AUBURN, Maine — Craig Rivas bought his first house the day before Thanksgiving in 2007. Within an hour of signing loan papers, he yanked the “For Sale” out of the lawn and did a little dance.
“I did the, ‘Oh, my god, this is mine!’ thing,” said Rivas, 45.
He took the keys out during Thanksgiving dinner and shook them in front of family members, his way of telling them, “I did it.”
Days later, they helped him move into the small Pownal Road colonial.
For a few years things were great. Then paychecks became erratic at work. He suddenly lost his well-paying Web job as his employer struggled in a tough economy.
Rivas fell three months behind on his mortgage. When he approached the bank with enough money to make up two missed payments, they nicely told him no. He had to pay all three months or nothing.
The next month: All four months or nothing.
Sixteen months behind, Rivas now owes $22,000. Multiple attempts to refinance or modify his loan have failed. Without help that he can’t see coming, he’ll lose his house.
“The economy that ripped through the world has affected a lot of people in Maine,” said Rivas. “I was one of those people.”
The Maine Bureau of Consumer Credit Protection is notified daily when any lender sends a mortgage default notice to someone in Maine, typically a sign that a borrower has fallen two to four months behind. Within 24 hours, Bureau Superintendent Will Lund’s office sends off a packet with information on rights and resources.
Last year it sent out, on average, 150 a day.
On Jan. 11 — nine days ago — the bureau mailed 450, a one-day record.
Some measures show the state’s housing market having turned a corner, with fewer foreclosures and prices inching up on home sales.
Lund’s numbers, however, say the worst isn’t over.
“I had predicted to lawmakers we would take a downturn [by] now,” he said.
Foreclosures down, defaults steady
Maine has operated its Foreclosure Diversion Program through Lund’s office since 2009, after the Legislature tweaked the real estate transfer tax code to fund the program, a cost of about $1 million annually. The original impetus, Lund said, was the alarming number of Maine residents who did nothing when they received word that they were being foreclosed upon.
“If a lender hears nothing and gets no money, then they expect the worst and they have no reason not to proceed down the foreclosure path,” Lund said.
The program helps pay for Housing and Urban Development-certified counselors at a dozen nonprofit agencies around Maine. Each office has about 200 active cases involving people trying to avoid foreclosure or in the midst of it.
When they hear from a counselor on behalf of a homeowner, “lenders will ordinarily back off, at least temporarily, or slow down to await a proposal,” Lund said.
From there, it’s a matter of exploring options: refinancing, stretching a term, tacking missed months on to the end of a loan, seeking a medical deferment. Or, if a homeowner has to walk, figuring out what’s least harmful to their credit.
“We get them at all stages, from very early to very, very late,” Lund said. “We’ve actually worked with some lenders over the years and have had auctions undone. The whole idea of the program is to change the previous culture, which was that many consumers were intimidated by what was happening and pulled into a shell.”
In 2010, Lund’s office sent 33,995 packets to delinquent homeowners encouraging them to call the program.
In 2011, it sent 41,462.
In 2012, that figure was 40,562, down slightly, but it masks a November surge and was followed by the all-time high two weeks ago.
In Lund’s assessment, Maine is still in the thick of its housing mess.
“It’s remained at a very high, steady — surprisingly steady — rate,” he said.
Based on other measures, though, some experts are tentatively ready to say the state has turned the corner.
“Of course, I’ve been saying for a couple years now, ‘Ah, things will get better,’ because obviously, they will,” said Richard Borgman, a professor at the University of Maine’s Business School. “Eventually, I’m going to be right. I think we’re starting to see it now.”
According to the Mortgage Bankers Association, the number of Maine homes actually entering foreclosure peaked in the third quarter of 2010 at 1.2 percent. Last fall it was 1 percent, a decline, though still significantly higher than the 0.3 percent a decade ago.
In early 2010, the rate of people behind on monthly payments peaked at nearly one in 10, according to that group. By last fall, it was down to 7.6 percent.
Ten years ago, only one in 25 people was late.
The difference between the bureau’s experience and MBA’s numbers might be a matter of errors introduced by sample size, said Charlie Colgan, a professor and economist at the University of Southern Maine’s Muskie School of Public Service. The association relies on survey results from 120 banks across the country; Maine is so small it can get skewed in those numbers, he said.
Still, the big picture: Colgan’s models show “the trend is definitely in the right direction and it’s moderately strong at this point, but not conclusive,” he said. “We’re nowhere near back to where we were before the recession; at least it’s getting there.”
State Economist Amanda Rector agreed. Her signs also point to Maine having hit the peak in foreclosures.
She called housing a key part of Maine’s economy. Residents having sufficient resources to pay their mortgages and rents means more money for other expenses, she said.
“One of the things we’ve seen over the past few years is that people have been unable to move to take advantage of better job opportunities because they haven’t been able to sell the home they’re living in,” she said. “Improvements in the housing market contribute in many ways to improvements in the broader economy.”
Rector predicted it could be several years before Maine returns to early 2000 levels.
“I think Maine is starting to see gradual improvement in delinquencies and foreclosures,” she said. “It will be a lengthy process to get back to historical levels, especially for foreclosures, but I think things are starting to move in the right direction.”
Lund wonders whether foreclosures have the appearance of being on the decline as defaults pile up because foreclosures are being initiated more slowly, a theory backed by the most recent report from the Maine Bureau of Financial Institutions.
The bureau tracks state-chartered banks and credit unions. Its report last month counted 347 in the lead-up to foreclosure in September compared to 323 a year earlier. Banks and homeowners are doing more talking, it said, partly due to state-mandated mediation. In recent years, fewer properties in-process were being formally foreclosed upon.
“Lenders have told us from the start they don’t want to foreclose; they don’t want to be the owners of these properties,” Lund said. “What they want are performing loans. They want their principal plus interest back.”
But with so many people behind on payments, those outstanding mortgages will have to be resolved, one way or another.
‘It was wonderful’
Deanna Brown, a housing counselor at Western Maine Community Action in Wilton, has seen people lose jobs, divorce or separate and fall ill, and not be able to afford the new payment on a variable-rate mortgage. Some call directly; some are referred through Lund’s office. Some she has met through her monthly visit to district court.
“It’s very overwhelming,” Brown said. “We’ve had people show up here with bags full of unopened mail.”
Even with homeowners fully engaged, trying to help can take months, if not years.
One perk: Housing counselors like Brown have access to an email system for lenders and loan servicers that provides a time stamp and proof of documents being sent, skirting a common “lost in the mail” refrain when homeowners go it alone.
WMCA worked with one single mother who’d fallen a year behind on her mortgage after her husband left and she lost her job. She owed $6,000 in back payments and $2,000 in fees.
“Late fees, lawyer fees,” Brown said. “The lender actually pays somebody to drive by your house to take a picture to make sure somebody’s still there.”
The woman found a new job. Meanwhile, Brown worked with the lender, who agreed to add $58 to each month’s payment to make up that balance.
In another case, a self-employed man with things slow at work discovered he and his wife were $32,000 behind in their mortgage after she left him.
“He had thought his wife was making the payments, and after she left, (he) found out she wasn’t,” Brown said.
Working with that lender, the monthly payment was cut almost in half and his loan stretched to 40 years.
Jason Thomas, one of three housing counselors at Coastal Enterprises in Wiscasset, said his agency has been able to help people retain their property in 50 to 60 percent of cases. There are no promises and, like the other agencies, no fees.
At every information session he’s held for distressed homeowners, at least one has paid thousands of dollars to an out-of-state company that promised to help.
“‘This is your new payment; we’ll take care of it.’ Six months later the phone number doesn’t work,” Thomas said. “Those groups are selling hope, and that’s an easy thing to sell to somebody.”
Rivas, in Auburn, called one of those numbers as seen on TV. He paid $4,000 to an Arizona company and got where he’d gotten on his own — nowhere.
Rivas’ home cost $131,000 in 2007. Payments were $1,100 a month, manageable at the time.
He lost his Web job in August 2011 (that company eventually closed). The man with a high-tech background found work a month later at a group home, for half his former salary.
“You do what you have to when there are no options. I would have driven a cab,” he said. It turned out, “I love it. The company is great, the job is so rewarding.”
He said he called his bank before missing a mortgage payment to warn them that things may get tight. Three months later they wouldn’t accept a partial back-payment, and the meter kept running.
Lund said there’s nothing in state law that says lenders have to be reasonable or take less than they’re owed.
“I don’t want to cheat anybody out of the money I owe them,” Rivas said. “I’m just so far in the hole, I don’t qualify for anything. My credit is in the toilet. For me, it’s really damaging. It really, really is.”
Rivas’ father immigrated to the U.S. from Lima, Peru. Rivas called home ownership his “American dream.”
He has yet to be formally served foreclosure papers. Until then, he holds on to shreds of hope and plans to reach out to the diversion program.
“The day-to-day thinking to myself: ‘My god, there’s going to be a sheriff that’s going to show up at my door,'” Rivas said. “It was wonderful when I first had the home. It’s still wonderful. But now it’s such a disappointment.”