The Next Wave
Some experts now anticipate a second wave of foreclosures in Connecticut, especially if the job market continues to languish.
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When tenants for low-income apartments and multifamily dwellings failed to materialize—or did but weren’t willing to pay exorbitant rents—many investors simply walked, leaving the properties to languish. Streets in nearly every part of Waterbury, in fact, are dotted with houses that have been foreclosed by lenders trying to maintain growing inventories of houses in their portfolios.
When Pappas went to show foreclosed houses one day recently, she found one with the back door broken off the hinges and another, where a door had been left open, stripped of its plumbing. “The impact on the neighborhoods is terrible,” she says. “Unoccupied properties get a look about them and they’re affecting value across the board.”
Early on, blame for the recession and the first wave of foreclosures fell squarely on sub-prime mortgages—loans with a greater-than-average risk of default—and sub-prime borrowers. But the crisis has gone far beyond the sub-prime mess, now engulfing laid-off workers and those whose savings and credit lines have been sapped by the economy, or illness, or both.
“Mary,” who spoke on condition that her real name not be used, bought a two-family house 15 years ago, taking a 30-year fixed mortgage through People’s United Bank that she managed by living in one half of the house and renting out the other. That worked until she was diagnosed with multiple sclerosis a few years ago and lost her job.
“I was struggling to keep up with my payments and the stress was causing my MS to kick up,” she says. “I needed help.”
Fortunately for her, Waterbury is one of the few Connecticut towns offering distressed homeowners some relief.
Mary contacted the Neighborhood Housing Services of Waterbury Inc. (NHSW), which serves residents of the city and surrounding communities. Founded in 1980 to revitalize neighborhoods and provide housing advice, the nonprofit revised its programs three years ago in response to rising foreclosures. To date it has counseled some 2,500 homeowners in trouble.
“We can’t help everyone stay in their home, but we can help everybody mitigate their losses,” explains Vivien Becker, CEO of the agency.
Martha Ross, a foreclosure assistance counselor with NHSW, submitted Mary’s “packet”—her financial information—to the lender, who granted her a trial modification of her loan and is now reviewing her file for permanent modification. “She missed a couple of mortgage payments because of her illness, so the point now is to try to get her more affordable payments,” Ross says. “There’s no way to honestly tell how long it will be—it can take anywhere from two weeks to months and months—but I definitely see light at the end of the tunnel for her.”
Mary continues to live in her home, awaiting the outcome. “Thank God,” she says of the assistance. “Neighborhood Housing has given me peace of mind; it’s given me hope.”
In effect, Ross is acting as a “mediator” between her client and Litton Loan Servicing LP, which bought Mary’s mortgage from People’s United Bank. She follows up with Litton every two weeks.
The Connecticut Fair Housing Center operates in much the same way, though on a larger scale. The only statewide nonprofit agency of its kind, the center distributes free foreclosure manuals, conducts homeowner clinics, supports housing counselors and a network of pro-bono attorneys. In addition, Jeff Gentes actively argues clients’ cases—as many as 30 to 40 at any one time—with banks and lenders.
The state provides the same service through a “mandatory mediation” program, under which the Connecticut Judicial Branch appoints a mediator to work with owners of primary residences (investors and developers aren’t eligible) who are in foreclosure.