Lenders, homeowners reach out to solve mortgage troubles

For Darrell Logan, 2008 has been the most difficult year of his life. An unyielding series of financial setbacks have culminated in the Queen Creek homeowner, along with his wife, Donnique, and their four children, falling behind on their mortgage and hoping that their lender, Washington Mutual, will give them a break and not rush them into foreclosure.

Foreclosure’s consequences not always understood

"What I hope will happen is that they would be understanding and try to work out something ... and give us a little chance to get back on our feet," Logan said. "I'm just looking forward to some type of modification or something like that, which will give us time to get back to where we were."

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All across the East Valley, distressed homeowners are on the verge of losing their homes, and there are already roughly 40,000 foreclosed homes in Maricopa County.

"I believe we're going to continue to see more foreclosures occur for at least the next 12 months," said Andrew Loubert, vice chairman of the Arizona Foreclosure Prevention Task Force.

"If you look at some of the Arizona data as to the cause of default, almost half was either a loss of income or a reduction of income into the household. That tells me it's less about decisions or the loan product they have and more about the economic condition of the marketplace."

According to RealtyTrac.com, foreclosure filings - default notices, auction sales notices and bank repossessions - were reported for 13,511 homes last month in Maricopa County, or one in every 110 homes.

One of the biggest problems has been homeowners waiting too long before contacting a lender or counselor, and therefore limiting their options, Loubert said. Homeowners are starting to seek help earlier, and lenders are being more proactive in reaching mortgage holders before they're in too deep, "but it's still a mess," Loubert said.

OBSTACLES MOUNT

Things were going well for the Logans when they moved from Compton, Calif., in July 2007 and purchased their Queen Creek home in October 2007. Darrell is a counselor at the University of Phoenix and Donnique was a special education assistant with the Chandler Unified School District. They also owned a home in Compton and chose to rent it after they left.

"(The tenants) were doing OK with the payments in the second half of 2007, but, starting in January, they just weren't making payments consistently and then they stopped paying," Darrell Logan said. "So we basically had to use our savings to make up for the payment. Even when they were making payments, we still had to pay $500 extra to make up what they weren't paying in rent, so that put us in a bind."

Donnique Logan then lost her job with the school district while pregnant with their fourth child.

"In August, she got a job at a day care, and then ... in October she has the baby and now she's on maternity leave with no income coming in," Darrell Logan said. "At the same time, we're paying lawyers to evict these people out of our house ... and they just got out of the house on Nov. 12, but the house then foreclosed on Nov. 12. So it just hasn't been a good year at all."

The couple made partial mortgage payments in September and October, and then received a packet from Washington Mutual inviting them to sit down and explain why they fell behind on their mortgage. Last week, Darrell Logan was among several mortgage holders who met with a WaMu representative at the Housing Our Communities office in downtown Mesa.

"What I hope would happen is that the lender will be understanding," he said. "If you just look at our record over the past year, up until September we've been diligent about making our payments. We've been honest, we haven't tried to hide from anybody."

TRYING TO FIND HELP

The Housing Our Communities office in downtown Mesa is constantly swamped with calls from panicking homeowners, many of whom already are on the brink of foreclosure. The nonprofit organization helps spread affordable housing awareness.

"Sometimes there are options for them and sometimes there aren't," said Graciela Hernandez, bilingual housing counselor.

The Arizona Department of Housing has fielded more than 8,000 calls since the Arizona Foreclosure Help Line's inception in late May, said Fred Karnas, department director.

"There's a national hot line also and people who just call directly the counseling agencies or show up at the door, so that 8,000 only represents a subset of the sheer number of people who are trying to find help," he said. "It's been more of a challenge than I would have hoped it would have been to keep track of this."

Hernandez sits down with distressed homeowners, examines all of their financial information and determines likely options. She communicates with many different lenders and knows "what they're looking for."

"Sometimes it may be a matter of just readjusting the budget and figuring out how to prioritize and make sure that mortgage is made first," she said. "But other times, we find out that they have a negative cash flow at the end of the month where it's no longer affordable. If there's an option that we can work out ... then at that point we would submit to the lender a financial packet and wait for their response to see if there is an approval on the loan modification."

BANKS PROVIDING OPTIONS

Among the banks, JP Morgan Chase, which acquired Washington Mutual, and Wells Fargo say they are stepping up efforts to work with mortgage holders and intervene earlier.

"Our loan modification effort began early in 2007, and records show we have helped about 250,000 customers nationwide," said Mary Jane Rogers, Chase spokeswoman. "With our new program, the enhancement to our loan modification effort, we are targeting an additional 400,000 families to help them stay in their homes and make it more affordable to do so."

Chase is adding 300 telephone counselors around the country, and will be opening 24 regional counseling centers, including one in the Valley, where mortgage holders will be able to bring in their paperwork and talk face to face with a loan counselor, she said. "We will not be adding any new mortgage loans into the foreclosure process," Rogers said.

Carolyn Mitchell, community development manager at Wells Fargo, said the bank has been "proactively and aggressively" reaching out to customers who are having a tough time with their mortgages. "We've staffed up our loan servicing departments and we've created numerous dedicated hot line numbers, including a hot line number for nonprofit housing counselors," she said. Wells Fargo has been warning adjustable rate mortgage holders before their interest rates reset, Mitchell said.

"We have been successful in reaching 94 percent of our borrowers who have problems with delinquencies," she said. "We find that the sooner we begin communication and contact with the borrower, the more successful the outcomes tend to be."