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Is your landlord in foreclosure?

11/29/2012 – West Side Leader

By Staff Writer

Law You Can Use

Q: What happens if the property I’m renting is in foreclosure?

A: You probably make monthly rent payments to your landlord while your landlord makes mortgage payments to a lender. If your landlord stops making payments, the lender may foreclose on your landlord, which also will affect you. In Ohio, the lender must file a foreclosure complaint before legally taking a house or apartment away from the landlord (owner). Your landlord still owns the property until a court grants a foreclosure judgment and approves a sheriff’s sale.

Q: How will I know if a foreclosure has been filed against my landlord?

A: Generally, the lender (“plaintiff”) will name you as a tenant in the foreclosure complaint, but may only list you as “Jane or John Doe” or “unknown tenant at [your address].” You are unlikely to get a copy of the foreclosure judgment, but keep any notification you receive so you can find out how the case is progressing or get legal advice, if necessary.

Q: How can I find out about the status of the foreclosure case?

A: Check with your local clerk of courts for your county’s Court of Common Pleas. Many clerks have case information online ( You may need to provide your landlord’s name to get information about the foreclosure, which is a civil lawsuit.

Q: Can I stop paying rent if a foreclosure lawsuit is filed against my landlord?

A: No. Your landlord still owns the property until there is a judgment and sale, and if you stop paying your rent, your landlord could file an eviction action in court, even during a foreclosure action.

Q: Can I break my lease if a foreclosure lawsuit is filed against my landlord?

A: Generally, a foreclosure filing doesn’t allow you to break your lease unless your lease agreement says otherwise. If you do so, your landlord could sue you for money damages. If you decide to move, you may want to negotiate with your landlord to terminate your lease early. If you reach an agreement, make sure it’s in writing and signed by your landlord, yourself and anyone else on the lease.

Q: Must my landlord maintain the property while it goes through foreclosure?

A: Yes. Until the court approves the sale, your landlord must still fulfill all obligations, such as making repairs, just as you must continue to pay rent.

Q: Can my landlord still collect rent after the court issues a foreclosure judgment and approves the property sale?

A: No. Once a “confirmation of sale” has been filed with the court, it cuts off all the owner/landlord’s rights, including the right to collect rent, but you should continue to set aside rent payment so you can pay the new owner. Whoever purchased the property at the sheriff’s sale will become your new landlord because the lease survives the foreclosure sale. The new owner should tell you where to make your rental payment, and the amount should not change. Also, the new owner must make any repairs that the lease or Ohio law would have required the old owner to make.

Q: Can I stay in my apartment once the foreclosure process is completed?

A: Yes, for at least 90 days. Under the federal Protecting Tenants at Foreclosure Act (PTFA), which applies to anyone who bought a property on or after May 20, 2009, as the result of a foreclosure, the new owner generally must keep you as a tenant. Usually, the new owner is the lender (plaintiff), who buys the property back from the landlord at the sheriff’s sale, so the lending company may become your new landlord.

Q: Can the new owner force me to move out?

A: Possibly, but you should receive at least 90 days’ notice before the new owner can make you leave. If you are a “bona fide tenant” with a “bona fide lease,” then you have the right to stay in your home until your current lease ends. If, however, the new owner intends to live on the property, you must receive at least 90 days’ advance notice to move out. The new owner can evict you if you do not leave after being properly notified. (Note: You must meet certain criteria to be a “bona fide” tenant with a “bona fide” lease. Consult an attorney if you are unsure about your tenancy status.)

Q: Can the court evict me through the foreclosure action?

A: No. If you are a “bona fide tenant” with a “bona fide lease agreement,” then the new owner must give you a 90-day eviction notice. If you do not move within 90 days, the new owner must: 1) serve you with a three-day Notice to Leave Premises and 2) file an eviction action. Under the PTFA, you may have the right to stay through the end of your lease.

Q: Where can I get more information or legal help?

A: Go to www.ohiolegal or call 866-529-6446 to locate the legal aid program in your area. You must be financially eligible to receive services, including advice.


This column was provided by the Ohio State Bar Association (OSBA) and prepared by attorney Joe Maskovyak, of the Ohio Poverty Law Center in Columbus. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, the OSBA urges readers to seek advice from an attorney.



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White Supremacist says foreclosure won’t stop Aryan Nations compound

PRIEST RIVER, Idaho — White Supremacist Shaun Winkler said he is not going to let foreclosure stop him from building a new Aryan Nation compound in Bonner County.

Winkler said he owes nearly $10,000 in back mortgage payments on his land in the Hoodoo Mountains. He purchased the 17 acres near Priest River in 2011, and the seller told KREM 2 News Winkler stopped paying his mortgage nearly a year ago.

The property is going into foreclosure and will be put up for auction January 14.

Winkler said he started running into financial problems last spring after running for Bonner County Sheriff. He said he lost his job because of his controversial beliefs

Winkler said he already has another piece of property lined up for a White Supremacist compound. He said a family who supported his run for sheriff is giving him several acres of land so he can invite families with ties to the KKK and Aryan nations to come and live there.

The new compound will used as a rally point, Winkler said. It will be located about one mile away from the acreage in foreclosure by the Hoodoo Mountains.

Winkler said people in the Priest River community seem to be more accepting of his beliefs than other towns in Idaho.

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State offers mortgage clinics

Homeowners faced with potential foreclosures headed to Waterbury Wednesday hoping to retain their homes, but solutions may be hard to find.

The Connecticut Department of Banking organized its fourth free mortgage assistance event yesterday at the Waterbury conference center. The event brought together representatives from major banks — including Bank of America, Citigroup and Wells Fargo — housing counselors and homeowners from across the state to discuss solutions to prevent foreclosure.

“We’ve created a forum where people can sit down with a single point of contact,” said Howard Pitkin, commissioner of the Connecticut Department of Banking. “We hope that the highest number of people possible can reach an agreement with their banks and keep their homes [through this event].”

Options available to homeowners include interest rate reduction, modification of general terms and principal reduction. It is important that people sit down with their mortgage holders, “one-on-one, face-to-face,” and try to work out the solutions, Pitkin said.

While Pitkin said Bridgeport has been hit hardest by foreclosure, New Haven has also witnessed high foreclosure filings since 2008.

Though foreclosure rates are holding steady or dropping nationwide, Karah Johnson, project coordinator at New Haven ROOF, a nonprofit organization committed to foreclosure prevention, said that foreclosures have actually increased in New Haven from the first to third quarter this year.

The root of the problem, Pitkin and Johnson agreed, lies in the high Connecticut unemployment rate, which has hovered at 9 percent, over a point more than the national average of 7.9 percent. As a result of such high unemployment, Pitkin said, people at the mortgage assistance event may feel obliged to give up their homes.

“People reach the decision that they have to find alternative housing. And that is not an easy decision,” Pitkin said.

For homeowners to avoid losing their homes, housing experts like Johnson suggest that anyone who might be at risk of foreclosure should meet with housing counselors, many of whom provide advice and help to underwater homeowners for free.

Foreclosure prevention may be a very confusing process, and homeowners need the help of counselors to see the big picture, Johnson said.

“These [events] are great resources,” she said, “but only if individuals go in with all the information that’s needed from them.”

In fact, according to Johnson, 85 percent of homeowners who went to a housing counselor have come to some sort of resolution and were able to keep their homes.

Pitkin agrees that the more prepared homeowners are, the more likely they will see a good outcome at the event. Some homeowners start the mortgage renegotiation process at events like the one held Wednesday, he said, and follow up with later meetings with their banks.

But Greater New Haven Community Loan Fund Executive Director Carla Weil said she believes that the event, while effective at raising awareness among homeowners as to where they may seek assistance, may be less helpful in reaching solutions.

“There’s not a lot of resolution that happens at the event,” Weil said. “But these events have been getting more effective and better-organized.”

Even if homeowners missed Wednesday’s mortgage assistance event, Pitkin said, the Connecticut Department of Banking has regular office hours committed to helping homeowners with foreclosure prevention and financial issues in general.

According to California-based realty company RealtyTrac, one in every 700 housing units received a foreclosure notice in October 2012.

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Tax Hit Looms on Mortgage Relief

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FHFA’s DeMarco Optimistic About Recovery, Eager To Define Future Role …

Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), told members of the Exchequer Club in Washington, DC on Wednesday that, in contrast to how they are sometimes portrayed, Fannie Mae and Freddie Mac are playing a leading role in providing assistance to homeowners.  He said that as conservator of the two government sponsored enterprises (GSEs) the FHFA’s biggest challenge has been to avoid foreclosures and minimize losses to taxpayers on loans originated prior to its conservatorship.  He divided the GSE’s borrowers into four groups:

  •     Borrowers unable to pay their mortgage but with an ability to pay a reduced amount and a desire to stay in their home;
  •     Borrowers unable or unwilling to pay any reasonable mortgage amount or lacking a desire to stay in their home;
  •     Borrowers able to pay their mortgage but unable to exercise their refinance option because of the decline in house prices; and finally,
  •     Borrowers able to pay their mortgage and able to refinance as in normal market conditions.

For each of these categories, FHFA has worked with the GSEs to develop and implement programs tailored to the circumstances.  Since conservatorship, the GSEs’ foreclosure prevention activities have helped nearly 2.5 million borrowers avoid foreclosure.  Of this total, more than 2 million of these actions have resulted in the borrower retaining their home.

FHFA have prevented foreclosure through several mechanisms.  Over 2 million homeowners have been kept in their homes through loan modifications which provide households in financial distress with an opportunity to reduce their monthly mortgage payments.  The agency has also utilized short sales to help homeowners avoid foreclosure while reducing taxpayer losses.  The third method employed to avoid foreclosure is through enhanced refinance opportunities including the Home Affordable Refinance Program or HARP which helps homeowners refinance loans even with substantial negative equity.

FHFA has also worked to restore prudent underwriting and risk-based pricing to a housing finance system that went badly off-track.  This has been done by steadily raising the GSE guarantee fees which over time should gradually reduce taxpayer risk though their support of the GSEs.
The GSEs have long operated without taking into account differences in doing business in different parts of the country which, while leading to a uniform mortgage price across the country also meant that they absorbed but did not price for added credit risk associated with specific state and local policies.  A proposal is now undergoing a public comment period got a pricing approach to better capture the costs associated with state and local policies.  This may involve an upfront fee on newly acquired single-family mortgages originated in states where the GSEs are likely to incur default-related costs that are significantly higher than the national average.

DeMarco explained that the GSEs have long operated under a representation and warranty model which called for relatively few reviews of mortgages sold to them unless or until the mortgage went into default as which point, if defaults were found in the origination, they could demand a repurchase.

While that model may have worked reasonably well in stable credit conditions, it did not work so well under stressed conditions.  As the GSEs have enforced their contractual rights through loan reviews and repurchase requests it may have created an atmosphere of uncertainty that could be affecting the willingness of lenders to extend credit.  Therefore in September FHFA and the GSEs announced a new representation and warranty framework for conventional loans sold or delivered on or after January 1, 2013.  Under this framework, lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements.

For example, certain representation and warranty relief will be provided for loans with set periods of consecutive, on-time payments. Most important, the focus of the GSE’s quality control reviews will be shifted earlier in the loan process, generally between 30 to 120 days after loan purchase.

DeMarco said that FHFA also continues to explore options for disposing of real estate owned, or REO, properties.  It recently completed a pilot REO initiative that allowed investors to purchase pools of Fannie Mae foreclosed properties with the requirement to rent the purchased properties for a certain time.   FHFA remains committed to pursuing similar efforts.

DeMarco told his audience that 2012 brought some changes to the Senior Preferred Stock Purchase Agreements (PSPAs) between the Treasury Department and the GSEs.  One of the key changes was to the way the GSEs pay dividends to Treasury.  Instead of a 10 percent dividend on outstanding senior preferred stock, the GSEs will pay Treasury with a quarterly net worth sweep, essentially a payment of income earned in the quarter. This change eliminates the possibility GSEs will have to borrower from Treasury to pay dividends and ensures that everything the GSEs earn is returned to taxpayers.

Another key change was the requirement to contract the Enterprises’ portfolios at an annual rate of 15 percent — an increase from the 10 percent annual reduction called for previously. This means that the portfolios will be reduced to $250 billion four years earlier than previously scheduled.

DeMarco explained that one goal of the conservatorship is to build a new infrastructure for the secondary mortgage market, something that will be needed regardless of the final disposition of the GSEs.  The existing infrastructures are not the most effective when it comes to adapting to market changes, issuing securities that attract private capital, aggregating data, or lowering barriers to market entry.  The goal is to establish one that can support the secondary market post-conservatorship with or without government involvement, and attract more private capital to the market.

To accomplish this, the GSEs’ outmoded proprietary infrastructures need to be updated and maintained, so as to provide enhanced value to the mortgage market with a common and more efficient model.  This new infrastructure must be operable across many platforms, so that it can be used by any issuer, servicer, agent, or other party who decides to participate.

FHFA has also put forth some broad ideas on creating a model pooling and servicing agreement, the legal document that lays out the responsibilities and rights of the servicer, the trustee, and others over a pool of mortgage loans.

DeMarco said he was cautiously optimistic that the signs of stabilization — and in some places, strength – that have started to emerge in certain sectors of the housing market are signals that it is beginning to recover, however many challenges remain. Today, the government touches more than 9 out of every 10 mortgages. With this in mind, it is essential that the mortgage market transition to a more secure and sustainable and competitive model.

The conservatorships of Fannie Mae and Freddie Mac were never intended to be long- term solutions, he said. They were primarily meant as a “time out” for the rapidly eroding mortgage market, to provide stability while deciding on how best to rebuild the housing finance system.  It is vital that the conservatorships are brought to a conclusion and that the government’s role and requirements for housing finance are defined for the future.

At the most fundamental level, the key question in housing finance reform is what, and how big, should the role of the federal government be, DeMarco said.  Perhaps it will be easier to break this question up into component parts, perhaps by first defining the role of the traditional government mortgage guarantee programs like the Federal Housing Administration (FHA).  If policymakers begin with the role FHA should play in the future in terms of what borrowers would have access to this program, and what structural changes might be needed, than it should be easier to consider the government’s role in the remainder of the mortgage market.

He said that his agency is taking a number of steps – whether it is increasing guarantee fees or pursuing risk sharing alternatives – that have the potential to transfer some credit risk to the private sector.  ‘We will continue to try to make progress in this area, but if policymakers are serious about limiting the government’s role, more direct action may be needed to have significant near-term effects.  And, elected officials must give direction on how to end the conservatorships.”

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Oregon Woman Says 3-Year Long Bank Error May Lead to Foreclosure

PHOTO: Delores Dee Dingman said a bank error may lead to her losing her home in Tualatin, Ore.

A woman in Tualatin, Ore., says she’s at the end of her rope fighting a three-year battle with Wells Fargo for mistakenly stating she has missed mortgage payments on her home, which is now in foreclosure.

Dee Dingman, 79, and her late husband moved into their four-bedroom home in 1967.
After her husband, Leland, died in March 2008, Dingman took out a new mortgage while she paid off his medical bills, never missing a payment. Court records show she promised to pay $308,000 plus interest on June 16, 2008.

The next year, after Wells Fargo’s acquisition of Wachovia was completed in Jan. 2009, Dingman began receiving foreclosure notices. She believes the bank did not corrrectly process her payment since around Oct. 2009. But her bank records show her mortgage payments have been deposited by Wells Fargo. Despite efforts to clear up the mistake and paying nearly $12,000 in attorney fees, her home is now in judicial foreclosure.

“I’m really very tired of it,” said Dingman. She has been employed by the local Kmart since it opened 40 years ago but stopped working when the store closed last month.

She continues to pay her monthly mortgage amount of over $2,300 while paying an attorney to help her clear up the mistake.

Read more: 10 Most Expensive and 10 Most Affordable Housing Markets

Tom Unger, spokesman for Wells Fargo, said the bank is trying to get to the bottom of the matter and no foreclosure sale is scheduled.

PHOTO: Delores Dee Dingman said a bank error may lead to her losing her home in Tualatin, Ore.

PHOTO: Delores Dee Dingman said a bank error may lead to her losing her home in Tualatin, Ore.

“We are very sensitive to Mrs. Dingman’s concerns but there are some details regarding her loan that still need to be addressed,” he said. “There is no foreclosure sale scheduled, giving us additional time to work with our customer.”

This is not the first time Wells Fargo has been involved in an error over a foreclosed home. The bank’s contractors mistakenly cleared out the home of a retired couple twice in Twentynine Palms, Calif., after confusing it with a neighboring foreclosed home.

The bank said it has worked with Dingman “since 2009 to identify options that would allow her to stay in the home.”

Dingman said there has been no cooperation from the bank.

“This is going on too long,” she said. “I just keep paying lawyers and I think it’s time to end this. It’s using quite a bit of my money and time. I just don’t need this and they don’t need it.”

Read more: Home Prices Rise Sixth Month in a Row

“Foreclosure is always the very last option we explore with any customer,” Wells Fargo said in a statement. “We feel foreclosure is bad for the customer, bad for their neighborhood, bad for their community and bad for us as the lender. Our goal is to keep our customers in their homes, have them pay off their loans, and own their homes outright. Given that there is active litigation around their loan we can’t discuss the case in any more detail at this time.”

Though she is in good health, Dingman’s family and friends are concerned that stress from the possibility of losing her home is beginning to take a toll.

“Both I and, more so, her family have been very concerned for her health,” her family friend, Sue White, said. “She’s been really emotionally affected by this with a lot of crying and a lot of anguish. It’s really interrupted her joy in life at this point, as you can imagine.”

For these past few years, her payments were considered missing even though she has checks that have Wells Fargo’s stamp on the back after they have been deposited, said Dingman.

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Bills requiring foreclosed home maintenance, Turnpike meetings in Bergen …

Towns could penalize banks for failing to maintain vacant, foreclosed houses under a bill that unanimously passed the Senate today.

If the legislation becomes law, banks could be required to fix code violations in vacant houses they have foreclosed on. The lender would have 30 days to fix the problem.

The Assembly version of the bill has not yet been taken up by a committee.

New Jersey municipalities have been worried about the upkeep of empty homes since the foreclosure crisis began in 2008. They say the houses drive down property values and present health hazards for their neighborhoods.

Currently, banks can sometimes avoid responsibility for maintaining vacant houses if the homeowner has received a notice of foreclosure and moved out, but the bank has not yet received title to the property.

The bill passed today would eliminate that loophole and would allow municipalities to impose the same fines on banks that they can on individual homeowners who violate building codes, whether or not the banks have already taken a property’s title.

The Senate also passed two bills aimed at making the New Jersey Turnpike Authority more transparent.

One would require the agency to hold at least one meeting in Bergen County each year. Currently, the Turnpike Authority – which oversees the Garden State Parkway and the New Jersey Turnpike — holds monthly meetings at its headquarters in Woodbridge.

The bill also requires the authority to hold at least two meetings each year in Atlantic, Cape May or Ocean counties. Its sponsors in the Senate and Assembly represent those three counties.

Bergen County was not originally included in the legislation, said Sen. Robert Gordon, D-Fair Lawn, who sits on the Senate Transportation Committee.

“I said, ‘Well, why the south and not the north?’ ” Gordon said.

The second Turnpike bill passed today requires the authority to install electronic screens at toll plazas to tell E-ZPass users what they are paying. E-ZPass users are often unaware of how much they are being charged, according to the bill’s sponsors, who include Sen. Loretta Weinberg, D-Teaneck.

The legislation, called the “Truth in Tolling Act,” would apply to New Jersey’s three toll roads — the parkway, turnpike and Atlantic City Expressway – but not bridges or tunnels.

“The Truth in Tolling Act is nothing more than a little transparency” to help people immediately know how much they are paying, Weinberg said.

Neither Turnpike bill has been taken up yet in Assembly committees.



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Foreclosure wave averted as housing doomsayers defied: Mortgages

When banks pulled back on foreclosures two years ago following a government investigation into allegations of faulty practices, market researchers, academics and Wall Street analysts said that a surge of delinquent homes would deluge the U.S. market once lenders resolved the claims and worked through backlog, driving down prices for years to come. RealtyTrac Inc., a seller of property data, warned a year ago of a “new set of incoming foreclosure waves.” Susan Wachter, professor at the University of Pennsylvania’s Wharton School, said in February that a logjam may be “unleashed” and destabilize the market.

In fact, the flood failed to materialize, even after the five biggest U.S. mortgage servicers reached a $25 billion settlement with federal and state regulators in February. Instead, the number of properties for sale shrank to the fewest in a decade, prices appreciated at the fastest pace since 2005, and the gradual healing of the housing market helped boost consumer confidence and the economy.

“We don’t have enough homes now to meet the needs of the market,” Paul Jacobson, a Stockton native and real estate broker for 22 years, said as he cruised the city’s northern fringe, where suburbia meets farmland. “People see a foreclosed home for sale in this area and they’re going to jump on it.”

Bank Deals

Banks have stepped up foreclosure alternatives to avoid legal challenges. They’re forgiving debt, modifying payment plans and approving short sales that allow homeowners to sell for less than they owe.

The federal government, criticized by consumer activists for failing to prevent more than 4.7 million homes from being lost to foreclosure or short sales since President Barack Obama took office in January 2009, is also helping to stem the crisis. Expanded loan-modification programs have gained traction, and the Federal Reserve has kept bank interest rates near zero. Investors including Blackstone Group LP and Colony Capital LLC are purchasing thousands of foreclosed homes in bulk before they even hit the market, further limiting new supply.

With the unemployment rate also coming down, concerns are fading that a deluge in foreclosures will destabilize the housing market as it recovers from a six-year slump.


“Many of us, myself included, feared a wave of foreclosures when the settlement came,” Wachter, professor of real estate and finance at Wharton in Philadelphia, said in a telephone interview. “I was wrong.”

Slowing the foreclosure process has allowed banks to avoid booking losses on non-performing loans, said Joshua Rosner, an analyst with Graham Fisher Co. in New York. U.S. banks reduced their net charge-off rate on mortgages to 0.77 percent in the second quarter, the most recent available, from a high of 1.81 percent at the end of 2009, according to data Rosner compiled. That drop occurred as the rate of non-current loans declined to 9.77 percent from 10.15 percent in late 2009.

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Texas law firm to give up foreclosure fees

CHARLESTON, W.Va. — A Texas law firm agreed to stop charging West Virginians a fee for foreclosure assistance that was already free to them, Attorney General Darrell McGraw said Wednesday.

McGraw filed a complaint against Murray LLP, a law firm based in San Antonio, in Jefferson County Circuit Court in October. The complaint alleges Murray, through its website,, charged state residents a 20 percent fee to help them process claims for benefits under the National Mortgage Settlement.

Congress reached the National Mortgage Settlement with 49 attorneys general last year and ordered the nation’s five largest loan providers to pay $21.5 billion in reparations and restitution to consumers victimized by illegal foreclosures.

The only requirement to receive the NMS payment of $1,500 to $2,000 was by completing a free, one-page form that was mailed directly to all eligible people from September to October, McGraw said.

He said Wednesday the law firm agreed to stop the service and add a disclaimer to its website advising its services are not available in West Virginia.

“I am pleased that we promptly achieved our objective which was to prohibit Murray from charging West Virginia consumers who lost their homes to foreclosure a fee for a benefit that was intended to be free,” McGraw said in a news release.

McGraw’s complaint also alleged that Murray’s website was deceptive and attempted to hide the fee it charged for the service.

Reach Travis Crum at travis.c… or 304-348-5163.

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Paper Route Helped This Disabled Couple Save Home From Foreclosure

Mike and Lora Zook (Brian Treffeisen Photography)Mike and Lora Zook have not had an easy life. The Pasco, Wash., couple has had to deal with cancer, a disabling accident, a genetic disease, and even a fire that almost destroyed their house.

But facing the loss of their home to foreclosure was unfathomable to the Zooks. So while facing obstacles that would cause most people to give up, the Zooks did what they had to in order to keep their home.

The Last Straw

While the Zooks have faced hard times, they have always had their home, their family and each other. “My wife is a superwoman,” says Mike Zook. “We’ve been married 30 years and we’ve gone through some terrible things, but she has incredible strength.”

Lora Zook was born with neurofibromatosis, often known as the elephant man’s disease, which has over her lifetime required 28 surgeries on both legs. She still struggles to walk. On top of that, 10 years ago, she battled cervical cancer, and four years ago, she fought breast cancer.

“We went through radiation and chemotherapy, and nothing keeps her down,” says Zook.

The Zooks’ home caught fire in 2008 and was nearly destroyed, but their homeowner’s insurance paid for the residence to be rebuilt.

Then in 2009, Mike Zook, who had been a barber for 43 years, fell at work and injured his hip. The nerve damage he experienced meant he could no longer stand behind his barber chair and had to stop working completely. “Time will tell if the nerve damage ever repairs itself, but for now, I can’t be a barber at all,” Zook says.

$7 Short; A Lifetime on the Line

At first, Zook received workman’s compensation of about 80 percent of his wages. That amount enabled the couple to keep up with their mortgage payments. But then he applied for Social Security disability benefits. When those payments began, his workman’s compensation stopped.

“I went from earning $50,000 a year to $40,000 a year on workmen’s comp to $13,000 a year on Social Security,” says Zook. “My monthly Social Security check was $1,093 and my house payment was $1,100 per month.”

With their only income came from Social Security benefits, they faced extremely difficult choices.

“We had to choose whether to eat, to pay our utility bills, or to make our mortgage payments,” says Zook. “We sold almost everything we owned in yard sales and cut way back on our spending. To this day, our living room doesn’t have any furniture in it.”

In spite of their efforts, the Zooks eventually fell four months behind on their mortgage. They received a foreclosure notice from their lender with a referral for housing counseling. The Zooks contacted Apprisen Financial Advocates, a member of the National Federation for Credit Counseling. Their counselor explored the option of a loan modification for the Zooks with the Home Affordable Modification Program, but when she consulted a mortgage amortization chart, she realized the couple would need about $500 more per month in income to qualify for the new payment plan.

Mike and Lora ZookA Paper Route Saves the Day

The Zooks explored every avenue they could think of for a job that one or both of them could do in spite of their disabilities. The best option turned out to be a paper route delivering newspapers to local businesses. Mike assembles the papers, Lora drives the route and their 21-year-old son helps them make deliveries.

“We make almost $900 a month now delivering these papers because we picked up another route recently that pays us $115 a month,” says Zook.

The extra income allowed them to qualify for a loan modification with Citibank, which lowered their interest rate and refinanced the delinquent portion of their loan. The Zooks’ new mortgage payment is $600 a month — about $500 less than it was before the modification.

“We had a probationary period during which we had to show that we could make the payment and put it into a savings account every month,” says Zook. “We made nine on-time payments and so we qualified for a permanent loan modification.”

The Zooks’ interest rate is 1 percent for the first year, and as long as all their payments are on time for the next five years they will be granted a principal reduction of $1,000. Their interest rate will gradually rise over the next few years to 2.5 percent and then stay at that rate until the mortgage is paid in full.

“Money is still pretty tight even with the loan modification because our income comes just from the paper route and the Social Security benefits,” says Zook. “We started a vegetable garden in the back yard and we don’t go out any more to restaurants or to movies. We play a lot of board games and read.”

Zook’s advice to homeowners who are having trouble making mortgage payments is “don’t panic.” Stay calm, reach out for help if you need it, and in moments of weakness just think about how the Zooks were able to persevere and overcome countless obstacles to save their home.

Michele Lerner is a contributing writer to The Motley Fool.

Tagged: Elephant Man, Foreclosures, HAMP, Home Affordable Modification Program, housing counseling, loan modification, Mike and Lora Zook, neurofibromatosis, principal reduction, refinancing, second job,

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