What Do You Do When Your Home Has Been Foreclosed?
TUESDAY, DECEMBER 23, 2008
April Newbauer

April Newbauer, Attorney-in-Charge of the Civil Practice's Queens Neighborhood Office, discussed the plight of low-income New Yorkers during a National Public Radio segment on "What You Do You Do When Your Home Has Been Foreclosed?"

 

National Public Radio
December 18, 2008
Foreclosures

The latest statistics show nearly 260,000 foreclosed properties last month. Behind that very big, faceless number are lots of real people. Losing your home can be a devastating experience, especially for poor families who have few resources and often don't know where to go. Cindy Rodriguez of member station WNYC recently spent time with one family on the brink of foreclosure in Queens.

CINDY RODRIGUEZ reporting:

Visitors to New York City don't go to Jamaica, Queens. They pass through it on their way from JFK Airport to Manhattan. There are few high-rise apartment buildings here. Instead, modest, single-family homes fill block after block. One of these homes belongs to, for now, BB Wasadally. The 38-year-old has four children, all of them girls. The oldest is 11, and the youngest is still a baby.

She offers a quick tour of her home with the girls trailing behind. The kitchen is a good size, but it's old and needs a few repairs. Outside, the backyard is just a sliver of space. Upstairs are the bedrooms. The three girls share one room. They all sleep in the same bed. Wasadally's father is resting in another room. The 84-year-old has Alzheimer's, and his daughter pokes her head in to check on him.

Ms. BB WASADALLY (Homeowner): You OK? Huh? Daddy? You want something?

RODRIGUEZ: Wasadally says she bought this home for $550,000 in 2006. It's worth much less today. She says she was given a loan for the full price and it was based on her annual income of just over $22,000, poverty wages for a family her size.

Ms. WASADALLY: I jumped at the opportunity, because I didn't have to put anything down. And then I was going to get a place for my kids to have their own room. My mom and dad could come with me. And it wasn't something that I thought ahead that it's going to be too much or whatever. Didn't know what I was getting myself into.

RODRIGUEZ: Wasadally thought she was getting a good deal. Prior to buying a home, she and her kids had been living with a sister nearby. All of them shared one room. In this house, her monthly mortgage payment is about $5,000. Wasadally cobbled it together for nine months with help from her mother, who receives disability, and her sister.

But then she could no longer pay.

Ms. WASADALLY: So when I went to reach legal aid, this is when I'm finding out that the foreclosure had started (unintelligible). And now they're trying to sit down with me to see what's going to happen. I don't know how it's going to be, how I can help in any way, because I just lost my job. So I have no income right now.

RODRIGUEZ: Wasadally says she worries most about her elderly parents, especially her father, who needs a nurse and a home attendant. While his illness keeps him from understanding the dire situation, his wife, 78-year-old Carim Watty (sp) Wasadally, is acutely aware of what's going on. She came to the United States from Guyana about 20 years ago. She says she was happy when the family moved in, and she and her husband were given two rooms upstairs.

Ms. CARIM WATTY WASADALLY (Mother of Homeowner): They saw that me (sic) worried. Where we can go? Where we can go? Nowhere, so we were every depressed (unintelligible).

RODRIGUEZ: A tear streams down her face as she talks. Her daughter says the only place that she could afford that's big enough for the whole family is in public housing. She has an application but hasn't finished filling it out yet.

About a 10-minute drive away are the offices of legal aid. This is where Wasadally first came to get help. April Newbauer and three other attorneys do their best to deal with the flood of families facing foreclosure.

Ms. APRIL NEWBAUER (Legal Aid Society): This is--this is October 29th's load which have to be inputted into the computer.

RODRIGUEZ: All these applications are from families who need help. Some have stories similar to Wasadally's. Newbauer says while it should be shocking that a person making just over $20,000 could get a half-a-million-dollar loan, it's not anymore.

Ms. NEWBAUER: In the last couple of years, there were, of course, no-doc loans, no-income-verification loans and brokers out in the field who were trying to make as many loans as quickly as possible. And, unfortunately, a lot of unsophisticated borrowers relied on them as real estate professionals to tell them whether they could afford a particular house.

RODRIGUEZ: Newbauer says poor people were specifically marketed to, especially in minority communities, such as Jamaica, Queens. She says, so far, the only thing her staff hasn't seen yet is someone on welfare with a home loan, though there was one person who got a loan with no other income except a monthly disability check. This tall, slim attorney dressed in a purple suit says many of these families are also in credit card debt and behind on their taxes.

BB Wasadally is still not ready to fully accept that she may have to move soon. Outside her home, Wasadally and her daughter admire a white wire reindeer and snowmen. Wasadally says it has crossed her mind that this could be the last time she decorates this house.

Ms. WASADALLY: That's why I really did the decoration--for the kids to please have a good Christmas.

RODRIGUEZ: She will know more in a few days, when she meets with her lender's attorney. Wasadally has packed nothing, and she says she still has not told her daughters exactly what's going on, though she admits they must have some idea from overhearing her conversations. The 38-year-old understands she has many people depending on her right now. But she just wants to enjoy what she has, even if it might be ending soon.

She is partly embarrassed, partly ashamed but says she's not angry at anyone, because at least she got to live this way for a little while. But eventually, she'll have to fill out that public housing application.

For NPR News, I'm Cindy Rodriguez in New York.

COHEN: Let's look now at the main federal program to help people avoid foreclosure. It is a failure--that's the conclusion of the man who oversees it. He's on the line now. Housing Secretary Steven Preston.

Welcome to the program.

Secretary STEVEN PRESTON (US Department of Housing and Urban Development): Thank you very much.

COHEN: Now, we're talking about the Hope for Homeowners program that went into effect in October. And essentially, it lets homeowners get into a fixed, 30-year mortgage at the current value of their house. And it was supposed to help, I think, around 400,000 people. But only 312 so far have signed up.

Sec. PRESTON: Congress passed this program back in July. Very well-intentioned. But they really dotted the "I"s and crossed the "T"s on the program, and as a result, it's expensive for the borrower, it's expensive for the lender, and it's very complicated to use. We're making additional recommendations for improvements to the program. But Congress will need to address those.

COHEN: Now, this is a program that one housing advocate told me looks like something Tony Soprano would have set up, because the provisions for the homeowners are so onerous. In other words, there are very high closing costs and very high percentages on the loans that they have to pay, and homeowners would have to share half the profits, if they ever sold the house, with the federal government. Are you addressing any of those provisions?

Sec. PRESTON: I wouldn't have used the Tony Soprano comment. I mean, part of this was to address other concerns in the program, but it's every inflexible. So what Congress has done is improve the program to encourage more lenders to use it. I think, as it was structured before, it was so onerous for lenders that they would have been more likely to foreclose rather than put people in the program. I think the next step that can't be addressed without Congress' support is to make it more affordable.

COHEN: Well, so why didn't Congress come up with something that both lenders and homeowners would like?

Sec. PRESTON: When you actually go through the details of why Congress structured it this way, there are a lot of things that made a lot of sense. Now that it's being implemented, it's just too tight for people to use.

COHEN: Well, Secretary, if I'm a bank, what would--why would it be in my interest to re-write a loan under a Hope for Homeowners program, take a loss, if there's a possibility with a new administration and a new Congress that the federal government will come in and use some TARP money to bail out the whole thing to take these loans off my hands?

Sec. PRESTON: There is an incentive for banks, generally, to make those loans more affordable and take some economic loss if the cost of foreclosure is greater. Banks do not want to own your house. That's why we consistently urge borrowers, if they think they can't make their payment, to get into a housing counselor to help them understand what their alternatives are, give HUD a call, and go into the bank to say, 'I need to work out a better solution.'

Because banks should be prepared to find a middle ground if there's something that can be reached.

COHEN: But I have to say in a lot of interviews that we've done--and, in fact, the family that we just heard from--they try to renegotiate their loans with the banks, and the banks seem unwilling to do so.

Sec. PRESTON: Well, it's hard to--you know, for me to comment on any specific case. But let me just make a couple of points. We are seeing hundreds of thousands of people get modifications. And, in fact, it's now into the millions. So we know that many lenders are addressing the issues.

However, we still hear problems. A lot of people can't get their lenders on the phone. They can't get them to spend enough time with them to do a good modification. We've consistently urged the private industry to make sure that they have the capacity to help people in need. And if people aren't getting that help, that's why we want them to make sure to come into counselors, because they're the people that can sit down, look at your financial information, look at the terms of your loan and help you understand what your alternatives are. And there--most of these housing counselors are free.

The other thing I want to caution your listeners about is that if somebody wants a big, upfront fee to help you or wants to put you in the greatest loan that you've ever heard about and you 'just have to sign something here,' make sure you understand fully what you're getting into.

COHEN: Do you think that the government should come in and buy up a lot of these loans and just take it over?

Sec. PRESTON: My view is if you do that, it needs to be in a fairly targeted way. I don't think the federal government should be buying loans at face value. If they do that, I think they should be buying them for what they're worth. The federal government does have those loans in their portfolio, however. It does have the latitude, then, to help those homeowners directly.

And so that is clearly one of the ideas that's under heavy consideration, as well as a couple of other plans. People in the administration, including myself, are working actively with the incoming Obama administration to understand what the implications are and whether or not we think they'd be effective.

COHEN: Steven Preston is Secretary of Housing and Urban Development. Thank you very much.

Sec. PRESTON: Thank you.