Home foreclosures 

ACORN empowers those in need

Latosha Poston staved off foreclosure on her Westside Indianapolis home but the victory was at a bittersweet cost. The certified nursing assistant who makes $10 an hour can now afford her $725 a month mortgage payment, though just barely.

Poston completed a mortgage modification in mid-September that lowered her monthly mortgage payment by more than $100, although that is still $100 more than what she was paying when she originally purchased the house six years ago. 

“I just wish I had stayed with Irwin Mortgage,” Poston said of the original holder of the mortgage that is now held by AMC Mortgage. 

Poston’s struggles in the last two years put a human face on a problem that is plaguing Indianapolis: mortgage foreclosures. In fact, a recent survey by ACORN, a national organization whose goal is to empower low- and moderate-income people, revealed that Indianapolis has one of the highest mortgage foreclosure rates in the country. That is because, the survey revealed, 33.4 percent of homeowners in the Indianapolis area receive a high-cost loan when refinancing. What is worse is that minorities like Poston are more likely than whites to have high-cost loans when refinancing.

“Lenders aren’t required to steer you into the lowest cost loan you qualify for,” said Valerie Coffin, a spokeswoman for Washington-based ACORN.

Some 65 percent of blacks wrongly assume that lenders are required by law to quote the best mortgage rate to a consumer, according to a Fannie Mae housing survey in 2003. But, also according to Fannie Mae, 50 percent of the borrowers who end up with high-cost loans could have qualified for market rate loans.

“It’s a jungle out there,” said Amanda Wilkerson, a housing counselor at ACORN Housing, which helped Poston get out of foreclosure. “You can’t tell the good guys from the bad guys without an education.”

The education that Wilkerson speaks of is on the intricacies of mortgage financing, which is a major problem both here and across the country since the largest purchase most people ever make is a home. 

“It’s a problem because many low- and moderate-income people do not understand credit,” she said, explaining that low- and moderate-income means a household of four with an income of no more than $41,680 (which is 80 percent of the medium income of $52,100). Poston admits that she didn’t have a good understanding of credit.

In 2004, she sought to lower her $615 monthly payment by refinancing the loan she had with Irwin, which had a rate of around 6 percent a year. She got a flexible rate loan with AMC Mortgage, which at the time was known as Ameriquest, that initially had a low interest rate but that suddenly shot up. Poston saw her monthly mortgage payment skyrocket in six months to an unmanageable $840 a month.

“I just couldn’t afford it,” Poston said. By last November, she was facing foreclosure.

While Wilkerson says “most lenders don’t want to write bad loans,” the marketplace is replete with failures, largely due to borrowers getting high-cost loans. ACORN’s study examined the extent of high-cost lending in 130 cities around the country, and discovered that borrowers with such loans are more likely to have lower income and have fewer resources to cope with the coming “rate shock” when their interest rates adjust even higher, according to ACORN President Maude Hurd in a news release when the study was made public last month. In the study, Indianapolis ranked 33rd in terms of having high-cost loans. Ft. Wayne ranked 41st, while Gary ranked 13th.

“The key to changing all this is education,” Wilkerson said.

She said a Fannie Mae study showed that a borrower who attends a home buying workshop before obtaining financing is 23 percent less likely to later go into foreclosure. And borrowers who attend a workshop and obtain home buying counseling are 35 percent less likely to go into foreclosure. 

“It’s a simple theory of whether you are going to shop for something or whether you are going to be sold something,” Wilkerson said.

Poston said when she originally refinanced, she was sold something. But correcting that mistake came at a cost. She was only days away from foreclosure last year when she went to ACORN Housing for help. Earlier this month she completed a mortgage modification but it cost her $2,000. Poston now has a 30-year, fixed-rate loan at 7 percent, and a $725 monthly payment, down from $840.

“ACORN [Housing] did get that straightened out,” Poston said. “They got me the best they could.”

For more on ACORN: www.acornhousing.org.
 

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