Why Public Policy Education is Extension's Long-Standing Approach for Working...
Homeowners in Distress: Preventing Foreclosures
1. Homeowners in Distress:
Preventing Foreclosures
Strategies to Help Homeowners
J. Michael Collins & Deb Neubauer
University of Wisconsin Cooperative Extension
October 20, 2010
2. Overview
• Current issues
• Data on foreclosure
• WHPE educational materials
• Strategies
• Dane County Case Study
3. Nationally Expecting Wave of Foreclosures Soon…
CoreLogic, formerly First American Corporation, www.corelogic.com
6. High Area Unemployment Correlated
with REOs
1.16
5.4 5.61
11.08
4.16
<5% 5-10% 10-15% >15% All
% REO by Zip Code Unemployment rate ( 2010)
<5% 5-10% 10-15% >15% All
7. Data for Wisconsin
• http://www.uwex.edu/ces/cced/economies/c
ommunityindicators/Indicators_Links.cfm#q2_
2010
8. Foreclosure Filings 2010 (thru June) 2009
Adams 90 171
Ashland 33 57
Barron 107 227
Bayfield 35 67
Brown 597 1097
Buffalo 10 44
Burnett 83 139
Calumet 82 160
Chippewa 145 272
Clark 69 126
Columbia 172 349
Crawford 43 58
Dane 801 1550
Dodge 232 446
Door 72 143
Douglas 115 224
Dunn 99 197
Eau Claire 172 335
Florence 11 16
Fon du Lac 188 449
Forest 18 37
Grant 50 101
Green 82 164
Green Lake 43 101
Iowa 69 101
Iron 16 33
Jackson 36 72
Jefferson 209 399
Juneau 84 193
Kenosha 628 1238
Kewaunee 46 95
La Crosse 156 339
Lafayette 33 78
Langlade 60 105
Lincoln 57 142
Filings by County 2010 (thru June) 2009
Manitowoc 179 301
Marathon 283 505
Marinette 114 260
Marquette 51 113
Menominee 0 6
Milwaukee 3071 6323
Monroe 88 188
Oconto 125 261
Oneida 115 232
Outagamie 417 770
Ozaukee 124 266
Pepin 18 37
Pierce 121 254
Polk 180 408
Portage 0
Price 33 64
Racine 630 1221
Richland 45 64
Rock 532 1165
Rusk 37 62
Sauk 176 381
Sawyer 59 122
Shawano 114 213
Sheboygan 278 547
St. Croix 353 753
Taylor 38 78
Trempealeau 32 100
Vernon 47 81
Vilas 85 159
Walworth 404 726
Washburn 57 118
Washington 270 552
Waukesha 783 1335
Waupaca 160 338
Waushara 79 158
Winnebago 382 787
Wood 118 259
Wisconsin (sans Portage) 14341 27967
9. Common Themes of Interviews with
People in Foreclosure Process
• School aged kids – minimize disruption
• Relationship issues
• Pride management with family & peers
• Lack of trust in institutions
– Some exceptions for ‘helpful’ counselors /
agencies
• Communication / Education is challenge
– Lack internet, limited phone, time constrained
– Interest in budgeting (reformed spendthrifts)
10. Financially Strapped
“I am on unemployment and I am about ready to declare
bankruptcy. I can’t do consumer credit counseling b/c I
am not employed. All my unemployment checks go
toward paying my two mortgages. I am $19k in debt. I
would like to save but I need to work in order to save.”
- married woman in 40s
By late delinquency (180+ days)
• Tapped out family
• Cashed in / borrowed from 401k
• Austerity budgeting
11. Emotional Toll
“I had a job where I could work overtime when I
wanted. So I bought a lot of toys (motorcycle, trucks,
etc.). Then they got repossessed. I found it
devastating. It was so embarrassing. Now I have one
vehicle – the one that is most practical – and it is hard.
I did not realize my unemployment would be so long. I
did not think it would happen to me.” – male in 50s
• Unwilling to reveal extent of needs
• Not seeking advice in community
12. Hard to Reach / Not Accessing
Information
“I have access to the internet through the
library. I simply cannot afford it at home. There
is a lot of waiting and stuff so it makes it
difficult. I do have an internet account at work
but limited so I can’t really do a search at work.”
- Single mother in 30s
• Reaching people – phone, mail, web – all limited
13. When during the month are people looking for help?
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Week 1 Week 2 Week 3 Week 4
September 2010, Referrals by Week
Source: MortgageKeeper.org, September 2010 Referrals by Counselors
14. Most Common: Food, Job, Utilities
Food Assistance
Programs
19%
Job Training
18%
Heating/Utility
Costs
18%
National Hotlines
11%
Legal Services
9%
Pharmaceutical
Costs
7%
Home Repair
3%
Unemployment
Assistance
3%
Senior Citizen
Services
3%
Childcare
2%
Other
7%
Services Referred, 2009-2010
Source: MortgageKeeper.org, 2009-2010 Referrals by Counselors
15. Typology of Consumers in Distress
(Negative Trigger Events)
• Income disruption, but potential to work
– Job loss/cutback (relocation options)
– Divorce (child support issues)
– Widow/er (may have limited work options)
• Disability
– Chronic (DI application process)
• Health crisis
– Acute or ongoing expenses (medical debt management)
• Investor (not all are speculators)
– tenant eviction issues
– subsidized units
• Small business failure (non-real estate)
– Sale / bankruptcy (special issues if farm)
• Strategic defaulters
16. Providing Services
• Prevention
– People not in default, but worried
• Early Intervention
– Missed 1-2 payments
• Late Intervention
– Missed 3+ payments
• Transitional Support
– Short sale or foreclosure auction
17. Early Intervention is the Ideal
-0.1
-0.05
0
0.05
0.1
0.15
0.2
Counseled when current Counseled at 30 days delinquent Counseled at 60 days delinquent Counseled at 90 days delinquent
Effects Vary Depending on When Counseling Occurs
Pr(Mod) Pr(REO)
Source: Collins & Schmeiser, 2010
19. WHPE Themes
• Financial Issues of Owning a Home
• Physical Issues of Owning a Home
• When Things Go Wrong
20. 1. Budgeting Basics
The goals of this chapter are:
• Understanding your situation.
• The benefits of and process for creating a
spending plan.
• To discuss financial priorities and goals and
the steps needed to achieve them.
21. 2. Making Ends Meet
The goals of this chapter are:
• Show resources that may be available.
• Understanding benefits and assistance
programs, as well as tax credits.
• Address embarrassment of help seeking.
• Programs can have complicated details. Be
patient and take time to learn your options.
22. 3. Credit Management & Counseling
The goals of this chapter are:
• To overview the benefits and drawbacks of debt.
• How review a credit report.
• Understand credit scores
• Options for managing debt.
Take-away messages:
• Always keep an eye on your credit—it affects more than you think.
• Manage an economic hardship with the least damage to your credit
record.
• Check your credit score.
• Bankruptcy and repayment are options but will not make your
financial problems go away.
23. 4. Understanding Default & Foreclosure
The goals of this chapter are:
• Background into how and why default and foreclosure occur.
• Alternatives to foreclosure
• The legal process of foreclosure.
Take-away messages:
• Losing your home to foreclosure is in no one’s best interest;
understand your options.
• Decide if you want to stay and are committed to repaying the loan;
if not look into a sale.
• Talk to your lender.
• Take time to learn details of programs and follow up on every
detail; Don’t be derailed by paperwork.
• Ask for help but be careful of anyone offering a quick fix.
24. 5. Keeping Organized
The goals of this chapter are:
• To help you embrace the benefits of being organized.
• To provide you with the tools to make smart decisions when
purchasing Insurance.
• To encourage and guide you in creating your own household
organizational system.
• To provide advice on which records should be kept and where.
Take-away messages:
• Paperwork matters!
• Know what to store and where to store it.
• Plan for the unexpected.
25. 6. Maintaining Your Home
The goals of this chapter are:
• Understand the responsibilities of owning a home.
• Provide tools to help budget for repairs.
• Understand the costs and benefits of financing repairs and
remodels.
Take-away messages:
• A lot goes into owning a home beyond simply choosing what color
to paint the walls.
• Staying on top of home maintenance is important to save money in
the long run.
• Energy efficiency and proper insurance can also save you money
over time.
26. 7. Refinancing
The goals of this chapter are:
• To illustrate the hidden costs that interest adds to a
mortgage payment.
• To explain how refinancing can save homeowners money.
• To explain some of the fees associated with refinancing.
Take-away messages:
• Over the course of a loan, you will pay much more than you
originally borrowed.
• Refinancing a loan can save you a lot of money on interest
that you will not have to pay.
28. Scope Of Problem
# of Foreclosures in Dane County (2000-2008)…47%
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008
29. Scope of Problem
• 2009: Increased 39%
over 2008
– 10% points higher than
the statewide average
30. Community Answer
• Dane County Foreclosure Prevention Taskforce
– Coalition of public agencies, non-profit service
providers and other community partners working
together to develop sustainable alternatives to
foreclosure
• UW Law School instrumental in the formation
32. Prevention
• Broad, coordinated approach to providing
early outreach/ education on a community-
wide basis
– Created print material identifying local resources
to families facing the possibility of foreclosure
33. Intervention
• Effective assistance to individual homeowners
at imminent risk of default, in default or in
foreclosure
– Community workshops-2 sessions:
• Objectives
– Increase homeowners’ awareness of options for mortgage
help
– Help homeowners to determine their next steps
– Prepare homeowners for their next step by encouraging goal-
setting and budgeting.
34. Intervention cont….
• Created a Wisconsin Foreclosure Timeline
– Presents the basic process of foreclosure simply
• Major deadlines and events to be expected in a
foreclosure lawsuit
– Court filing requirements, redemption period, public notice of
sale, etc..
– Critical for homeowners who are overwhelmed by the court
processes and deadlines
35. Intervention cont….
• Dane County Foreclosure Mediation Program
(DCFMP)
– Workgroup advocated for a local rule mandating
that homeowners who are sued for foreclosure
are notified of the mediation program
• Voluntary
• Both parties pay $75
• Homeowner agrees to housing counseling
36. Intervention cont…
• Answer Clinic
– State Bar awarded a grant to the workgroup to
create a clinic to help homeowners file answers to
foreclosure lawsuits.
• Staffed by volunteer attorneys and volunteer law
students
37. Stabilization
• Objective is to identify and strengthen
neighborhoods impacted by foreclosure
– Purpose: find “hot spots” for foreclosed homes
38. Extension’s Role
• Coordinate the key players
– Attorneys, community partners, law school, HUD
approved housing counseling agencies
• Provide the education required for goal-
setting and budgeting
• Assist with the follow-up and evaluation
39. Websites
• Home Ownership Preservation Foundation
www.995hope.org
• Wisconsin Housing and Economic
Development Authority
www.wisconsinforeclosureresource.com
• Dane County Foreclosure Prevention Taskforce
www.daneforeclosurehelp.org
40. Deb Neubauer
Dane County Extension Financial Education Center
Lower Level, Suite 101
2300 S Park Street
Madison, WI 53713
(608) 261-5077
Fax: (608) 261-9727
deb.neubauer@ces.uwex.edu
For More Information: http://fec.uwex.edu
J. Michael Collins
Faculty Director, Center for Financial Security
University of Wisconsin-Madison
7401 Social Science, 1180 Observatory Drive
Madison, WI 53706
608-616-0369
jmcollins@wisc.edu
For More Information: cfs.wisc.edu
