New Haven Independent

In search of suggestions for a federal effort to address the fallout from the subprime mortgage crisis, New Haven U.S. Rep. Rosa DeLauro (top photo) stopped by Sherman Avenue Thursday. She heard Brown (pictured below her) and two New Haven homeowners offer tear-filled descriptions of how they faced losing their homes, then found a way to hold on.

DeLauro was attending a “listening session” at the HomeOwnership Center run by Neighborhood Housing Services (NHS).

City government is trying to figure out how to handle a surging wave of foreclosure lawsuits; the mayor has aggressively ignored a key component of the problem caused by his own administration, aggressive debt-collection tactics by the regional sewer authority. Meanwhile, NHS, a not-for-profit housing builder, has started actually helping dozens of families racing to keep their homes.

Some 125 foreclosure-facing homeowners have contacted a new “Rescue Center” NHS set up to handle the crisis and work with lenders to keep people in their homes.

People like Celestine Brown. Brown, 39, told DeLauro about how friends convinced her to “refi” — refinance — her mortgage. “Do the refi. Do the refi. You’re going to be able to pay off your bills,” they told her. So she did, and went from a 6 to 8 percent interested rate.

Meanwhile, she was laid off from ‘“a very good job” as a billing investigator at SBC/ AT&T. Some days she could get temp work; some she couldn’t. She fell behind on her mortgage — which had a “reset.” That means the interest rate was about to soar. (Many homeowners were lured into taking out mortgages that seemed affordable, but which suddenly ballooned after a couple of years.)

Desperate, she called a number she saw on a TV news report. It was Bridgette Russell’s number. She runs NHS’s Rescue Center. Russell contacted Brown’s lender, who agreed to a “forebearance” plan. The lender agreed to hold off on the foreclosure while Brown paid three months of the bill, with some help from NHS. At the end of the period, the lender agrees to modify the terms of the loan at a lower rate.

Meanwhile, Brown has attended Russell’s homeowner classes, including sessions on budgeting.

“The mortgage company wouldn’t listen to me. But they listened” to Russell, said another homeowner at Thursday’s event, Mary Levey. She lost a $50,000 job, got sick, and faced losing her house. A mortgage broker convinced her to perform a complicated quit-claim sale to her husband combined with a new loan that she was told would work her way out of debt. Instead, “We got caught in a trap,” she said. Her monthly mortgage bills — originally $1,000 — is now $1,700. Russell convinced the lender to a gradual plan to modify the terms.

A “Hard Struggle”

Not all lenders agree to work out such plans. Yvonne Hammonds’ didn’t.

Hammonds, an outreach worker at the Yale Child Study Center, told DeLauro how she bought a two-family house on Shelton Avenue eight years ago. She had gone through a divorce. She had four kids, and an ailing mother on dialysis. They were leaving public housing, where Hammonds’ brother had been murdered.

It turned out the Shelton Avenue house had severe plumbing problems that had been hidden at the time of the original sale, she said.

Her bills mounted. She refinanced. She didn’t understand the terms; it was a classic subprime loan. She ended up having to pay $2,400 a month; she had paid $700 a month on her original mortgage.

Her other bills mounted, too. The Water Pollution Control Authority has added hundreds of dollars to her legal bills by suing for foreclosure over unpaid back bills as part of an unusually aggressive debt-collection campaign that is enriching local lawyers. (Hammonds’ story was among those originally told in this article about WPCA targets.)

Like many subprime loans, Hammonds’ mortgage was sold to a company she’d never heard of. NHS’s Russell wasn’t able to negotiate a modification plan with the lender. But NHS is helping Hammonds pay some of her bills for now. The goal is to establish a years’ worth of solid credit so she can refinance her mortgage — with a legit lender, like the Connecticut Housing Finance Authority.

“The struggle is very, very hard,” Hammonds said. “I have so many friends who have lost their homes just in the last six months.”

After listening to their stories, DeLauro spoke of how she and other members of Congress are looking at what the federal government can do to address foreclosures. The discussion included requiring mortgage companies to follow the same truth-in-lending and other regulatory rules required of car salesman and peddlers of IRA and 401K plans.

Statewide, DeLauro noted, third-quarter foreclosures leaped an astounding 920 percent in 2007 from a year earlier. Experts expect the crisis only to worsen. To see a neighborhood breakdown of New Haven foreclosures and the list of top lenders involved in them, click here.

DeLauro agreed with the three homeowners about one big lesson of their experience: People need more “education” about how to buy a house before they do it, the kind of classes that takes place at NHS, for instance.

Looking For $$$$

NHS’s Rescue Center was set up with $43,500 originally donated by Countrywide, one of the largest companies caught up in the mortgage crisis. (The money was filtered through a national group of which NHS is a part, called Neighbor Works.)

So far, according to Bridgette Russell (pictured with NHS chief Jim Paley), the center has received 125 calls for help. The center is actively working with “65 to 72” of those people.

In some cases Russell offers to help the borrowers bring their mortgages current in exchange for immediate new terms: a lower rate closer to the original, with no “resets” in the future. One man kept his house under that plan, for instance, with an interest rate lowered from 11.5 to 7.1 percent.

In most cases, like those discussed with DeLauro Thursday, lenders agree to a more drawn-out “forbearance” plan: Borrowers make three or six or 12 months of regular payments with NHS’s help, with either new mortgage terms at the end, or the possibility of refinancing elsewhere.

Chances are that NHS will continue to be flooded with calls from people needing help as the crisis mounts. (The number: 777-6925., ext. 20.) So NHS is looking for more money. It currently has a $100,000 grant request pending with Melville Charitable Trusts.

Read previous Independent coverage of New Haven’s foreclosure crisis:

• WPCA Grilled on Foreclosures
• WPCA’s Targets Struggle To Dig Out
• Sue The Subprimers?
• WPCA Hearing Delayed
• Megna’s “Blood Boils” at WPCA Tactics
• Goldfield Wants WPCA Answers
• 2 Days, 8 Foreclosure Suits
• WPCA Goes On Foreclosure Binge
• A Guru Weighs In
• WPCA Targets Church
• Subprime Mess Targeted
• Renters Caught In Foreclosure King’s Fall
• She’s One Of 1,150 In The Foreclosure Mill
• Foreclosures Threaten Perrotti’s Empire
•“I’m Not Going To Lay Down And Let Them Take My House”

The following links are to various materials and brochures designed to help homeowners avoid foreclosure.

How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.

For lawyer referral services in New Haven, call 562-5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.

Click here for information on foreclosure prevention efforts from Empower New Haven.