The Star-Ledger

Forclosure Is Forestalled For Dover Mom

The Star-Ledger — Sunday, August 24, 2008

By Brad Parks / The Star-Ledger

Marisol Perez already had stopped answering her phone, knowing it would be just another hectoring creditor. Her hair started falling out from the stress of working two jobs but still not being able to cover her monthly mortgage payment.

Then she got the letter that jabbed her in the gut: A lawyer's office informed her it was foreclosing on her house.

"That's when it hit me: I'm going to be homeless with three kids," said Perez, an X-ray technician who lives in Dover.

It's the kind of realization that has been hitting more families around New Jersey, where foreclosures are up 140 percent over last year, according to the latest data from RealtyTrac, a California firm that monitors foreclosures nationwide.

But there's another side to that story, one that's offering encouragement to distressed homeowners: Loan modifications also appear to be surging.

Sometimes known as "workouts," modifications involve banks negotiating new terms – often lower interest rates or longer terms – with borrowers who otherwise would lose their homes.

America's largest home loan provider, Bank of America, which recently acquired troubled lender Countrywide, has announced a goal of modifying at least $40 billion in mortgages by the end of 2009, helping roughly a quarter of a million families stay in their homes.

"Right now, the banks seem to be willing to make deals," said Bonita Holmes, loan counseling director for New Jersey Citizen Action, a nonprofit group that helped 290 customers out of foreclosure in the first half of this year. The group is on pace to triple last year's numbers.

"We're having the most success when people come to us early," Holmes said. "Don't wait until you're already in arrears."

When Perez and her fiance bought in Dover two years ago, foreclosure was the furthest thing from their minds. They put down $4,000 on a $245,000 home and took out two fixed-rate loans, one at 7 percent interest, the other at 9 percent.

The payments were doable. Then Perez said she and her fiance broke up, he insisting she buy out his portion of the house. Perez refinanced, switching to a subprime loan with an interest rate of 10 percent and monthly payments of more than $2,500.

She started working a second job – part-time at AutoZone – but it still wasn't enough.

"I had some savings, but that went pretty quick," Perez said. "Between the bills, the food, the kids ... I just couldn't keep up."

Then, in November, she got that letter. That evening, Perez happened to see an advertisement for (888) 995-HOPE, a hotline for people in danger of losing their homes that is run by the Homeownership Preservation Foundation.

Her call to the hotline got her a referral to Brand New Day in Elizabeth, one of 12 nonprofit organizations in the state recognized by Neighborworks, a national non-profit group Congress established to provide support for community revitalization.

But, at first, it didn't look good.

"I thought she was going to lose her home," said Penny Meredith, Brand New Day's community education coordinator.

Meredith submitted a workout package to Aurora Loan Services.

In March, Aurora turned it down, saying she still didn't have enough income. So Perez, who had quit her job at AutoZone, once again got a second job, this time at Walgreens. Then in April, she got the notice a sheriff's sale had been scheduled for June 26.

Brand New Day helped her apply for a pair of two-week adjournments to help give her more time to come up with a workout package with Aurora.

Olga Montero – one of five certified loan counselors now working for Brand New Day – had taken over Perez's file by that point. She submitted another workout application, using Perez's extra income from Walgreens.

But, again, it was turned down. The loan servicer said her monthly expenses were still $270 too high.

They re-crunched the numbers, looking for places to find that $270. And they did: A utility bill had been reported as too high, a quarterly water bill had been counted as if it was monthly and so on.

Meanwhile, the clock was still ticking on the sheriff's sale now scheduled for July 24. By the night of the 23rd, Perez found herself throwing her belongings into boxes. She rented a storage facility and made arrangements with a friend to take in her family.

Then, about two hours before the sale, Brand New Day got an e-mail from Aurora: Her workout application had been accepted.

Under the new terms, the interest rate had been slashed in half, to 5 percent. The loan term was switched from 30 years to 40. The new payment was $1,768 a month – still a squeeze, but doable.

"These things don't always work out this well. We're thrilled when it does," said Marshall.

"The best part was when I got to tell my kids we were going to keep the house," Perez said. "My kids can still say, 'I'm going home.'"

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