TALLADEGA COUNTY – Alabama homeowners in or near foreclosure have a limited-time offer to seek free assistance that may help them keep their homes.
Last year, the Alabama Center for Dispute Resolution received a $500,000 grant through Attorney General Luther Strange as part of a national mortgage settlement reached in 2012 between the nation’s five largest mortgage services and several state attorneys general.
The grant is funding training and services for 44 Alabama lawyers to offer free mortgage modification mediation services to people on the brink of losing their homes. These services will be free through April 30, 2015.
“Mediation is an alternative to litigation,” said Sylacauga attorney Sarah Clark Bowers, the only trained foreclosure mediator in Talladega County. “The mediator is a neutral communicator between the homeowner and the lender. Being neutral doesn’t mean I don’t have a dog in the fight, it means that I am on both sides, and I truly want both sides to benefit by the solution or settlement that is reached.”
This service is especially important in Alabama, Bowers said, because the state is a non-judicial foreclosure state, meaning the mortgage provider does not have to go to court to get out of a property it has mortgaged. Homeowners also have a short window of 120 days in foreclosure before their house is taken.
“I was interested in this mediation training because it is a kinder, gentler way of resolving that conflict and helping people stay in their homes,” said Bowers, who has a background in social work as well as real estate. “Not everyone can meet the criteria to keep their home, but you can leave the home gracefully or have a plan, and that affects families and children, so I think it is important.”
Though the economy is on the mend, foreclosures are still a serious problem. In Talladega County, about 60 percent of residential sales last year were foreclosures, according to Realtor and County Commissioner Greg Atkinson.
“That is a shocking statistic that most people don’t realize,” Atkinson said. “It fluctuates between 50 to 60 percent foreclosures, and some areas fluctuate more than others. You have some investors buying and homeowners taking advantage of lower prices, but the market is not as strong as it had been because people are still worried about the economy.”
Numbers have improved this year, with only about 25 percent of sales being foreclosed homes, Atkinson said. The reduction in foreclosures is a positive for numerous reasons, he said, as foreclosure is a losing situation for all parties. The spike in foreclosures has reduced home values in the area by 10 to 20 percent, he said, but Realtors are hopeful low interest rates will help home values edge back up.
“I guess we need to be grateful that it hasn’t been worse than that, because some areas in Florida lost more than 50 percent in value,” Atkinson said. “Thankfully, we didn’t have a lot of overbuilt subdivisions, but at the same time, you’re not seeing any new construction, so you lose jobs related to that industry. We’d like to see more jobs and people moving in, because each new resident attracts more income for schools and local governments.”
In the county, Atkinson said foreclosures have affected every size home and every price range as well. Homes in the higher price ranges are much harder to sell, he said.
“Some homes are $10,000, and you have some that are $200,000,” he said. “The economic downturn does not discriminate. And foreclosure can happen for numerous reasons. You can have one person lose a job or an illness or divorce or a bad business investment. There are a lot of different reasons, and sometimes, people really can’t help it.”
Bowers said there are several ways mediators can work to help a person avoid foreclosure by acting as a neutral communicator with the lender. Depending on the situation, they may be able to negotiate a reduced interest rate, extend the amortization term, defer some payments until the end of the loan, or even have payments reduced to 31 percent of the homeowner’s gross income.
“Once they are late on a mortgage and get that letter from the lender that they are in trouble, so many people are in denial,” Bowers said. “They let it go on until it’s too late to do anything. The most important thing is to contact a mediator as soon as there is a sign of trouble.”
Bowers said it benefits lenders to avoid a foreclosure, because they lose money on each foreclosed home, and extending a loan or reducing the interest actually saves them money in the end. A mediator can also provide the personal connection with a homeowner in trouble that a lender may not be able to achieve.
“Homeowners avoid their lender when they know there is a problem,” Bowers said. “So the mediator is the catalyst to make that connection and wade through this bureaucracy, because all these programs are very regulated by federal law. A mediator helps them decide what path to go in a certain timeframe.”
The best time for mediation, according to a brochure from the Center for Dispute Resolution, is pre-foreclosure within the first 90 days of the missed payment. Whether a person has a housing counselor or a lawyer or is on their own, they can ask the lender to participate in mediation and contact an approved mediator. Lenders can also contact a mediator for help. Mediation is also available for people in post-foreclosure or in bankruptcy court. Free mediation is only offered through mediators who have been trained for this purpose.
The brochure notes that mediators do not give legal or financial advice, nor do they hold the paperwork. They convene the parties to help them communicate about outstanding issues, paperwork and options.
In some cases, modifying the mortgage is not an option, and Bowers said that is when she discusses a “graceful exit” with the lender, possibly allowing the person or family more time to move out.
“The stereotype is that big banks are kicking people out of the house, and as a lending organization, they should want to help people, and if they can do something small to help that homeowner make a graceful exit, they usually will,” she said. “We can make negotiations with the lender to give them an extra month to move in another property. There is even a program called Cash for Keys, where they are given some of their money to make a down payment on a rental property. There are options according to a person’s individual situation.”
Atkinson said avoiding foreclosure not only benefits the person or family involved, but the larger community, as well.
“It keeps the community together and helps families and kids, because that’s a lot of stress,” he said. “Anytime you can keep people in their homes, it’s better for the community, because that is somebody who doesn’t lose their lifetime investment. It maintains the community, because you don’t have a rundown house that is more apt to be vandalized and that reduces the value of other homes in the neighborhood. It’s a very good thing to help prevent a foreclosure.”
Though Bowers is the only approved mediator in Talladega County, many Birmingham-based lawyers are willing to assist residents here or in other surrounding counties. Bowers said she will travel to surrounding counties as well. A complete list of mediators can be found at www.alabamamediators.com.
“With programs like this, we never know how many lives we touch, but I honestly feel like this will help people out there,” Bowers said.