A local family receives counseling support during a January foreclosure prevention clinic at Lowell’s Coalition for a Better Acre.
Foreclosures were a frequent occurrence in Lowell last year. There were 283 foreclosure deeds filed in the city, including 108 for single-family homes.
That puts it sixth in the statewide lineup of cities with the most foreclosures, according to statistics from The Warren Group, Banker & Tradesman’s parent company.
City officials, lenders and nonprofit agencies focused on keeping residents in affordable housing say they are concerned and ramping up activities aimed at curbing the rapid increase in foreclosures. Middlesex North Register of Deeds Dick Howe is busy preparing reports analyzing trends within those numbers to further the efforts.
At the center of it all is the Lowell Foreclosure Prevention Task Force, a coalition started up 18 months ago that includes Howe, more than a dozen local city and bank officials, and representatives of area nonprofit community groups.
Task force co-founder Frank Carvalho, branch manager at Enterprise Bank’s Lowell Connector branch, said the problem first took on a face for him almost two years ago, when he started getting questions about whether he could help borrowers facing foreclosure refinance their mortgages.
He soon found that many either didn’t have enough equity in their homes or faced “astronomical” prepayment penalties on their existing mortgages.
Soon after, Executive Director Victoria Fahlberg of ONE Lowell, a nonprofit that focuses on integration of immigrant populations, called Carvalho to talk about the problem. Together with Merrimack Valley Housing Partnership Executive Director Jim Wilde, they planned the formation of the task force.
However, task force volunteers quickly found that most callers to a hotline they set up were too deeply in debt or had so little equity in their homes they could not be helped. The group’s organizers were forced to take a step back to reassess how they could more effectively help prevent foreclosures, Carvalho said.
Today, a broader partnership offers help in the form of short-term emergency financial assistance from the Lowell Financial Development Corp. (LFDC), a group of local banks that has pooled funds to help delinquent borrowers with such needs; referrals of borrowers in trouble to local nonprofit Coalition for a Better Acre, which offers foreclosure prevention counseling; assistance from attorneys who provide legal assistance for free or a nominal cost; relocation assistance to people who must leave their homes; and efforts to make sure lenders maintain foreclosed-upon homes.
To date, three families have avoided foreclosure through the LFDC fund, which was put together in August. That compares to 10 families throughout New England helped, to date, by a similar pool of $125 million offered by five national and regional banks last December, through the Federal Reserve Bank of Boston.
“We’ve done pretty well [for one city],” Carvalho said. “That makes me feel great.”
Carvalho declined to reveal how much money is in the LFDC fund, saying he didn’t want to “limit its possibilities.”
Borrowers LFDC has helped so far had defaulted on home-purchase loans made within the last two to three years, Carvalho said.
‘Pack Mentality’
According to Howe’s research at the Registry of Deeds, home-purchase borrowers owed lenders an average of $53,000 more than the amount the lender ultimately recouped at the foreclosure sale. Lenders often then resold the properties for as much as 25 percent less than the amount realized at the foreclosure sale.
Howe found that more than half of Lowell’s foreclosures last year – 141 of 247 cases he studied, or 57 percent – were home-purchase mortgages. Sixty-six percent of those were 100 percent financed – meaning the buyers did not make a down payment – and the foreclosure deeds were recorded an average of 28 months after the property was purchased.
The significance is that the borrowers who end up in foreclosure more often than not have little financial stake in the house they purchase and the neighborhood in which they live, Howe said.
Their circumstances differ markedly from refinance borrowers whose homes foreclosed last year, he found. Forty-three percent of all Lowell foreclosures in 2007 fell in this category. Those borrowers had owned their homes an average of seven years before the foreclosure occurred, and typically were on their fourth mortgage at the time of foreclosure.
The refinance mortgages typically were obtained just over two years before they foreclosed – the same length of time it took purchase mortgages to foreclose.
When refinanced homes were foreclosed upon, the average borrower owed the lender $75,000 more than he or she had paid for the house.
Howe suggested that purchase mortgage borrowers who get foreclosed upon might be better helped by moving to a rented property, at least temporarily, until they are in a better position to buy. With comparatively little financial stake in the home or personal stake in the neighborhood, those borrowers have less to lose by walking away, he said. In contrast, refinance borrowers who have been in their homes longer may be better candidates to try to keep in their homes, he suggested.
Howe said he thinks task force members share this opinion.
“It may be hard to break away from the pack mentality of trying to keep every [delinquent] borrower in their home,” he said, “but I think my report may have given them the confidence” that categorizing borrowers and prioritizing efforts differently could lead to more effective public policy.
Lowell Assistant City Manager Adam Baacke, who sits on the task force, agreed that “a one-size-fits-all solution frankly won’t work for everyone.” The circumstances that led to a foreclosure are probably one of many factors that should be considered in deciding how to help a borrower, he said.
The city is separately considering ways to help neighborhoods with foreclosed-upon homes, so the “blight” doesn’t spread, he said. It is looking at other communities, such as Boston, which have instituted fines against owners of foreclosed properties who don’t maintain them.
But Baacke said Wells Fargo is one lender taking a proactive stance in that area. Just a few weeks ago, the national lender sent him a letter offering a toll-free phone number the city can call “to bring to our attention any issues concerning our company’s property preservation practices.”
Emily Rosenbaum, executive director of Coalition for a Better Acre, said CBA is the primary Lowell agency to whom callers to the national HOPE NOW hotline (888-995-HOPE) are referred. CBA has received 170 referrals since the group began taking calls in July and has managed to get a “positive outcome” – meaning avoiding a foreclosure – for about 40 percent of callers, she said.
But the number of calls has increased dramatically, from about 12 per month last summer to 40 in January, and as many as five calls per day more recently.
CBA doesn’t offer assistance to owners who weren’t using the home as a primary residence, Rosenbaum said, but is nonetheless aware of many boarded-up properties in the city that were investor-owned.
Some owners couldn’t afford their home loans to begin with, while others’ home values decreased, meaning they owed on a mortgage worth more than their home, even if they could sell it, she said.
Rosenbaum said there is no such thing as a “typical” borrower in foreclosure.
“It’s really affecting people across the board. It’s young families and it’s seniors,” she said. Two recent cases involved an 81-year-old woman who called to ask whether she should pay her oil bill or her mortgage, and two retired women who lived with their elderly mother and would have been forced out of their home when their mortgage interest rate adjusted upward, she said.
In the first case, CBA is helping the woman connect with fuel assistance programs, and in the second, CBA was able to help the women negotiate a loan modification with their lender, so the interest rate was actually adjusted down instead of up, she said.
“This is affecting everybody,” Rosenbaum said. And assistance can be slow going, sometimes taking months.
