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Foreclosure Mediation Program Saves Parsonsfield Home

January 19, 2010 - AUGUSTA -- Tracy Camden built his five-bedroom colonial house in Parsonsfield himself, with money he earned from trucking.

"When I built this house, I owned it outright," he said. That was 18 years ago.

Like many Mainers at that time, he did not have a credit card. He figured that if he paid cash for everything, he would have good credit when needed.

But 15 years later, he was facing foreclosure. First, he had mortgaged his house to buy a car, because he could not get a normal car loan without an established credit history.

"It was the stupidest thing I ever did," Camden said. "The next thing I knew, everybody was giving me credit cards, and the interest rates kept going up all the time."

He said that he did not always understand the forms he signed, and he blames predatory lenders for part of the problem. He took out a second home-equity loan to build an addition for his family; he and his wife have had three children, and adopted another five.

One son has diabetes, and without health insurance, they wracked up $50,000 in medical bills, he said. The family borrowed to pay that debt.

Before long, Camden owed around $100,000.

His payments shot from $1,100 a month – already more than half his income – to $1,600 a month. He contacted his lender in the summer of 2008 and said there was no way he could make the higher payments.

He struck a deal, he said, to pay $1,100 again. If he made the first three payments on time, the reduction would be permanent.

Instead, after three months, the lender sent him a letter saying he had to pay $1,600 again, plus late fees, he said.

He called Pine Tree Legal Assistance, a low-income legal advocacy group. For a year, attorney Chet Randall tried to work with the lender to rewrite the terms of the mortgage.

"I tried for months and months to get an affordable modification for the family but couldn't get them to make a decision and tell us what they were going to do," Randall said.

But then last spring, a bill was passed making Maine one of the first states with a program that requires creditors to appear at foreclosure mediation, either by phone or in person.

Randall requested foreclosure mediation on Camden's mortgage during a pilot project in York County in August, and the lender settled for a trial payment of $980 a month in November -- including taxes and insurance.

Randall credits mediation with getting the lender to finally act.

The mediations are now available statewide, but the legislation, sponsored by state Rep. Sharon Treat, D-Hallowell, has another provision that has yet to take effect in many cases because of an error in its wording.

The final notification a home-owner receives, 30 days prior to foreclosure, is required under law to go to the state Bureau of Consumer Credit Protection. This triggers the bureau to send a packet to homeowners, explaining their rights under mediation and providing information about nonprofits that offer U.S. Department of Housing and Urban Development-certified housing counselors.

The error in the law, however, created a loophole that allowed about half the foreclosure warnings to go unannounced to the bureau. Many scheduled foreclosures from larger banks, like Chase, Citi and Bank of America, fell through the cracks.

This is set to change, as updated emergency legislation has already garnered full committee support. It may be signed into law by Gov. John Baldacci as soon as Friday, said Treat.

The expansion of the bureau and hiring of housing counselors is financed by closing an exemption that had previously existed in the real estate transfer tax for properties sold after a foreclosure. The courtroom mediation is paid for with an added surcharge for foreclosures that are completed.

State officials said many people who are eligible for loan restructuring under federal programs are not getting help.

"We've got a lot of folks who ignore the problem. They don't talk to their lender, or if they do, it's not going well," said David Stolt, chief field investigator for the Bureau of Consumer Credit Protection. "We want them in this program."

Of roughly 800 people who have called the bureau to explore their options, he said, nearly 90 percent live south of Augusta.

"These folks up north just don't call," he said. "They're too damn proud to call."

He has also found a generational gap. People over the age of 50 tap their resources dry to stave off a foreclosure, whereas about half of the younger home-owners walk away, he said.

Camden, 50, said he and his wife considered doing that, when he was depressed and didn't see how to make things work.

"But then I looked at my wife and kids, and I saw we had got a lot of blood, sweat and tears in this. I'm not going to give it up," he said.

Today, he again is happily without a credit card and is making payments on time. "I encourage everybody, if they're going through this and they haven't talked to an attorney, by all means get on the phone and get on it," he said.

"People can save their homes. They just can't give up on it."

By ETHAN WILENSKY-LANFORD, Kennebec Journal January 18, 2010


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