Trying to Avoid Foreclosure

More than 9,000 homes around Massachusetts have gone into foreclosure so far this year. That's 38% more than the same period a year ago, and according to foreclosuresmass.com, the trend has spread to three quarters of the state's communities.

While lawmakers are looking for ways to help people stay in their homes, WBUR's Bianca Vazquez Toness reports how some homeowners are individually negotiating with their lenders.

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BIANCA VAZQUEZ TONESS: Claudia Sierra's condo sits in a triple-decker along the waterfront in East Boston. Sierra opens the living- room blinds and sees the Tobin Bridge.

CLAUDIA SIERRA: You know, the sunset is very good. Whenever people come here, they say, "Wow, you have a very nice view."

TONESS: Sierra bought the property in March of last year. Finally, her two children each had their own room and the single mom felt a sense of security. She worked then as a real estate agent making more than $80,000 a year. That's until she got sick and couldn't work for six months, then the real estate market started slowing down.

After missing a few payments, she did what lenders say you should do if you can't pay your mortgage: She contacted her mortgage company.

After two months, the company called her back, and recommended she sell the condo for less than she paid for it. But she begged for another option, a repayment plan.

SIERRA: This is my home, I have no other where to go. So I told them, "Tell me the income figure that I need to be at in order to qualify. What did you consider my fixed expenses to be? And I'll make the numbers work."

TONESS: Sierra made the numbers work by letting the bank repossess her car. She also sent her kids to live with relatives so they wouldn't be counted as an expense. That way Sierra could use her now much smaller paycheck to cover three monthly payments of $3,200. If she made those payments, the servicer said it would consider changing her mortgage terms.

Her son is nearby with his father; her daughter, on the other hand, is in Colombia with her grandparents.

SIERRA: I mean she's only 8 years old. (My son is 16 and he understands a little more.) Every time we talk she says, "How many weeks, how many weeks until I can come back?"

VIRGINIA PRATT: These are the kinds of choices that people we work with are faced with all of the time.

TONESS: Virginia Pratt is a foreclosure counselor at ESAC, Ensuring Stability through Action in our Community, a Boston nonprofit specializing in protecting home ownership. She says if a client is lucky enough to get a repayment plan, it's often unrealistic for the homeowner.

PRATT: They take it and are struggling to make their payments at the expense of everything else. I have a family who has been without heat for like six months because they decided to stick to their repayment plan, but have not been able to pay their gas bill to keep their hot water on.

TONESS: Pratt provides paystubs, tax returns, and other documents to the mortgage servicer when she tries to negotiate a loan modification with lenders.

PRATT: If they have this information then they can see that this is a set-up for the person.

TONESS: Pratt handles about 100 cases, and says they're all different. Some lenders are willing to lower interest rates and lock them in instead of letting them adjust every six months.

PRATT: What we have not seen, at least I haven't seen it, is lenders who [are] willing to take a loss in terms of the amount of the mortgage even though the housing values have dropped.

TONESS: And she says that's a problem since many of these loans were written based on wildly inflated incomes. Or, in Claudia Sierra's case, on an income that didn't last.

Sierra and her dog play outside after work. This is her only steady company since she sent her kids left last fall.

SIERRA: It's too big; the place is too big for just for myself.

TONESS: Sierra doesn't know when she can bring her kids back to live with her. She now works for a non-profit that builds affordable housing, and makes less than half what she earned selling homes.

And the deal she negotiated with the mortgage company to send three payments of $3,200 hasn't gone as planned.

SIERRA: So I sent the first payment, I called them and I gave them the control number for Western Union. They confirmed that they had the money. Everything was very nice. I was very happy. I had a big weight off my back for a couple of weeks. Until I got a letter from them saying that I had broken the agreement and then I got a letter saying they never received the money.

TONESS: Sierra contacted the mortgage company and got conflicting stories. One person said they'd received her money, while several others said they didn't. Sierra sent the second payment but it was returned to her shortly after with a letter saying her repayment plan was terminated. She didn't send a third payment and is now receiving letters from foreclosure attorneys notifying her that the condo is up for auction on June 2.

She says she feels confused....also foolish for trying to negotiate with the mortgage company by herself.

SIERRA: I was referred to an attorney and they advised me to file for bankruptcy. And I thought that's not how to deal with it. I mean, I owe this money to the bank. I'm going to work with them. And I'm just going to pay it. But sometimes I feel like, especially my daughter being away from me just so I could qualify for this, I just thought it was not even worth it.

TONESS: The mortgage company servicing Sierra's loan will not comment on her case. But says the company has been inundated with foreclosure cases and added about 100 employees to talk to customers looking to modify their loans.

KEVIN CUFF: I sympathize entirely with any consumer that is going through a frustrated process.

TONESS: Kevin Cuff is the executive director of the Massachusetts Mortgage Bankers Association. He says lenders have done a bad job of working with customers trying to avoid foreclosure.

CUFF: This problem with foreclosures has caught most national lenders a bit off guard. This month is better than last month which is better than the month before

TONESS: Cuff opposes any state legislative changes to prolong the foreclosure process or give homeowners more tools to fight losing their homes. He says homeowners already have a lot of time to fight a foreclosure and the solution has to come from the industry. He has advised mortgage companies to modify loans when they can.

CUFF: It is in their best interest to modify any loan that they can possibly modify to make it a productive loan relationship. Not because it's in the best interest of the city, not because it's in the best interest of the homeowner, although it may be, but because it's in the best interest of the lender. Foreclosure doesn't help anybody, including the lender.

TONESS: Cuff thinks that lenders are starting to wake up to this notion, and are starting to add staff to deal with consumers wanting to modify their mortgage.

Still, it appears Sierra's lender will foreclose. And despite a repayment plan, her home will be auctioned off on June 2.

For WBUR, I'm Bianca Vazquez Toness.