Debt counselors say underwater homeowners overlooking assistance programs

Consumer Credit and Housing counselor Angela Ghilarducci speaks with a client at Consumer Credit Counseling Services on Monday, Nov. 28, 2011.

Consumer Credit Counseling Services

Consumer Credit and Housing counselor Angela Ghilarducci speaks with a client at Consumer Credit Counseling Services on Monday, Nov. 28, 2011. Launch slideshow »

Clay McRae is something of a recent exception as far as Consumer Credit Counseling Service of Nevada and Utah is concerned.

Out of work for nearly two years, possibly on the verge of losing his home to foreclosure, McRae walked in the front door of the nonprofit early Monday in pursuit of help, something a surprisingly large number of Nevadans have failed to do this past year.

Maybe they’ve given up any hope of resolving their financial troubles amid the worst economy since the 1930s. Record unemployment and home foreclosure rates will do that. Maybe they’ve decided it simply isn’t worth the time and effort to save homes that are worth much less than the mortgages used to purchase them. It’s a strategic choice for many financially and emotionally exhausted Nevadans.

But that’s a mistake, credit counselors say, because working through financial problems can not only benefit underwater homeowners but their neighbors, as well.

McRae lost his $54,000-a-year engineering job at the Circus Circus Adventuredome Theme Park in January 2010 and hasn’t pulled down a regular paycheck since. He earns about $650 a month repairing cars for friends and acquaintances but isn’t eligible for unemployment benefits, having lost his position in a dispute with management.

Yet the 57-year-old native of Canada doesn’t want to walk away from the

North Las Vegas home he bought in 2009 for $125,000, even though it’s worth just $70,000 today.

“I’m just here to see if somebody can help me save my house until I find a job,” he says. “I don’t let life get me down. I’m not depressed. I just want to save my house and find that job.”

In the early goings of the recession, Consumer Credit Counseling President and Chief Executive Officer Michelle Johnson and her staff at 2650 S. Jones Blvd. dealt with a crush of individuals in McRae’s situation — once solidly middle- and upper-middle class Nevadans and Southern Utahans who’d hit hard times and were fighting to hold onto their homes and pay their bills.

Now, Johnson’s team sees “the most incredible slowdown” in the demand for their services. Some of that, she says, can be attributed to a lack of awareness of federal and state programs that have helped troubled homeowners find some relief.

Much of it also can be found in the frustration of tens of thousands of Nevadans who cannot begin to grasp the complexity of federal and private-sector homeowner relief programs, a significant number of which fail to meet the needs of homeowners who are significantly upside down on their mortgages. Nonetheless, at least half of all Nevadans qualify for “some sort of program,” Johnson notes.

“It’s really a case of the homeowner self-eliminating themselves from applying,” she says. “Then again, maybe I’m kidding myself.”

There’s also a caveat. Even if homeowners fail to qualify for relief, there’s a right way to walk away from a home. It may sound counterintuitive, particularly for angry Nevadans about to lose their homes, but she suggests that homeowners facing foreclosure:

• Maintain their home, inside and out.

• Assist the lender or loan servicer by finding a buyer for the home, listing it for sale, locating a real estate agent who is experienced in a short sale and providing all the required documents that lenders need to substantiate that a short sale is the best alternative.

• Recognize that the job of an experienced real estate agent is to negotiate with the mortgage company to ensure that the short sale eliminate any financial obligation written into a homeowner’s contract. The lender can pursue the homeowner for the deficiency balance unless otherwise negotiated.

• Understand that the federal government permits until Dec. 31, 2012, the forgiveness of any tax obligation on deficiency balances that remain on owner-occupied homes. Investment properties are not eligible for such exemptions.

“I understand the homeowner’s asking, ‘Why should I help the lender?’”

Johnson said. “The homeowner signed a contract and should fulfill their obligation by finding resolution if they’re not able to honor their original contract, and this is where it gets a little fuzzy because this is where social responsibility comes in. It also benefits the neighborhood because the home doesn’t remain empty, and it benefits the homeowner because they’re fulfilling their legal obligation. You can also speak about moral and social obligations, as well. It doesn’t matter to some people, but that’s where our conversations about the long-term health of the community come in.”

To help McRae hold onto his home, the CCCS set up meeting between him and

Angela Ghilarducci, a certified housing counselor with the nonprofit agency.

Her job was to evaluate his financial situation and options, explain the benefits and detriments of his choices and help resolve his housing situation. The goal: manage McRae’s expectations, given his lack of income, and help him understand the best way to keep or sell his home.

McRae and Ghilarducci put together a worksheet estimating McRae’s monthly household expenses, which totaled $2,420 for a mortgage, child support, groceries, utilities and other needs.

Ghilarducci called McRae’s mortgage lender, Bank of America, to determine whether he qualified for a loan modification. He didn’t without earning a regular income, decreasing his likelihood of maintaining smaller monthly payments.

No foreclosure notice had been filed on the home but one could be forthcoming, which woould force McRae to vacate the home by late spring. He needs a job, but more than 100,000 construction jobs have been lost in Nevada since 2008, so it’s likely that he’ll have to undergo job retraining to find employment if he chooses to remain here. There are federal and non-profit dollars available to help pay for school.

“Try to get employment, anything and then apply for the (loan modification program) to save your home,” Gilarducci told him.

Ghilarducci also provided McRae with a list of nonprofit and government agencies that might help him retrain, including Nevada Partners, Catholic

Charities and the Community College Workforce Development Center. She also recommended that he pursue the safety net of food assistance through

Catholic Charities, the Jewish Family Services Food Bank and the food stamp program.

Would he fail to find work to qualify for a mortgage modification, Ghilarducci told McRae, he could qualify for the federal Home Affordable Foreclosure Alternatives program, which provides troubled borrowers with $3,000 for relocation assistance after completing a short sale. Borrowers are fully released from future liability for the first mortgage debt and second-mortgage lenders participating in the program must also release borrowers from future liability.

“You least you know what your options are,” Ghilarducci told McRae.

After the counseling session ended, McRae said he was firmly committed to hanging onto his three-bedroom, two-bathroom home. He shares the residence with his daughter, who shuttles between her parents’ homes.

“Everything I’ve got, I own. It would be gone if I didn’t take care of it,” he said, “and I don’t want that to happen. I’ll do all I can to keep my home.”



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  1. "I understand the homeowner's asking, 'Why should I help the lender?'" Johnson said. "The homeowner signed a contract and should fulfill their obligation by finding resolution if they're not able to honor their original contract, and this is where it gets a little fuzzy because this is where social responsibility comes in. . . it benefits the homeowner because they're fulfilling their legal obligation."

    It's so sad to see Johnson has hung out her counseling shingle being woefully ignorant of the real rules of the homeowner/lender game. Like those government programs she's there to "help" others with -- they don't help anyone but the very bogus "lenders" threatening to take her customers' homes.

    Last July our Supreme Court made it clear in the Leyva case every homeowner "has the right to know the identity of the entity that is 'entitled to enforce' the mortgage note under Article 3, see NRS 104.3301, otherwise, the homeowner may pay funds to a stranger. . ." NRS 104 Article 3 is Nevada's current version of the centuries-old law of notes. Here's the best part -- it's there for homeowners to use without courts, lawyers, or any government permission.

    McRae is quoted here saying "I'm just here to see if somebody can help me save my house until I find a job..." Nevada homeowners can save their own homes by making sure they're not paying strangers. They do it by using laws like NRS 104.3309 and 104.3501 to change the rules of the game in their favor. The first step is to demand "where's my Note? Who's the Note Holder?" using those old, old laws.

    I'd wager Johnson doesn't include any of that in her counseling. For sure the "lenders" won't.

    "If you're going to take my house away from me, you better own the note." -- Joe Lents (who hasn't made a payment on his $1.5 million mortgage since 2002) in Bloomberg's 2/22/08 "Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish"

  2. "If your agent doesn't recommend an attorney who specializes in this, find one that does."

    lasvegasexpert -- did you miss the part about the guy in this article being unemployed and underwater in more than just his house payments? And did you miss my post about how even the experts miss the threshold point -- "where's my Note? Who's the Note Holder?"

    "Why don't the banks want us to see the paperwork on all these mortgages? Because the documents represent a death sentence for them..... in America, it's far more shameful to owe money than it is to steal it." -- an article from the November 25, 2010 issue of Rolling Stone by Matt Taibbi "Courts Helping Banks Screw Over Homeowners"

  3. Mr. McRae's job prospects are not encouraging. He is 57 years old and out of work for two years. He lost his last job to a dispute. This is a lesson for others out of work. Don't wait and be willing to move if an opportunity presents itself. Don't depend on government to solve your problems. At least for now we are still a land of opportunity and individual initiative.