May 12 , 2008
Philly.com

As mortgage noose tightened, these 3 slipped its grip

By Dan Geringer

WHEN JANICE Freeman bought her $65,000 fixer-upper in Overbrook six years ago, she was working two human-services jobs, including one with lots of overtime, and had tenants paying $1,000-a-month rent.

She was proud that buying her first house after a lifetime of renting provided a "real home" for her daughter, her foster child and her grandson.

But after she refinanced her mortgage three years ago to make necessary major repairs, Freeman lost the job with the overtime. Four months later, she lost her tenants.

Her income was cut in half while her $1,147 monthly loan payments were double what her original mortgage payments had been.

She fell $3,500 behind and was receiving foreclosure threats along with a lot of unsolicited offers to "save" her home by declaring bankruptcy.

"I think that's cruel," Freeman said. "I believed that declaring bankruptcy would save my home, wipe the slate clean and give me a fresh start. I found out that's not true."

Swollen by bankruptcy legal fees, her $3,500 bad debt ballooned to $20,000. Her house was scheduled for sheriff's sale last month. She needed a miracle.

Freeman and hundreds of equally desperate Philadelphia homeowners have found that miracle in the person of Common Pleas President Judge C. Darnell Jones II, who recently issued a court order that may become a national model for saving the homes of people drowning in debt.

Whether they succumbed to the teaser-rate adjustable mortgage loans that suddenly readjusted skyward or predatory lenders or deceptively expensive bankruptcies or fragile personal finances that collapsed due to loss of income - all of them could lose their homes to foreclosure if they don't grab the lifeline that the judge is tossing them.

Judge Jones ordered lenders to sit down with foreclosed homeowners in front of a judge and make a good faith effort to renegotiate mortgages reasonably to allow those homeowners to keep their houses.

Jones decreed that lenders can only put an owner-occupied home in a sheriff's foreclosure sale if that good-faith effort fails.

Facing a sheriff's sale of her home on 63rd Street near Lansdowne Avenue, Freeman reached out to the nonprofit Philadelphia Unemployment Project (PUP), where counselor Pamela Kennebrew called Freeman's lender, who quickly agreed to work out a realistic payment plan that would enable Freeman to keep her house.

"When you're delinquent with your mortgage," Kennebrew said, "you get a lot of offers telling you, 'File for bankruptcy. That's the only way to save your home.'

"They fail to remind you that if you file for bankruptcy, you still have to make your mortgage payments plus you have to make payments to a trustee that disburses your money to all your other creditors," she said. "Plus, you have to pay upfront money to the bankruptcy lawyer and that's money you don't have."

Freeman's mortgage company is in the process of modifying her loan, Kennebrew said. "Ms. Freeman's delinquent amount is now high. We hope to add it to the principal and amortize over 30 years or reduce the interest rate to make her payments affordable and make this a win/win situation for both the lender and Ms. Freeman."

Bad to worse

Freeman hopes that PUP will soon do for her what it just did for Helen Shiffler, a beautician from Fishtown, who bought her first house in 1985 on Cedar Street, a couple of blocks south of Lehigh Avenue, where she lives above her beauty shop, The Hair Pub.

She paid off her 1985 fixed-rate $45,000 mortgage in 15 years, but in 2006, she needed to borrow $75,000 to address family financial problems and business debt at two other beauty shops she had opened.

Her mortgage broker said that because of her credit problems, the best he could find was a $100,000 loan at a fixed rate of 9.5 percent for 30 years.

But at settlement, Shiffler discovered that the promised 9.5 percent was really 11 percent and the promised fixed rate was really adjustable.

"When you're in a desperate situation, you'll do anything," Shiffler said, explaining why she signed the papers.

She soon fell behind in her $970 monthly payments and started getting foreclosure letters from the lender, Countrywide Financial.

She called PUP, where her counselor, Brendi Lopez, discovered that the seven back-taxes liens against Shiffler's property that were supposed to have been paid off at settlement were still active.

Lopez also found that Shiffler's broker had pocketed several thousand dollars in extra commission for deceptively steering Shiffler into a high, adjustable-rate loan.

"I'm sitting there watching the TV news one night and there he is in handcuffs, being led away by the police," Shiffler said. "I said, 'Oh, my God! That's my broker!' "

Last December, a month after Shiffler walked into PUP, her counselor made an all-night drive to Cleveland with several colleagues because they'd heard that Texas-based Countrywide Financial, on the invitation of Cleveland housing activists, was spending a day there working out problem loans on the spot.

"We drove for 16 hours to sit down with them, face to face," Lopez said. "It was worth it. On March 31, we received Ms. Shiffler's workout. They lowered her double-digit adjustable interest rate to a fixed 8.5 percent for 30 years, which made her monthly payments reasonable. They saved her home and her business."

A rise, then a fall

 

While Shiffler was the victim of a predatory loan broker and Freeman was the victim of an ill-advised bankruptcy, Raymond L. DeShields almost lost his home because a loss of overtime that he depended on drained his financial resources while a near-tragic family situation drained his ability to replace the lost overtime with a second job.

After living in rental apartments for years, DeShields, a Verizon database clerk, was finally able to buy a home for his wife, LaTocka, and their two young children in June 2005 - a three-bedroom house on 79th Avenue near Ogontz Avenue in West Oak Lane.

He and his wife looked at three dozen houses before they found it. "You know how you walk into a place and you feel this is it?" DeShields said. "That's how I felt when I walked in there. I felt the warmth. It felt like home."

Although other people were bidding on the house, DeShields feels that the owner, who had lived there for almost 40 years, chose him because she saw that he carried a Christmas photo of his family on the back of his Verizon ID card. She told him she sensed how much he loved his family and how much it meant to him to provide a good home for them.

DeShields paid $83,000, signing a 30-year mortgage at a fixed rate of 8.62 percent, which came out to $852 monthly.

He knew he could manage the payments because he was steadily making $800 a month in overtime.

But shortly after he bought the house, the overtime ended. And then his wife, who had given birth to their third child, was diagnosed with breast cancer. The foundation of DeShields' finances crumbled.

"She had to have surgery, then chemotherapy," he said. "We had lost our first son to leukemia in 1997. I couldn't stand the thought of her being snatched up from me, too.

"I was just shutting down. I was totally focused on her. Watching her, helping her, not knowing if she was going to make it - I was a wreck. Everything else began to suffer."

Trying to keep up the mortgage payments without the $800 in monthly overtime meant falling behind in his utility bills. "I wasn't intentionally breaking payment arrangements with the utilities," he said. "I was making promises and just hoping I could keep them. I spread my money out as much as I could until I reached the point where there was nothing left to spread and I didn't know what to do.

"With my wife being sick, I couldn't get a second job," DeShields said. "She was weak from the chemo. She had the baby all day long. I couldn't just come home from work, turn around, go right back out to a second job and leave her there with our 8- and 10-year-old, and the baby. I had to help her at home. I needed to make extra money but I just didn't have the time to do it."

DeShields fell three months behind in his mortgage payments. He did not answer calls from the lender, First Franklin Financial in Pittsburgh, "because I didn't have the money and I didn't know what to tell them," he said. "I didn't want to deal with the fact that I was so far behind and I was a failure, letting my family down."

The foreclosure notice arrived with a list of counselors to call. By the time DeShields started calling, a few days before foreclosure, several counseling agencies told him it was too late to save his home.

But when he called Diane Gaffney at Consumer Credit Counseling Service, "She talked to me like she'd known me for years," DeShields said. "I told her my job is to provide for my family and the fact that I couldn't was hard to digest. She felt my pain. She understood that we were a good family, just fallen on hard times.

"She called First Franklin and explained my family situation. They said if I gave them $1,300 that day and another $1,300 in 30 days, they'd stop the foreclosure, take me out of their default department and put me back on a regular payment plan.

"Had I called on my own, they probably would have given me a hard way to go," DeShields said. "But when Ms. Gaffney explained my situation, they understood that I was serious about saving my home."

DeShields' wife had surgery in July. "She's doing fine now," he said. "We can actually exhale and enjoy life again."

He's working overtime again. "I am proud that I am able to support my family," he said. "I am so grateful to Ms. Gaffney. We would have lost our home without her help."