Community groups offer help to foreclosures

By Melissa Wirkus

The amount of foreclosures and mortgage delinquencies are expected to increase considerably during the next couple of months as certain mortgages begin to “reset,” causing much higher payments for a number of home owners.

These loan products, known as adjustable-rate mortgages, offer a very low fixed-rate for a certain period of time, and then the rate adjusts to the current market standards, leaving people with monthly payments that are sometimes double or triple what they were used to paying in the very beginning. Now, analysts are predicting there to be an increase in foreclosures because of these facts, which is bad not only for the homeowner, but for the lender and community as a whole as well.

But now, lenders are finding that community groups are offering help to get homeowners out of trouble.

A November 1, 2006 article by Lingling Wei of The Wall Street Journal, “Lenders get help to prevent foreclosures,” looks into how various community groups from across the country are doing their part to prevent foreclosures.

“Mortgage lenders are finding themselves a strong ally in preventing foreclosures: community groups. Consider East Side Organizing Project, a Cleveland neighborhood organization founded more than a decade ago to focus on improving local schools. J. White, among hundreds of other local residents, credits the group for preserving homeownership in the community by serving as a liaison between financially strained borrowers with their mortgage lenders.”

White started to fall behind on his mortgage payments after he was duped into getting into an adjustable-rate loan he really didn’t understand and ultimately could not afford. White contacted the Department of Housing and Urban Development (HUD) and the East Side Group, and the group eventually found a lender who would lend them some money and brokered a deal that helped them pay off their mortgage, thus saving their house. “Amid rising mortgage delinquencies and defaults, community groups like East Side, together with some nonprofit housing counselors, are becoming valuable to financially stressed homeowners to battle against foreclosure. A powerful tool in their arsenal, says Mark Seifert, executive director at East Side, is the fact that ‘contrary to the common myth, the lender loses, too, when someone goes to foreclosure.’”

The biggest element of this foreclosure problem is that many people are too scared to reach out to their lender to get help. Lenders do not want people to go into foreclosure; so most of the time they will do a lot to provide a solution to the problem.
After all, according to a study by the Federal Reserve, a foreclosure can cost a lender anywhere between 30 to 60 percent of the outstanding loan balance because of all the fees and interest lost.

“Foreclosure prevention has proved challenging for borrowers and lenders. Delinquent borrowers may feel too wary of creditors to reach out to them, while lenders often find borrowers hard to reach. That is where community groups and nonprofit housing counselors come into play.”

People are much more likely to contact a community group or housing counselor as opposed to their lender, because it is a common misconception that lenders won’t do anything to help.

So if you find yourself facing foreclosure, act quickly and you should be able to work something out with the various resources that are available to you.

Back to Articles