By Wendy Innes and Andrew White, Staff Writers
HARTFORD — Roberto Rodriguez is knee deep in foreclosure-related paperwork, sorting out fax receipts from folders he has stacked in his two-bedroom condominium in Windsor.
His papers date back to May 2008 when he first sought help to avoid an impending foreclosure. But help didn’t come soon enough. Six months before Wells Fargo filed foreclosure paperwork in New Britain Superior Court, Rodriguez contacted the bank’s bill collector, America\’s Servicing Company, and sought ways to overcome his unfortunate situation. First, he was underemployed, then unemployed. Then his mother died, and he lost his job. But the bank did not offer a solution. He then learned about a Connecticut Housing Finance Authority’s Housing Fair in late spring 2008. While there, he talked to someone at Department of Banking, which in turn referred him to Association of Community Organizations for Reform Now ( ACORN) and Neighbohood Assistance Corporation of America (NACA) programs. Both program representatives in 2008 requested financial information and other personal documents after telling him they had a record of getting modifications for their clients. To date, Rodriguez has yet to get a help from ACORN or NACA.
Then in May 2009, the bank filed foreclosure papers and Rodriguez applied for foreclosure mediation. Since then he has been in mediation. Armed with his fax receipts of paperwork he sent to the bank, he would meet with the bank’s lawyers from Hunt, Liebert and Jacobson, P.C. Each lawyer would have a different story. They didn’t receive the paperwork. After he produced the fax receipts, they would tell him to refax the information and wait. He would wait only to hear on his second and third meetings that his paperwork was still being reviewed. And by the time the paper work was processed, he was told to refax the information—again.
“I don’t think there is any good faith effort in these mediation sessions,” Rodriguez says. “They are playing ridiculous games that even a five-year old can decipher. How can you mediate with someone who doesn’t want to mediate?”
In March, there was a 22 percent spike in new foreclosure filings statewide, according to RealtyTrac, a foreclosure tracking firm that gives monthly state by state foreclosure trends. In April, that number rose again by 4.4 percent, with another 2,915 new foreclosure filings. In Hartford county alone the number is down almost 3 percent from the previous month but up almost 13 percent from the previous year with one in every 593 housing units in some stage of foreclosure, including those who are stuck or are on their way to being stuck in mandatory mediation. According to the latest number released by the mediation program, about 10, 000 homeowners are in Connecticut’s mandatory court mediation program—and in limbo.
“It is a significant number,” says Foreclosure Mediation Program Manager Roberta Palmer. “But saying people are in limbo is, I guess, accurate, but they are in a much better place because their homes cannot be foreclosed on.”
Rising Mortgage Defaults, Rising Frustration
Industry experts at first linked rising default rates across the country to looser lending in the subprime market, which provides mortgages to people with poor credit or low income. Some were drawn in by initially low teaser rates, and then when the low-interest rate period ended, they got stuck and realized they can’t pay the loan,” says Erin Kemple, executive director of the Connecticut Fair Housing Center, a Hartford-based nonprofit organization that advocates for fair housing.
Because subprime lending in Connecticut appears to be concentrated in urban areas, the rise in foreclosure filings raises concerns about deteriorating rates of home ownership in city neighborhoods, Kemple, says.
“People have gotten into loans that have unaffordable terms,” she says. “We would call them predatory; not everyone would.”
Concentration of Foreclosures in Urban Areas
Now, the foreclosure crisis is also driven by people who lost their jobs. And they are turning to the courts for help.
Connecticut’s mandated mediation program is a judicial process that allows homeowners to meet with a representative who has the authority to negotiate for the lender. The mediator’s role, Palmer says, is to ensure there’s an accurate review of homeowner’s financial information and to make sure the federal guidelines are accurately applied. The Lender may reduce interest rate, fixt interest rate, extend the term of loan and/or reduce principal balance. Or the homeowner may qualify for the Home Affordale Modification Program (HAMP) where the federal government help with some of the arreagage and mortgage payments. However, some homeowners may still lose their homes after their paperwork is reviewed. These would receive “graceful exists” such as short sales, deed in lieu of foreclosure or an extended sale date.
But some who are considered qualified for what’s called the Obama plan or HAMP, never get to the end of the process, housing advocates say, because lenders come unprepared to sessions and are usually unaware of the guidelines and how to apply them.
Foreclosure Attorney Keith Fuller places most of the blame for the delays with the lenders. Fuller supports the program, but says that banks are making it difficult for the homeowners.
“I find that it takes a lot of these banks a while to do a full review of a loan for modification. By the time they get around to putting all the pieces together to analyze it for a full modification, the last financial information that’s been submitted is outdated.” Fuller says.
According to Fuller, it takes the bank 60-90 days to review all of the required information and by the time their review is complete, the information is no longer considered valid and the bank requests the information again.
“It’s sort of this cycle that goes on and on,” he says. “It’s extremely difficult and really emotionally taxing for these people to go weeks and weeks or months and months without a straight answer from the bank because from their perspective, it’s confusing to know what the bank is doing.”
In addition, borrowers will call their lenders only to find that the information that they had sent in weeks before has disappeared. Fuller expresses his frustration for his clients’ situations, “In this information age, it seems to me, that the banks should be a little bit more organized in collecting all this information.”
Eugene Melchionne, foreclosure attorney and chairman of the National Association of Bankruptcy Attorneys in Connecticut is a critic of the program, and he champions federal intervention in bankruptcy court. Melchionne also represents homeowners who are stuck in the foreclosure mediation process.
“The oldest mediation I have now is easily going on a year and a half,” he says. “The mediators don’t really have any power to be able to force banks to cooperate fully. Security is “the primary reason why people buy houses. Clearly those stuck in limbo, waiting to find out if they will keep their home have little of that.”
But there is a silver lining here. That’s because to being in limbo, Palmer says, is better than being out of the house. She says the court is aware of the frustration level on both sides and how burdensome it is for mediators as their caseload grows.
The court, however, is resolute on one matter. “We won’t let those cases out of mediation until we get an answer one way or the other on whether or not they qualify on any settlement,” Palmer says.
Mediation, A Success Story
Connecticut’s mediation session is touted as a model for other states across the country. In February, the program boasts a success rate of about 60 percent. But some question the accuracy of that number. Attorney Melchionne says that the statistics put out by the court don’t tell the whole story. The court only tracks those people who have completed the mediation process. There is no data on those who are in limbo. In addition, Melchionne says, his clients are making payments under temporary modification, but are continuing to be reported as late on their credit reports and receiving notices from the banks that their homes are going to be foreclosed on.
“They’re showing a huge success rate, but they’re counting people who are leaving their homes as successes,” he says. When asked what he would define as a successful mediation, he says that homeowners staying in their homes are what he considers a success.
Matt Silverman, a Boston-based businessman who was banking specialist for 10 years, agrees with Melchionne. Silverman says the state’s program has a phenomenal success rate and is too good to be true.
“I’d like to see that number verified because it would be the most successful program in the nation, especially when compared with about a 5 percent success rate everywhere else,” Silverman says. “If a program like this is working that well, they should be talking with the Obama administration’s highest officials to roll out … a national program that finally solves the housing crisis.”
Silverman offers a free online course at www.hopeforfree.org. This site helps homeowners with how to package their story for the lender and how to find a lawyer experienced in debt negotiation, he says.
The state also has measures to help homeowners stuck in limbo, thanks to the works of housing advocates such as Connecticut Housing Center. They recognized early on the limitation of the mediation program and have been pushing for state officials to strengthen the program. advocates say. As a result of their work, the General Assembly in May passed a bill to extend the state’s foreclosure mediation program for two years. The bill promises to punish lenders and servicers who come to the mediation unprepared to do good faith negotiation.
The new bill will take effect on July 1.
Connecticut Housing Finance Authority
Connecticut\’s Forelcosure Mediation Program
Mortgage Law Network
Editor’s Note: Roberto Rodriguez is a pseudonym for a person who wants to remain anonymous. The name and other identifiers have been changed to protect the person’s identity.