Summarized by Kevin Zeese
This is a session of the economic track of the Democracy Convention that was held on August 25th and focused on resisting foreclosure. The two speakers were Ellen Bernards and David Petrovich whose biographies are included at the end of the summary.
Foreclosure process varies across the country, sometimes even based on the county of the state you are in.
In Dane County there has been a rapid increase in foreclosures. Dane County has not had the crisis that other parts of the country have had. This does not mean people are not losing their homes. We have 100-150 foreclosure filings per month, ten times higher than it was five year ago.
The Dane Country Foreclosure Task Force is a volunteer organization that includes people like mediators, lawyers, law school students, home owners, counselors and bankers. It is not an advocacy group but works with individuals.
The Dane Country Foreclosure Task Force does an “Avoid Foreclosure” workshop which last two hours, once a month. Attendance varies based in large part on the advance press we get. Many of the people have not seen a housing counselor and are trying to do it themselves, which usually results in lots of mistakes. The goal of the workshop is to determine what is the chance the homeowner will get a loan modification. We let them know that some will be able to keep their house. It is a challenge to get people to attend as the shame in foreclosure is huge, so getting them to the meeting and seeing they are not alone helps.
This may seem counterintuitive, but if you have a lot of equity in your house you are less likely to get modification because it is the banks interest to foreclose. They will be able to sell the house and make a profit. The bank is there for its interest, not to help the home owner. Slowing the process down is also something that benefits the bank. It allows the bank to examine the situation and determine whether the person will catch-up on their payments or whether they would be likely to be able to pay if the loan were modified.
The Dane Country Foreclosure Task Force also has a lawyer that can explain every step of the process and what they should do in each phase. It takes 12-18 months to resolve a foreclosure lawsuit in Wisconsin through the court system. The steps include:
1. Homeowner begins missing payments
2. Lender mails default notices to homeowner
The above takes 3 to 4 months or more
3. Lender files foreclosure lawsuit
4. “Answer” due from homeowner: If no Answer is filed, default judgment is entered
ONLY 20 days to respond to the lawsuit!
5. Lawsuit proceeds in court
This may take 1-2mo. to more than 1 year
6. Judgment entered in favor of lender*
7. Redemption period
8. Public notice of sale published
9. Sheriff’s sale
Six weeks from the public notice to the sheriffs sale
10. Confirmation hearing in court, 10 to 14 days after the sheriffs sale
Steps 6 through ten usually take 6 months to 6 weeks
11. Homeowner must move out
This is only the process in Dane County, judicial foreclosure varies throughout the country, sometimes in a state it is different from county to county. There is no uniform foreclosure process. Some states it is merely the sheriff knocking at the door, entering and the homeowner is asked to leave. Having a judicial process is the best for homeowner because the court has to be involved. In non-judicial foreclosure jurisdictions, generally you are notified, but there is an opportunity to go to court only if you have the funds to hire a lawyer and do so. The Legal Services Corporation should be fully funded so people can get help. Most of the lawyers who take on foreclosure are real estate lawyers who usually do closings for home sales. They do not usually go to trial and therefore are not very good at defending against foreclosure. There are a few extraordinary attorneys who challenge foreclosures.
One defense that has been successful is based on flawed securitization – requiring the lender to “produce the note.” There are two key documents – mortgage and securitization note, i.e. a promise to pay. These show who has the right to foreclose. The lending industry is scrambling, nervous, because of lost, destroyed and fraudulent documents. Bank of America is currently in trouble in part because of their purchase of Countrywide, the largest mortgage company in the country. The motivation for short term profit clouded judgment. Many original loan documents were shredded because of the move to electronic documents. When there are suits based on flawed or missing documents, there will usually be no reported court record because the case will be settled before it goes to court.
The Dane Country Foreclosure Task Force also has a foreclosure answer clinic, free walk-in legal clinic. This happens twice a month. This helps homeowners to file an answer. In 72% of foreclosure cases in Dane County the homeowner does not file an answer to the lawsuit but they are unable to provide legal services after that and most homeowners do not have a lawyer and are defending themselves. This is a big hole the Task Force has not filled. In only 14% of the foreclosure cases in Dane County is the homeowner represented by an attorney but in 100% of the cases the lender is represented by an attorney.
The Dane Country Foreclosure Task Force also has a mediation program. Lenders can participate but it is voluntary. The mediation program is underfunded, understaffed, lacks mediators and people do not file all their documents. Sometimes there is a modification, but it rare and never a significant one, not enough to make a difference. It is not really a negotiation – the lender gives the homeowner an offer that they can accept or reject.
The Dane Country Foreclosure Task Force is also developing a support group connected with a local college that teaches therapy which is developing the support group. There is a need to deal with the psychological impact – depression, suicide, stress etc – as foreclosure is a very difficult and emotional process.
Dave Petrovich notes that he has gone through foreclosure. He had 5 houses, lost 4 of them in what would be described as strategic foreclosures. Petrovich had been in the business of buying distressed homes at the cost of the mortgage and then putting in place sale and lease back programs where the former home owners could remain as tenants and could buy their house back. In doing this he found himself to be able to communicate with the lender and work out their problems. This was 20 years ago. Petrovich was injured and found himself on his back for six months. During that time he discovered he had the skills to negotiate with banks and mortgage servicers. GE Capital got one of his proposals for a homeowner and asked to talk to him resulting in him becoming part of a loss mitigation team to work with distressed homeowners.
Things are changing very quickly around foreclosure. Ten years ago Petrovich would have felt very confident answering a home foreclosure question. But rapid change is making that more difficult. U.S. homeowners are out there without a safety net. Many of Petrovich’s clients were baffled when lenders refused to talk to them. For two years he talked to realtors to conduct short sales i.e. where lenders accept less than is due. But these rarely let the homeowners off the hook, they really served the lender.
Now we’re in a perfect storm, a conspiracy of sort that has resulted in the likely looting of our Treasury – under our very noses in broad daylight. We know the golden rule – he who has the gold rules. The rules are designed for the rich and that has been true in foreclosure so far. There are many players who deserve a share of blame for the foreclosure crisis: banks, mortgage companies, ratings agencies, derivatives traders, insurers like AIG. All these factors come into play. Mortgage crisis is a shared problem with widespread impacts.
David Petrovich’s career in real estate has spanned 30 years. In the late 90’s he co-founded Society for Preservation of Continued Homeownership, a 501(c)(3) consumer mortgage and tax advocacy and remains as its Executive Director. He has worked with thousands of distressed homeowners across the US trying to devise non foreclosure alternatives to their mortgage loan foreclosure problems. Dave has investigated allegations of loan origination fraud, predatory lending practices, and mortgage loan servicer error for the Mortgage Bankers Association of America, and is a Basic Human Needs Resource for NJ’s Social Service Network specializing in PROPERTY TAX and MORTGAGE FORECLOSURE issues. He has written numerous essays and several books including “Foreclosure – Half Truths and Outright Lies”, “An Ethical Approach to Pre Foreclosure Short Sales”, and “Fight Foreclosure – How to cope with a mortgage you can’t pay, Negotiate with your lender, and Save your home (Wiley)”. He serves as moderator on several on-line foreclosure blogs, and as a contributor to CNN’s Business News. Contact: NJSPOCH@aol.com
Ellen Bernards is a Community Relations and Education Specialist with GreenPath, Inc., a not-for-profit housing and credit counseling agency founded in 1961. Since she joined GreenPath in 2004, she has provided counseling to consumers on budgeting, debt and credit, bankruptcy and housing including reverse mortgage and foreclosure prevention. She now focuses on outreach and education including presentations on credit reports and scores, budgeting, generating income, using budgeting to relieve stress and others. In partnership with Project Home, she offers monthly workshops for potential home buyers. As Co-Chair of the Dane County Foreclosure Prevention Taskforce, she works with others in the community to provide support for homeowners in crisis including a monthly foreclosure education and prevention workshop. Ellen partners with Centro Hispano to provide foreclosure counseling and education to the local Latino community and spearheaded a financial education project for this community as well. Of the more than 3,000 National Foundation for Credit Counseling (NFCC) counselors, Ellen Bernards was chosen as the 2010 recipient Outstanding Individual Counselor of the Year. Contact: email@example.com.