Communities work to avoid foreclosures

It has been a long time since the economy in Washington County has meant comfortable living for the majority of its residents. The pressures to meet mortgage payments, property taxes, utility and heating bills and, in some municipalities, sewer and water bills have many homeowners struggling to meet their property tax payments while also putting food on the table or taking care of healthcare issues. Municipalities are working with some success to help homeowners resolve real estate tax foreclosures, but an unknown quantity is the impact that mortgage foreclosures, in particular those held by out‑of‑state institutions, are having on the long‑term community fabric and cultural health of the county.
Real estate taxes around the county have been creeping ever upwards. When combined with increases in utilities, heating, food, healthcare costs and the depressed economy's impact on wages, life in Maine's poorest county is becoming that much harder. Tobi McPhail of Eastport has two or three more months before she'll get her home's deed back. The house was foreclosed on by the city when she could not keep up with property taxes and sewer bills. "I was just so overwhelmed," she says. Working in Washington County, she adds, "It's feast or famine." McPhail works part‑time at the Eastport Health Care Center, and her husband is a fisherman who also works in the construction industry, neither of which is in a robust state. "The health center just cut some jobs," McPhail observes. Her two adult daughters live at home, and a nephew occasionally comes to stay with them.
The tidy Eastport house with the fanciful shingle work done by Tobi's husband has been mortgage‑free for eight years. They've had the home since 1995. "We've done everything on our own," she explains of the house. "That makes me feel good." They did not take out loans or pile on credit card debt. She is proud of her family's efforts to not "get caught up in big money schemes." She pauses and adds, "The majority of people [in the county] do what they have to do."
Saving money to pay off the city taxes is the top priority. Christmas presents were not on the agenda this year, but that did not bother the McPhail family. What did was not being able to contribute to the Silent Santa program. "My girls were upset. We've done that every year. We pick a boy and a girl and get them presents. But I couldn't pull an extra ten cents for that." The ten cents is going into McPhail's savings to pay the $250 quit-claim deed transfer from the city. McPhail's savings plan is a unique but effective one. She does not have a credit card and does not use her debit card. "Change is my big thing. Every cash transaction, I save the change and turn it in. Last year I had change that came to $1,000 for taxes. That's my savings," she adds with a smile. It's starting to run in the family. "My nephew started saving change and his mother said, 'You talk to your great aunt.' My daughters have learned from it as well."
City Manager Jon Southern notes that working with homeowners to keep foreclosure from happening is the city's top priority. The methods have paid off, with three properties being the average number that actually end up being taken by the city and put out to public bid for purchase. "We've got a very proud population here who doesn't want to come in and admit they have a problem paying. But there's no shame admitting it, not in this economy. It's all across the country."
Washington County's district and superior courts saw 166 foreclosures in 2010 and 143 in 2011. The filed numbers combine all real estate foreclosures that go through the courts and do not distinguish between residential or commercial properties.
The City of Eastport sent out 22 sewer and 146 tax lien notices in fiscal year 2011. The numbers are actually down from 2010 and 2009 when tax lien notices were 164 and 173 respectively. After working with property owners, the city winnows the foreclosure notices down to about 40 per year. From that number more work is undertaken until a few properties remain that do eventually end in publicly advertised sales.
Eastport is not alone in trying its best to work with homeowners. Lubec Town Treasurer Randy Campbell sent out 57 foreclosure notices for the 2009 tax year. "Compared to last year we sent out 53, a small increase. Hopefully, after we send out the notices everyone will pay the outstanding taxes and we will not have to foreclosure on any properties." The town has had to take from one to four foreclosed properties over the past few years. "It seems to be a mix of local and out-of-town owners." Machias had no foreclosures in 2009, one in 2010 and three in 2011. Town Clerk Sandra Clifton says that the town anticipates more will occur this year.
Perry has sent out 105 tax lien notices for 2010, up from 85 in 2009. Treasurer Barbara Hicks notes that for both years the town ended up having to take only three properties and sell them. "Fortunately, no one's been kicked out of their home," says Karen Raye, chair of the select board. She and Southern stress the importance of property owners coming in and discussing any difficulties they are having or anticipate having paying their municipal bills so that a payment plan can be worked out. Raye explains that once the process gets to a certain point, how the municipality acts is mandated by law, which gets much more expensive for the homeowner because of the fees.

Healthcare costs and foreclosures
Healthcare costs are increasingly being linked to foreclosures. Two studies, one published in 2005 and another in 2008, note that about 25% of survey respondents said that their housing problems or foreclosures were caused by medical debt and the increased stresses placed on families as they tried to negotiate healthcare issues. Fern Garrapy knows all about it. She too is saving up for the $250 quit-claim deed fee for the Eastport home she had owned for 23 years. In April Garrapy was in the hospital and then in rehabilitation for the month of May. During that time the bills "got forgotten," she says. Her husband, who at 72 is quite frail from a combination of serious long‑term health problems, "doesn't read or write that much because of illness, and everyone knows that," she explains.
When Garrapy returned home from her medical stay she had no idea that the house had been foreclosed on until she went to city hall to pay some bills. The city staff told her that they could not accept payment because the foreclosure process had started. The city and Garrapy were able to work out a payment plan, and she is set to finish her payments this year. But it is difficult, she says. At 58, she works part‑time as the volunteer director of the Labor of Love Food Pantry. Her husband, formerly a mason, can no longer work. Garrapy worked for years as a cashier and yard worker at Grossman's until they closed. After that she did pick‑up work, but now she says, "It's hard to get a job because I need to take so much time to care for my husband. Who would give me the time off?" They live on her husband's Social Security. Family members have tried to help. "My brother gave me $50; a neighbor gave me $20. My nephew brings down returnables for me; that's $40 to $50.
Understanding the foreclosure process has been difficult for Garrapy. But she says, "I think the city was pretty good about it. They aren't in the business of owning property." McPhail also has praise for the city's efforts to work with her. However, Garrapy advises anyone having trouble with their bills, "Even if they make payments, check on it and make sure."
McPhail says, "There were times in 2011 that were really dark, when I didn't know if I'd make those bills, payments." She smiles as she notes how proud her mother would be of her efforts, and adds, "Keep your chin up knowing that $20 a week can make a big difference."

The unknown quantity: bank foreclosures
While municipalities have a clear idea of their residential real estate tax foreclosure risk, it's much harder to have a clear idea of how bank foreclosures are affecting their communities. Southern tells the story of driving around the city and writing down the contact information from realtor signs. By calling the realtors, he found 62 bank foreclosures. "In a city of 900 properties, it's absurd. It's very, very high. It shows the impact of the economy and high taxes." He notes that the 62 number doesn't include those foreclosed properties that are not being advertised for sale or are utility foreclosures. "The banks, combined with city and other foreclosures -- it's a much bigger problem." He believes that a committee needs to be formed to address the problem. HUD has created a website, <www.foreclosure‑response.org>, dedicated to helping communities tackle just such issues.
The Maine Bureau of Financial Institution keeps foreclosure data from the state's 32 state‑chartered banks and credit unions, but Superintendent Lloyd LaFountain III explains that the numbers are reported in aggregate and are not broken down by county, and they do not include foreclosures held by out‑of‑state institutions. A report issued by the bureau on December 27, 2011, says "there still is no clear trend or indication that the bottom has necessarily been reached" for the third quarter covering first residential mortgage loans held by Maine banks, which held more than 51,000 first mortgage loans. There were 319 first mortgages in process of foreclosure during that quarter.
"Local banks say there isn't a problem in Maine, but most loans were sold to the secondary market," says Cathy McKelway, a housing counselor with the Maine State Housing Authority for the past three years. "A lot of people got their loans through loan brokers that were then sold to mortgage‑backed securities." Those securities were the driving force behind the housing bubble that is one of the causes of the national and global recession. McKelway was a banker for 30 years with the Citibank foreclosure department.
There is no clear tracking system for mortgages held by out‑of‑state banks and other financial institutions. Mortgage Bankers Association (MBA) Associate Vice President of Loan Administration for Public Policy and Industry Relations Vicki Vidal explains that the numbers are complicated. Each state has its own laws, which adds to the complexity. A foreclosure can take years, and trying to track it backwards is a monumental task. Properties "can go in and out of foreclosure." She adds, "I wish we did have the numbers, because it would help with data." She and LaFountain both caution that using national foreclosure numbers can be misleading.
RealtyTrac, for example, counts "each foreclosure action as a separate foreclosure, which includes first and second mortgages. The issue would be trying to decipher it," Vidal adds. A site that may be more accurate, she suggests, is Hope Now, an alliance of HUD approved counselors, mortgage companies, investors and other mortgage market participants.
The Center for Responsible Lending, which uses Maine data from Hope Now and MBA, has data showing 18,459 past due mortgages ending the first quarter of 2010. Foreclosure inventory for the same period was 6,539, but most alarming was its projection into 2012, with foreclosures expected to number 23,093 from 2009‑2012. HUD numbers from 2007 through the first half of 2008 were used in a report, "Foreclosure to Homelessness 2009," noting that out of Maine's approximately 750,000 housing units, 296,368 have loans, with 36,090 being subprime. Of those, 18,510 were 30 days or more delinquent. The report estimates 8,466 foreclosed loans for just that time period. The 2010 U.S. Census shows that Washington County has 23,000 homes. Using percentages from the report generates an estimate of 658 foreclosures in Washington County for the period of 2007 through the first half of 2008.

Help for homeowners
Through the Washington Hancock Community Agency referral process McKelway works with Washington County residents who have been threatened with foreclosure. Her services are free. She has heard from about 350 over the past few years. She explains how the foreclosure process works. "People need to call right away when they get that 90‑day letter. Once the 90 days have passed, it gets really quiet. Collectors stop calling because if they accept payment, they have to start the foreclosure all over again." About 30% of the people who call McKelway for help never follow‑up, either because they become disheartened by the amount of paperwork involved, or they think that getting no word from the bank means that "everything's okay."
When McKelway is helping a homeowner sort through the foreclosure paperwork, "I'm rarely talking to a local bank. When I have the luxury of talking to a local bank, I'm talking to a decision maker. ... Larger banks [out of state] don't have staff who always know [the state's laws], so the information they give can be incorrect and confusing. Even for someone like me, who was a banker for 30 years, it can be a long, confusing process." Of the people McKelway helps, about 25‑30% end up in bank modification. Bank modification resolution can take from six months to three years, she explains. "I do find that local banks try really hard, but almost no one gives someone two to three attempts before moving on."
The housing counselor will work with a homeowner to understand where they are in the foreclosure process and will create a balanced budget in comparison to a current budget. The balanced budget shows the homeowner what cuts need to be made to pay off their debt in a sustainable manner. "I look at anything and everything" to help the homeowner, whether it's getting rid of a cell phone or referring the client to the food pantry to cut down on food costs.
McKelway's experience working with homeowners has led her know that "if they are determined to keep their house and work hard at it, I believe they can be successful. But it's a time‑consuming process." Using a free HUD‑approved counselor like herself will go a long way. "HUD counselors can speak 'banker,' which is Greek to most people." Most importantly, she says, "They don't have to go through this alone. It can be such a relief to just talk to someone, because the stress can be terrible." Beyond that advice she notes the importance of a homeowner working with a reputable agency. "Don't pay anyone. There are people who take money up front, and they are usually not licensed in the state. There are scammers out there. They make it sound so easy, so sure. It's not easy. They might say they're an attorney. If it sounds too good to be true, it definitely isn't good."