Economy Project: Avoiding Foreclosure
By Alexis Yancey, KERA News
Dallas, TX –
A half-million people have benefited from the Obama Administration's program to help struggling homeowners since it began last march. But to qualify you have to have income. So what do you do if you're unemployed? In KERA's Monday economy segment, Alexis Yancey reports on an option for those with little or no income. It's called forbearance.
When 62-year old Amalia Lozano quit her teaching job in 2007, her prospects looked good. She thought she'd make more money as a contractor with school districts. She had the skills.
"When you get my age, it's hard teaching four year olds," she says. "So I said, 'I'm a teacher, I'm a translator, notary public. I can work from home.'"
But when the economy tanked, her contracting jobs sank with it. Now she's nearly three months behind on her house payments.
"We had a savings, a money market account and we always put our money in for escrow, taxes and insurance, but we don't have that anymore," she says. "It's scary."
Scared and frustrated after months of getting nowhere with her lender, Amalia did what homeowners in crisis should do. She drove 50 miles from her home in Seagoville to see Maria Santamaria, a HUD certified counselor with Housing Opportunities of Fort Worth.
Navigate the recession with KERA! Get tips on avoiding foreclosure, access job resources and more at kera.org/economy.
"What would you like us to do for you?" Santamaria asks. "How can I help you?"
Santamaria says homeowners often get confused when they call their mortgage company.
"They're not familiar with the lingo; the language the lender's servicing company is using...loss mitigation, loan modification or forbearance," she says.
Forbearance could be an option for homeowners like Amalia who've had a dramatic loss of income. It postpones mortgage payments.
"Basically, forbearance says, 'let's give you a break during this time, work on finding a job then let's see where you are at end of the time period,'" says Tom Kelly with Chase Home Lending.
"We give you a forbearance for three to six months where you pay either zero or a dramatically reduced amount," Kelly says. "Let's do this for three months, four months, five months, six months."
When the forbearance ends, the lender works out a plan to make up the delayed payments if the homeowner now has steady work.
"Say you find a job paying a little less than you were paid before - now you're in a good situation," he says. "You owe us $6,000, can you pay it back over a year or 30 years. Let's figure out what the right situation is for you."
So far, lenders have granted forbearance to only four percent of the homeowners applying for HUD assistance. Counselors hope more will be granted.
"They look at that proposal and based on your hardship they'll put together a plan, what is best for you," says housing counselor Santamaria.
She warns not all lenders offer forbearance, but if you're in trouble like Amalia Lozano, you should ask.
"My goal here with Ms. Lozano is to educate her, let her know how this process works, empower her," says Santamaria.
Amalia is now confident she'll get relief from her mounting mortgage payments.
"I feel like I finally talked with someone who knew what they were talking about and I have some answers to a lot of anxious questions that I did not know who to go to," she says.
You can find more information about forbearance and other economy issues at kera.org/economy