Wednesday, September 3, 2008

The Face of Foreclosure

The Smith family (not their real name) just walked out of my office. I spent the past two hours trying to find a way to help them purchase a home. Sam Smith is a retired Veteran with available V.A. mortgage benefit. Sam and Susie live with their daughter Sarah in her home.

About eighteen months ago, Sarah was involved in an automobile accident in which the other driver was at fault. This driver falsely claimed to have insurance. She also gave Sarah the wrong address and phone number. The uninsured portion of Sarah’s automobile insurance covered most of her medical expenses (over $30,000) but there was still a sizeable amount left for Sarah to pay. For the eighteen months following the accident, Sarah was unable to work.

Two months before the accident, Sam received a small inheritance from his uncle. For the next several months Sam and Susie used this money to continue paying all of the house payment, utility bills as well as the rest of Sarah’s expenses. Susie stayed at home helping Sarah while Sam continued working. Needless to say, the money ran out long before Sarah was able to go back to work.

May 2007 was the last payment that was made. Sam’s $1,500 a month income was completely inadequate to cover the $1,400 a month mortgage payment as well as the utilities, food, gasoline and other household expenses. To make matters worse, Sarah learned that her mortgage had an adjustable rate. After the first year of fixed interest rate payments her payments would fluctuate every six months. Her $1,400 a month house payment would soon swell even higher.

Sarah contacted her loan servicer and told them of her situation and found them unwilling to offer much help. After two months had passed with no payment made, they began receiving phone calls and urgent letters. Sarah continued communications with the servicing company. After four months without making a mortgage payment Sarah received more urgent letters informing her that unless the payment was brought up to date or some other arrangements were made, foreclosure proceedings would begin.

Again Sarah contacted her loan servicer and attempted to make payment arrangements. The only solution she was offered was a repayment of the missed mortgage payments at a 15% interest rate. At the same time she would have to keep her ongoing mortgage payment current.

Sarah and her parents have contacted two attorneys who have made frail attempts to help. Finally they spoke with a realtor who recommended them to me for V.A financing. After running all the numbers, their debt to income ratio is well beyond the V.A. maximum of 41%. Susie is scheduled to begin work in October and the additional income her employment provides should put them in position to qualify for V.A. financing. Until then, the Smith’s live under the constant threat of the loss of their home.

Just two weeks ago, Sarah received a letter from the loan servicer that September 5th was the date scheduled for final judgment. They have little time and few options that will save their house.

The Smith’s are not alone. Throughout the metro area there are other families who have extenuating circumstances that are completely outside of their control that have affected life in ways that threaten their homes. There are not easy solutions to these problems. And when adequate solutions are finally made possible it may be too late for the Smith’s.

The Smith’s are without living relatives who could possible help. They have used all their reserves just to keep the home as long as they have. They have consistently communicated with their lender and have done everything within their power by earning an income while nursing their daughter back to health.

I didn’t enjoy writing this article. And I certainly didn’t enjoy not being able to provide an acceptable solution to the Smith’s situation. I did, however enjoy writing a lengthy letter on behalf of the Smith’s that they can take to Legal Aid in hopes of pushing out the loan servicer’s final judgment to sell their home in a sheriff’s auction.

I offer this article in the hopes that it helps every reader find more compassion and understanding for families who find themselves facing foreclosure.