Each week, Tom Birch spends hours meeting with homeowners who know they’re falling behind. Many of them are beset with worry. At no charge, Birch talks to them about their finances. He gives them handouts with titles like, “What to Do When You Default on Your Mortgage.”
Birch worked in the mortgage business for 35 years, but he’s now the Director of Homeownership Counseling for Neighborhood Housing Services, Inc., a nonprofit community development organization in Boise. Foreclosure prevention counseling is one of his chief responsibilities. It sounds like an important service, but we here at StateImpact wondered: when a family is deep in the hole and in danger of losing a home, how much can someone like Birch do? As it turns out, quite a lot.
Q: First, what does foreclosure prevention counseling consist of?
A: It’s awareness of where the borrower really is. Borrowers that I see, about 99 percent of them, have lost a job. They had high credit scores when they got their loans, but they are in a new situation, because of job loss or a reduction in wages or hours, and they don’t know what to do. They’ve tried to make their payments. They wish they could make their payments. And when they come to see us, they basically are paralyzed.
Q: When someone sits down across from you and says, “This is the predicament I’m in, and I have never dealt with this before,” what’s the first thing you say?
A: You are not alone. You’re just like people that I talk to every day. There are some options, and the first step is to know where you’re at.
Q: In other words, you want to know the details of their financial situation. When you say they have options, what are those options, generally?
A: Well, the whole process is numbers. The first thing we do is get a very detailed budget. We have them fill it out at home, before they come to see us. Then we go through it item-by-item to get a good idea of where the money goes.
The numbers show us what kind of a situation the person or the family is in, and what causes that situation. Is it the house? Or is it other debt? We need to understand what it is so they can make changes to their situation.
Q: Part of what you’re assessing is their eligibility for loan modification programs, is that right?
A: That’s right. In most cases, loan modification is under the federal Making Home Affordable Program. And then lenders also have programs.
Q: About what percentage of people that you meet with actually do have the option of loan modification? And what percentage will, in the end, lose their homes?
A: Roughly half of my clients, when they come in, will get a modification or sell their home on a short sale. In other words, they won’t be foreclosed on.
Getting the modification is one thing. But everyone who comes to see us needs to know how to move on. They need to understand what to expect. One of the things that we do early on in our process is to go through the foreclosure process and the timeline. For example, we tell them that in the first 60 days, they’re going to get a lot of collection calls. We can help our clients by helping them understand where they are in the process, so they don’t have to guess.
Q: You have said that one of the most important functions you can serve is to shake people out of stasis, and make them understand that they have to make decisions.
A: That’s right. They come in, and they don’t know what to do. They don’t know what their options are. The only option they’ve ever had is to make the payment. And now they can’t.
Some clients will come in and say, “Should I move out today?” We tell them that there’s no reason to move out today. They’ll just have to start paying rent sooner. We tell them that if this is what it’s going to be, if they are going to have to move, then they can plan when they’re moving. We help them make their own decisions as opposed to feeling like they can’t make any.
Q: In other words, you’re trying to be both a realist and an advocate. You’re saying, “These are the circumstances you’re dealing with, and these are your logical options, and these are the options which most benefit you.”
A: That’s exactly what we’re doing. We’re trying to get them to start making decisions that will help their families.
Q: Many of the people you talk to are used to paying their bills on time. Sometimes, you’re telling clients that one option is to stay in the home rent-free during the foreclosure process. How many people have a hard time with that idea?
A: Almost all of them think it’s the wrong thing to do. But they also don’t feel they are completely responsible for their situation, because there’s instability in the economy and they’ve lost a job. In a lot of cases, if they can stay in a house through the end of the foreclosure process, then they will be better positioned to start over again. They’ll be able to save for rent later on, when they are no longer in the home.
Q: A lot of people wouldn’t have the stomach for what you do. You spend a lot of time talking to people who are in pretty bad situations.
A: You might be right, but I am excited about doing what I do because I am helping people. Not just families, but lenders, too. The mortgage business has been good for me over my career, and the whole industry is having problems. If I can help someone move on, then I feel I am winning the battle.