The Milan News-Leader
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Step away from the edge
Mortgage help available in Washtenaw County
By Edward Freundl, Heritage Newspapers
PUBLISHED: April 24, 2008
While the home mortgage crisis may be much worse in many parts of the nation, Washtenaw County has not escaped that dark economic cloud.
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Fortunately, help is as close as your telephone.
"My message is, 'Please call us because we will try to help,'" said Washtenaw County Treasurer Catherine McClary.
"We want people to call us as early as possible. The earlier you call, the more opportunities we have to help you."
McClary's first piece of advice for people who have fallen behind in mortgage payments is simple: "Be proactive and don't wait."
"Also, please call your lender," she urged. "That's sometimes harder to do, but it's really important to talk with lenders."
McClary advised that when you do call the lender, make sure you end up in the right place — and don't be afraid to state your case.
"When you call their 800 number for customer service, you just go into a voice mail queue, but you need to talk to their loss mitigation department," she said.
"Sound confident, and be insistent that you need to speak with them."
Even before the mortgage mess was making national headlines, McClary's office entered into a partnership with local agencies to offer assistance to homeowners who find themselves facing the possible loss of their home.
"My office doesn't do this alone. I put together a partnership many years ago before this ever became a crisis," McClary said.
"We work very closely with a lot of community agencies, and became a partnership to help people avoid foreclosure."
The other members of the coalition are MSU Extension-Washtenaw County, the Housing Bureau for Seniors and Legal Services of South Central Michigan.
There are two types of foreclosures: tax foreclosures, when the homeowner falls behind in property tax payments and mortgage foreclosures, when monthly mortgage payments are missed.
Although people may not be aware that the two situations can have very different outcomes, McClary said, the partnership can help in either case.
"If a person has delinquent taxes, they should call me, regardless of whatever else is going on. If they are 55 or older, we have special programs for them," McClary said.
If they are facing mortgage foreclosure but don't owe delinquent taxes, they would work with MSU Extension. Legal Services would get involved with anyone who has a "mortgage rescue scam" or predatory loan, she said.
"This partnership has been fantastic," McClary said.
The road to foreclosure has some pretty clear signposts, spaced at different intervals. The further down that road you go, though, the harder it is to turn around and end up in a good place.
Tax foreclosures are easier in Washtenaw County, McClary said, because much of it can be handled through her office.
"We have sole authority and responsibility to collect taxes and do foreclosures," she said.
"There's a lot we can do because it's under my control."
McClary said her office will work with businesses and individuals to come up with payment extensions, payment plans, automatic payroll deductions, credit cards or a referral to the University of Michigan Credit Union for free, independent and confidential credit counseling.
A mortgage foreclosure is not so simple because much of it is out of McClary's hands.
"For mortgage foreclosure, it's harder because there are so many people that are part of the process," she said.
If you are late one month, the lender might call you, she said, and the second month you'll get both a phone call and letter asking for payment,
"But the third month you miss, you'll get the phone call, a letter and a 'demand' letter, which is actually the start of the foreclosure process," McClary said.
Some people are in the doubly unfortunate position of facing both tax and mortgage foreclosures, she noted.
"We help them write their hardship letters for the lender -- we help them through the whole process," McClary said.
There are two ways to foreclose on a delinquent property:
In a judicial foreclosure, the lender goes to circuit court and sues for foreclosure, a legal proceeding that most states require.
But Michigan law also allows the practice of "foreclosure by publication."
"All the mortgage company has to do is publish their intent to foreclose in the Washtenaw County Legal News for four consecutive weeks, and they can foreclose," McClary said.
"They have a 'sheriff's sale' every week in the lobby of the county courthouse, and the bank or lender gives a deputy a list of properties they want foreclosed.
"Once it reaches that point, all of your options, even to sell the property, are gone. The bank owns it," McClary said.
Once that happens, she said, the person has the right to live in the home and try to redeem it for up to six months. But if they go beyond that time frame, the bank can initiate the eviction process.
If the lender agrees to a switch from an adjustable to a fixed rate mortgage, McClary's staff can help the homeowner through it.
"After a financial analysis, if they have a situation that they believe is sustainable, we'll go to bat for them with the lender," she said.
"We explain what they have to do, we get the lender — and the investors who bought the mortgage on Wall Street — to agree to a change the terms of the mortgage loan."
McClary was proud to report that her office has successfully completed 40 of those agreements since the beginning of the year.
Sometimes, though, the reality sets in that nothing further can be done.
"In the case where the mortgage is unsustainable or the lender won't agree to a workout agreement, we have the Soft Landings program," McClary said.
"We work with people during that six-month period to help them say goodbye to their home, help them repair their credit, help them find housing and help them move on."
Foreclosures up sharply
Although there are no hard statistics showing how many homeowners are facing foreclosure in Washtenaw County, it is clear that the numbers are accelerating far faster than anyone anticipated.
McClary said property values are down on average about 7 percent across the county,
"Every area has been hit. Not a single township has escaped this," she said.
"It has tended to start in our urbanized areas, but the biggest foreclosures we're seeing are in the townships that were being developed at the height of the boom at the turn of the century."
McClary said the number of mortgage foreclosures initiated by first notice published in The Legal News was 1,433 in 2006 and 2,194 in 2007, a jump of 53.1 percent.
Worse, the number from Jan. 1 to March 31 of this year was 601, or rate of more than 2,400 by the end of the year.
The number of foreclosures that went the distance to end up as sheriff's deeds show an even steeper rise: 703 in 2006; 1,151 in 2007, an increase of 63.7 percent; and 355 from Jan. 1 to March 31, a rate of more than 1,400 by the end of this year.
These are just the numbers that have gone through the Washtenaw County Treasurer's office, McClary pointed out.
"Some are still pending, some of the people scraped together money from family or friends, or are doing their own workout agreements," she said.
Todd Koch, a Realtor with Preview Properties, said he and his wife, Holly, also a Realtor with Preview, "definitely are seeing a lot more foreclosures."
"I don't believe we've seen the peak of it, unfortunately," he said.
"I was hoping it would bottom out this year, but now I don't know. Maybe next year."
The state's morose economy is exacerbating the foreclosure situation.
"I believe we are in a recession," McClary said. "My feeling is the peak may not be this year, it may be next year, and by 2010 we'll be starting a little bit of a recovery.
She added that Washtenaw County residents may have believed they were "kind of immune to this, but we're not."
"We've had job losses here, and people are earning far less when they do find another job," McClary said.
"Economic downturns are a marathon, not a sprint; (people) need to be prepared to weather this out," she said.
"I'm not comparing this to the Great Depression, but there are elements that are the same, like the housing situation."
Koch said a growing majority of his practice has become handling the sale of REO, or "real estate owned," properties, both residential and commercial, that are going through one or another stage of he foreclosure process.
"Approximately three-quarters of the properties are REO or short sales," Koch said.
He defined a "short sale" as a price negotiated with the lender between the outstanding amount of the loan and what someone is willing to pay.
"Before it gets to the sheriff's sale, we go in and try to negotiate that deficit," he said.
Koch noted that this kind of transaction really should be handled by experienced professionals.
"Talk to somebody who has done short sales, and have a team of people available," he recommended.
"You need to hear from a variety of advisers: a banker, an accountant, an attorney. We can put a whole package together so the seller can make a more informed decision."
Chelsea State Bank President John Mann said his institution has been insulated from much of the problem because it didn't get involved in sub-prime mortgages.
"We're certainly affected, but we're largely untouched," Mann said. "Out of 500 properties, we have only three are in foreclosure."
Mann said Chelsea State Bank has a portfolio of $45 million in residential mortgages and home equity lines of credit, and about $70 million in commercial real estate mortgages.
"So we're a relatively big player," he said.
Mann's counterpart across the county at United Bank & Trust-Washtenaw, Regional President Todd Clark, said United has also escaped the brunt of the foreclosure crisis through a portfolio heavily weighted to commercial lending.
"We don't have many foreclosures at all," he said. "We were not in the sub-prime business, but we're definitely seeing the effects of it."
Within United Bank & Trust's commercial portfolio is a "much smaller portion" that is related to residential through loans to builders and developers, Clark said.
"We continue to work very closely with our borrowers," he said.
"There's more stress in the economy — we're local too, we understand the market and we're trying to be as proactive as possible."
Resisting the dark side
A particularly appalling side of the problem is unscrupulous operators who prey on troubled homeowners by seeming to offer them a quick and easy way out.
"There are a lot of scam artists out there," McClary said. "I've turned over a couple of incidents to the attorney general."
There are all kinds of schemes and scams being advertised in billboards, print and broadcast media, McClary said, which are best left ignored.
People are sometimes being asked to sign quit-claim deeds, she said, which is a transfer of legal ownership.
"People should never sign anything without having it reviewed," McClary warned.
McClary said the latest "rescue scam" starts with a letter saying a homeowner is behind in their taxes or mortgage — without any proof that is the case — and they offer to pay up all the taxes and pay the homeowner for signing a document that is included with the letter.
"That's a quit-claim deed, and when you sign it, you have just given up ownership of your home," McClary said.
She went on to describe a recent situation in Washtenaw County in which an elderly man signed a quit-claim deed to his granddaughter, thinking that she would take care of him and the house.
"But when the ownership transferred the home's valuation went up," McClary said.
"Since it was no longer an owner-occupied home, the taxes went up the additional 18 mills and his taxes went up $1,800."
Looking on the bright side
It's important to remember that the economy is cyclical, and all is not gloom and doom.
"In the overall market things are just slow. I'm confident that things are going to break loose," Mann said.
"There are a lot of people looking to move up — eventually home prices are going to get to a price where they can afford to move up, and we'll see some fluidity in the market."
Clark said he was "very encouraged" by data from the Ann Arbor Board of Realtors for the first three months of this year, showing unit home sales and average price of homes are relatively stable compared to the same period a year ago.
"All in all, I feel pretty optimistic," he said.
"We all just want to feel that the market is stabilizing, but there's a still a lot of inventory to work through."
That inventory consists of a lot of homes in the $300,000 to $400,000 range, Clark said, a casualty of the Pfizer plant closure in Ann Arbor.
Koch prefers to be optimistic about the future.
"If you want to call it a silver lining, whenever you have an event in the economy like we've seen, it presents opportunities," he said.
"There are great deals for first-time buyers, investors and buyers of income properties."
State lawmakers responded to the public outcry cause by the mortgage meltdown by passing a number of measures in March and earlier this month.
Gov. Jennifer Granholm announced March 4 that the Michigan State Housing Development Authority is slated to receive a $661,916 federal grant to support foreclosure prevention counseling efforts.
The funds will enable MSHDA counseling networks across the state to provide foreclosure counseling to homeowners in danger of foreclosure.
MSHDA's loans and operating expenses are financed through the sale of tax-exempt and taxable bonds and notes to private investors, not from state tax revenues.
"We want to help citizens facing foreclosure, and this program will help provide relief and other workable options to citizens throughout the state who are facing the possibility of losing their homes," Granholm said.
"Citizens who are facing foreclosure now or are worried about that possibility should call our toll-free hotline or visit the Save the Dream Web site."
In addition, Granholm on April 3 signed a 13-bill package that will help protect Michigan consumers from mortgage fraud and unfair lending practices by requiring the state's estimated 20,000 mortgage loan officers to register with the state's Office of Financial and Insurance Services.
"This legislation will help us to protect consumers against unfair lending practices, mortgage fraud and unlicensed mortgage activity," Granholm said.
"Effective regulation of loan officers is critical in our effort to protect citizens from abusive lending practices by unethical individuals."
Granholm also signed into law programs that will assist Michigan homeowners facing mortgage foreclosure by offering new refinancing options to protect their home ownership.
The programs will be administered by the Michigan State Housing Development Authority in conjunction with its Save the Dream public awareness campaign to help citizens avoid foreclosure.
Granholm also asked state lawmakers to approve a supplemental appropriation of $1.4 million funded by regulatory fees to add 34 mortgage industry regulators overseeing the industry, including 19 examiners and additional enforcement staff, to ensure that consumers are being protected in the mortgage lending process.
The bills signed into law April 3 include two Senate Bills sponsored by Randy Richardville, R-17th District, and Senate and House Bills sponsored by 11 other senators and representatives from throughout metropolitan Detroit and Southern Michigan.
"The idea is to help people who got into trouble with adjustable rate mortgages," said state Sen. Liz Brater, D-18th District.
"I think it's important from the point of view of all homeowners and our economy in general to protect people who are at risk."
Brater said it was not a "bailout" for people who made poor decisions on sub-prime, adjustable rate mortgages.
"I'm not saying it's fair, but whether they used good judgment or not, it was a legal product at the time," she said.
"The Countrywides of the world were taking advantage of people," referring to the collapse of the nation's largest sub-prime lender in January and touching off the mortgage crisis.
Edward Freundl is a reporter with Heritage Newspapers. He can be reached at 1-734-475-1371 or efreundl@heritage.com.
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