ve done outreach to one of those,” he pauses, spotting one with gnarled trees and boarded windows. “I bet it’s that one.”

The trip down memory lane is fitting given this is one of his last outings as an outreach worker for the Foreclosure Conciliation Project.

Over the last several months, programs set up to support delinquent homeowners have fizzled. Money, or lack of it, is mostly to blame. Congress has zeroed out dollars allocated for housing counselors. The grant that paid for Eklund and other outreach workers is gone. The Foreclosure Conciliation Project, meanwhile, never had the resources necessary to take off.

That lack of support won’t go unnoticed, not with what’s likely around the corner, says Ben Carter. He’s an attorney who helped advocate for the Foreclosure Conciliation Project.

For about a year, he says, banks have been reticent to file new foreclosures after the “robo-signing” scandal of 2010, in which banks admitted to signing thousands of foreclosure documents without any knowledge of what they contained. Carter says that hesitation is now gone.

“Or at least the cost of not pursuing foreclosure has outweighed any risk they perceive in proceeding,” he says.

On top of that, Carter points to a recent report by the Mortgage Bankers Association. It shows a nationwide rise in delinquent or late mortgage payments for the spring of 2011, a predictor for future foreclosure filings.

Louisville’s Foreclosure Conciliation Project was modeled after a program in Philadelphia. In 2008, a network of housing advocates, lawyers from the Legal Aid Society and members of the Jefferson County Circuit Court collaborated to become the project’s leaders.

Here’s how it worked: First, outreach workers contacted homeowners. Those who wanted to participate filled out a hardship packet and began working with a housing counselor. Ultimately, a conference was scheduled where a housing counselor or lawyer, often from Legal Aid, represented the homeowner. Lenders had their own attorney.

After the first year, outreach workers contacted about 800 homeowners, and 120 conferences were scheduled. About half of those ended with the homeowner remaining in their home.

This was not the impact proponents of the project had hoped for, especially at a time when Jefferson County had 400 foreclosure filings every month.

Enrolling homeowners in the program proved challenging for a number of reasons, one being the program’s structure.

In Philadelphia, where the program has had great success, once a homeowner receives a foreclosure notice, they’re automatically inputted into the conciliation project. If they choose to participate, foreclosure proceedings are suspended.

In Jefferson County, that’s not how it works. Foreclosure proceedings continue even if homeowners opt into the conciliation project, lessening its appeal. Jane Walsh is a housing advocate with the Network Center for Community Change. She helped create the conciliation project.

“What’s frustrating to me as an advocate is that because we’re not in the worst shape in the country, our opportunities (to fix it) are greater,” she says. “It’s been disappointing to me to see we haven’t been able to get this opportunity right.”

Edith Halbleib, Jefferson County’s master commissioner, deals with foreclosure filings. While it may be ideal to create mandatory conciliation conferences, she says her office doesn’t have the manpower or money to make it work on a large scale.

This past spring, around the time the Foreclosure Conciliation Project’s future seemed dubious, the federal government handed Kentucky a lump sum of $148 million to assist unemployed homeowners.

The Kentucky Housing Corporation’s Unemployment Bridge Program is a forgivable loan that provides a maximum of $20,000 or 12 months of assistance, whichever comes first, to those who’ve lost their job through no fault of their own and can’t pay their mortgage.

According to a spokesperson for the Kentucky Housing Corporation, 270 Jefferson County residents have taken advantage of the program since its inception in April. After a year, though, if the homeowner is still unemployed, they’re back to square one.

In the meantime, banks have gotten a year’s worth of payments without ever being required to sit down and work with the homeowner.

Participants are assigned a housing counselor who should help them pursue a loan modification. But it’s a difficult, time-consuming process. And housing counselors are dwindling. Congress cut out all federal dollars funneled to nonprofits for housing counseling.

In Louisville, the two agencies who provide that service, The Housing Partnership Inc. and Louisville Urban League, lost anywhere from 15 to 30 percent of funding.

“We will simply not be able to serve as many people as in the past,” says Lessley Wood with The Housing Partnership Inc., which lost seven positions, including four counselors.

Jane Walsh, of the Network Center for Community Change, gets frustrated just thinking about it.

“The bridge loan was conceived with the idea that housing counselors would help people through the process,” she says. “But the money for housing counselors is being cut. So it’s just a level of crazy from the feds, really.”

If there’s one man who embodies how helpful a counselor can be in staving off foreclosures, it’s Dan Farris. He’s helped hundreds of Jefferson County residents stay in their homes. Unfortunately, he’s retiring.

Farris may not look like a superhero, sitting in the unflattering light of the courthouse holding a Styrofoam cup of black coffee. But behind the gray sport coat and glasses is someone unafraid of wrestling with huge banks and, like most superheroes, willing to keep the door open if duty calls.

“I really am passionate about staying involved with homeowners and trying to help out,” he says. “So I want to do that as a volunteer as long as I can.”

Farris is in the courthouse coffee shop after a meeting where he announced his retirement from The Housing Partnership. It’s where Farris, a trained mediator, worked as a housing counselor for three years doing the difficult, grunt work of loan modification — collecting tax records, pay stubs, sitting on hold with Chase or Bank of America for hours.

Farris sat in on most of the Foreclosure Conciliation Project’s conciliation conferences, largely due to decades spent in real estate and a wealth of institutional knowledge.

“Dan’s the man,” Walsh says. “It’s a big loss.”

It’s the sum of all the losses that concerns Walsh: Farris retiring, outreach workers no longer around to personally inform homeowners about free legal assistance, housing counselors disappearing. At the heart of all this, she says, are vulnerable homeowners up against Goliath.

“They’re being sued by some of the biggest institutions in the nation, in the world really for some, and they have no representation,” she says. “The homeowner is kind of hung out to dry.”