Facing foreclosure, Puget Sound families rush to hang on to their homes

It's like a chain-reaction pileup. Thousands of desperate homeowners — people like David Hall and Cheryl Miller — have fallen behind on their house payments and face foreclosure. They've turned to their lenders and local housing-counseling agencies for help, quickly overwhelming both.

As the mortgage meltdown continues to generate a swell of foreclosures, the desperate call for help is growing, Puget Sound housing counselors say. Statewide, August foreclosure activity was up 64 percent from the previous August, reported RealtyTrac, a foreclosure-information provider. That represents 2,762 households in the state in trouble.

While neither housing counselors nor lenders can help everyone, counselors stress that this message needs to get out: Some mortgages are being modified. Some homes are being saved. And there may even be money available to help Washington state homeowners who've fallen behind in their payments.

But homeowners need to be aggressive to get help before it's too late.

That's what Hall and Miller were doing recently when local nonprofit-housing agencies sponsored a free foreclosure seminar at a SeaTac conference center. It started at 10 a.m. Within 15 minutes all 100 parking spaces out front were full.

Hall and Miller were 60 days late on their mortgage payments — putting them a month away from the start of foreclosure — as they waited to meet with a counselor. They hoped their mortgage could be modified to require smaller monthly payments.

"This is terrible," Miller, a county employee, said of the descent into foreclosure. "I've never seen anything like this."

It's a far cry from the experience of buying their Auburn home in 2006, Miller said.

"The most exciting thing in the world ... like having a new child or winning the lottery" is how Hall described the purchase. They have two kids at home.

All was well until gas prices spiked several months ago, and Hall lost his truck-driving job. His boss couldn't afford to pour $1,500 in gas into his rig every three days, and Hall understood. He has yet to find a job, and he had to choose between paying their mortgage and feeding the family. Food won.

Other homeowners faced different circumstances.

When her adjustable-rate mortgage reset, the payments on Carol Clark's Kent condo rose from $1,297 to $1,825, including homeowners' dues.

A single mother with a good job and two kids in college, Clark fell behind. Late fees added to what she owed, putting her farther behind.

"I can afford my home if it gets refinanced at a fixed rate," she said, hopefully.

In a room packed with homeowners clutching notebooks thick with mortgage paperwork, nonprofit-housing counselors stressed that owners must contact their lender at the first hint of a problem. That provides the best chance of a successful solution, particularly for those facing an interest-rate reset.

"Some lenders will allow modifications to freeze or reduce the interest rate before the reset," said Erin Rearden, a housing counselor with Solid Ground, a Seattle social-services agency.

But once owners are five months behind, "it will be very difficult," cautioned Marcola Nixon, another Solid Ground counselor.

Then foreclosure or a quick sale may be those owners' only options. Ditto for owners with insufficient income to afford lower payments.

Counselors also warned owners to stay away from mortgage-rescue scams in which rescuers guarantee, for a fee, to stave off foreclosure. Instead, owners may lose their home to the scammers — a situation that's drawn the ire of the state Department of Financial Institutions.

Legitimate government-funded housing counselors don't charge a fee and don't make guarantees, counselors said.

Money is available to help some owners in arrears, said James Kelly, president of the Urban League of Metropolitan Seattle. Both his organization and Solid Ground have access to loans — up to $15,000 for each client — to help bring payments current.

The money is available to homeowners with incomes below 80 percent of the area median: For a family of two, that's $49,200. For a family of four, it's $61,500. Additional lending criteria apply.

What remains a problem is how overwhelmed lenders and housing counselors are by the volume of distressed owners, said Donna Dziak, manager of Solid Ground's housing-counseling program.

Calls to her agency are up 30 percent from a year ago, and at the same time, the federal government has cut funding for counseling programs, she said. Lenders are so swamped with calls that owners may wait an hour on hold just to talk to someone.

Bottom line, Dziak said: "You need to be persistent."

Elizabeth Rhodes: erhodes@seattletimes.com