After months of unemployment, Chris Johnston recently found a part-time, minimum-wage job. Even if the work becomes full time, it probably will be too little too late.
“We’re four months behind in our mortgage payments and just got a letter from the mortgage company,” Johnston, 31, said from the Spring Hill, Kan., home he shares with his companion, April Butler, 23. “They want to foreclose.”
Johnston and Butler are not alone. As the economy continues to founder and unemployment climbs, social service organizations and mortgage loan companies have seen a sharp rise in the number of families falling behind in their house payments.
“We began noticing it after Sept. 11,” said Pam Hider Johnson, senior housing counselor at the nonprofit Housing Information Center in Kansas City. “We’re seeing people from all over . . . People just don’t have any money.”
Phones are flooded
Johnson receives as many as 50 calls a day from families who can’t make their monthly mortgage payments. Most of the families have owned their homes for 12 to 15 years.
In August, the center had 27 active mortgage clients. Last month, that number jumped to 75. Since January, 15 of the center’s clients have lost their homes because they couldn’t pay their mortgages.
Families usually wait until they are three or more months behind before they ask for help, Johnson said. The center’s staff tries to arrange payment plans with mortgage companies whereby families can meet all their monthly obligations and also pay a portion of the accrued debt. In the worst cases, the center helps families who lose their homes find other living arrangements.
Making matters more difficult, the center’s government and private funding has been cut, and other programs to assist families are limited.
“Most of the time it’s a foregone conclusion they are going to face foreclosure because they are so far behind,” Johnson said. “Most have broken their 401(k)s, cashed in their insurance policies and have nowhere to get money.”
Johnston became a statistic when he injured his back in January and lost his job as a mover. He was earning about $1,500 a month.
Savings all spent
Weeks before his injury, he and Butler bought their house. Their mortgage payments were $870 a month. By August they had exhausted their savings and started falling behind.
“Between repairs to the house we had to make after last winter’s ice storm and Chris’ unemployment, we hit a wall,” said Butler, who receives a monthly disability check of $585 because of her own physical problems. “We’re in a situation. Our families have helped as much as they can. We don’t have enough money to move out and nowhere to move to.”
Bruce Huey, default manager at the mortgage banking firm James B. Nutter & Co. in Kansas City, said the number of delinquent house payments in the metropolitan area had risen to nearly 1,200 a month in July after previously averaging 900 to 1,000 a month.
“In the past, people fell behind because of family situations like divorce,” Huey said. “Now, we’re seeing job losses as the reason.”
He encouraged families to seek help as soon as they know they’re in trouble.
“Most people wait (until) the last minute; that’s the biggest problem,” Huey said. “The quicker they come in we can get something worked out. We can do loss mitigation, partial payments or help get loans reinstated. But there’s a tendency to put their heads in the sand.”
Paul Clevenger, 72, and his wife, Belinda, 52, are eight months behind in their mortgage payments. Clevenger, a self-employed lawn mower repairman who works out of his Kansas City, Kan., home, has seen his business drop precipitously this year. Belinda Clevenger was a waitress until she was laid off in the spring. Their mortgage is $304 a month.
More Top Picks Acer Nitro 16s Ai Review
“We’re trying not to lose the house,” Belinda Clevenger said. “The mortgage company asked us to ask our friends and relatives for help, but they’re not in good shape either. We’re trying to pack things up in case we’re thrown out. Where would we go?”
“I don’t know where we’d go,” Paul Clevenger said. “I have no clue. If we lose the house we’ll have a garage sale and sell as much as we can to get back on our feet. We’ll have to try to get by on what we can.”
According to a recent survey by the Mortgage Bankers Association of America in Washington, between April and June of this year delinquencies had jumped nationally by 44,000, to 250,000 loans.
“The default rates have been typical when the economy is in trouble,” said Jay Brinkmann, vice president of research and economics for the association. “Delinquencies tend to lag behind a downturn, so even though the economy went bad last year, we’re seeing the effect in housing now. Initially, people had cash reserves. They could tread water. Now they can’t.”
The situation will only get worse, Johnson said, as winter approaches, heating season begins, and families juggle their mortgage payments against rising utility costs.
“Folks are going to want to turn their heat on, and that’ll come out of their mortgage,” she said. “Some just won’t have the money no matter what they do.”