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Published: Sun, June 13, 2010 @ 12:00 a.m.

‘American dream has gotten lost in shuffle’

An increasing number of Valley families face possibility of foreclosure




Four years after the housing market fell — and brought Wall Street with it, Denise O’Malley’s story has become all too familiar.

After O’Malley, a registered nurse’s assistant, and her husband, Terry, a roofer, were laid off in the early stages of the recession, the couple realized they soon would have trouble making monthly payments on their Wilson Avenue home.

The O’Malleys’ home was now worth $62,500, significantly less than the couple owes on the 30-year, $177,900 loan.

Although they were current on their payments, the O’Malleys applied to their mortgage servicer, GMAC Mortgage, for a loan modification in spring 2009.

More than a year later, fighting to save their home has become Denise O’Malley’s full-time job. She said she has filed for a loan modification at least nine times. But every modification GMAC has offered also increased their monthly payments.

“I kept thinking, ‘They’ll see what they’re doing; they’ll understand that we aren’t working,’” Denise O’Malley said. “But the American dream has gotten lost in the shuffle.”

She has talked to countless GMAC representatives about why the modification is an increase — explanations have ranged from claims of missing paperwork to an overassessment of the O’Malleys’ income because Terry can pick up some temporary work, Denise O’Malley said.

“They said there were mistakes in the paperwork. They said it’s not their problem,” she said. “They are scary; they are intimidating because this is our home.”

The O’Malleys are now five months behind on their payments. GMAC has not begun the foreclosure process, but O’Malley said she worries it could start at any time.

An increasing number of families such as the O’Malleys are suffering as foreclosures continue to rise, ravaging local homeowners and communities, said Mary Ann Beal-Villa, a foreclosure-prevention counselor for the Mahoning Valley branch of Empowering and Strengthening Ohio’s People, or ESOP, which provides free foreclosure-prevention counseling.

In May alone, Mahoning County had 301 new fore-closure filings, and Trumbull County had 247, according to foreclosure data tracker RealtyTrac. Columbiana had 86 new filings.

Unlike the risky subprime loans and predatory- lending practices that caused earlier foreclosures, the recent foreclosures have been driven by the Valley’s persistently high unemployment and decreased home values, Beal-Villa said.

Unemployment in the Mahoning Valley has not fallen below 12.5 percent since January 2009. The national unemployment rate was 9.7 percent last month.

Because of long-term unemployment, a rising number of foreclosure victims are homeowners who formerly had good credit and avoided exotic mortgages, she said.

While foreclosures on subprime loans were concentrated in urban areas, the crisis has spread to suburban and rural communities, Beal-Villa said.

“Foreclosures are starting to affect homeowners that once considered themselves middle-class,” Beal-Villa said. “It is more of a widespread problem — it’s like a tornado; it doesn’t pick, it just goes.”

The primary cause of Valley foreclosures is loss of income, Beal-Villa said. Unemployment, wage freezes and furloughs have made it more difficult for families to make ends meet, she said.

“There is hope that when the economy turns around and more jobs are created in the area, it will slow down,” Beal-Villa said. “But when the foreclosure process starts, it’s hard to stop it.”

In April 2009, the Obama administration introduced a $75 billion federal fore-closure-prevention plan, the Home Affordable Modification Program, or HAMP, which promised to reduce monthly mortgage payments for 3 million struggling homeowners.

HAMP has been plagued by problems and largely ineffective for Ohioans, said Charu Gupta, a spokeswoman from ESOP’s central office in Cleveland.

The program provides incentives to participating mortgage lenders to reduce eligible homeowners’ payments to 31 percent of their monthly income. Lenders also must pledge to expand their staff and services to deal with a growing foreclosure backlog.

HAMP has encountered problems because no one has any authority to ensure the lenders are following program mandates, Gupta said.

“It has good intentions. But somewhere along the line, something has gone horribly wrong with the incentive structure,” she said. “If the proof is in the pudding, there is no pudding.”

But the service issues mask a more significant problem: HAMP was not designed to account for families such as the O’Malleys, who face long-term unemployment.

The original program would not consider unemployment benefits as a source of income, so those who were unemployed were not eligible for a HAMP modification. That rule was altered last week, but homeowners must prove they will get unemployment benefits for at least nine months. Ohio guarantees those benefits for only up to 26 weeks.

As a result, few Ohio homeowners have benefited from the program — only 8 percent of Ohio homeowners have received a permanent HAMP modification. The state ranks 48th in the number of homeowners who have gotten a loan modification through the program.

To try to stem the problem, the federal government has granted the Ohio Housing Finance Agency with $170 million in Hardest Hit Funds, part of a $2.1 billion in Troubled Asset Relief Program, or TARP. The funds will go to 10 states that have suffered severe home-price declines and high unemployment.

In a proposal submitted to the Treasury Department last week, the OHFA said it will target the funds for unemployed and underemployed homeowners in counties with “a high share of foreclosure, high unemployment rates, or large declines in home sales.” It also would provide financial incentives to mortgage servicers to either modify the loan or help the homeowner get out of the loan without going through the foreclosure process.

The funds will be administered by organizations such as ESOP that have been certified by the U.S. Department of Housing and Urban Development to provide free foreclosure-prevention counseling. ESOP and similar organizations work directly with lenders on behalf of homeowners to negotiate loan modifications.

On Wednesday, Denise O’Malley met with the Mahoning Valley branch of ESOP with the hope that the organization will be able to help her get a modification her family can afford.

Denise O’Malley hopes that ESOP will help reduce her monthly payment from $713 to around $600, with the outstanding payments wrapped at the end of the loan.

“I know I can make $600, so I’m hoping they might be willing to negotiate,” she said.

She says she is not going to give up on saving their house.

“Failure is not an option,” she said. “I am going to save my home, one paper at a time.”


1moringlory(16 comments)posted 6 years, 1 month ago

hahaha too bad their story isnt the truth

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2Rokscout(310 comments)posted 6 years, 1 month ago

What's the truth?

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3alphadog(2 comments)posted 6 years, 1 month ago

I am in the same boat as these people,only Citi Mortgage is my servicer. We went thru esop to apply for the laon mod. witch was the 3rd time my wife and I tried,we got every excuse from the mortgage co. befor that from we never recived the documents to we dont have enough info . My wife sent them Certified mail no how can they say they never got them.I lost my job & the wife had an illness last year in turn she only worked 5 months , we contact citi to make arrangements thy refused to, got 60 days late on payment when taxes came back sent the money to citi to make loan current the following week I get papers from thier law team stateing they want to forclose the next day my check for the payment to make loan current was sent back to us. ESOP didnt help much they did what we did filled out the same documation twice with them they faxed it to Citi took a good month for an answer from citi only to be put on a trial mod. for about six months then the day after christmass got a letter from citi saying had too much income no how can a family that is pulling in 800.00 a month have too much? got another paper rasing monthly payments from 500.00 to 625.00 I believe the Woman in the article is telling the truth ,Obama is giving struggling homeowners lip service to make him look likt the hero. My question to is why hamp can only be for people that are current on their monthly payments shouldnt it be for whoever is struggling to make mortgage payments current or not . By the way I have yet to meet one person in this area that got a permenate loan mod. Please let us know if there somebody with a permenate one in this area because I lost my faith in the system.A total of five times we tried for loan mod and nothing.

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4moringlory(16 comments)posted 6 years, 1 month ago

although the plight of many american families are the same and programs like this are misleading and very hard to qualify, her personal story is not accurate, i know this because i know her and their histroy quite well. how can you owe $177,000 on a home in girard that was given title free and clear ,,,,,,,,,the home wasnt that when the origional personal who really paid for it bought it....mmmm i wonder

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5Rokscout(310 comments)posted 6 years, 1 month ago

That's why I asked. Something didn't add up. Seemed like some odd numbers and quite a drop in home value, if that were the case.

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6Springman(274 comments)posted 6 years, 1 month ago

Alpha: Get a lawyer. Not everyone will qualify for HAMP or any of the other programs. If you aren't too far "under water" you may have recourse.....

Vindy should have interviewed a couple of lawyers who specialize in representing mortagees.

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7moringlory(16 comments)posted 6 years, 1 month ago

trumbull county auditor has a site look it up

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8alphadog(2 comments)posted 6 years, 1 month ago

Got a lawyer, Now In Chapter Seven. Wasn't too far under. Walking away the Home is not Worth it when it's been 18 months on a layoff due to employer closeing down for good.Wife is back to work fulltime.Go to Job interview's don't get called back . Sold and cashed on what was worth anything . I know a lot of people in the area are in the same situation due to jobloss & etc. We aren't looking for pity we just want to keep our homes,get jobs and such. Time fo all of us to move on to better times. Good luck and prosperity for all .

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9UnionForever(1470 comments)posted 6 years, 1 month ago

House is worth $62,500 and you owe $177,900 - WALK AWAY!!! Give the house back to the mortgage company. Only a fool would stay with the house that much under water.

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10havinmysay(155 comments)posted 6 years, 1 month ago

Amazing how everyone wants the gov to stay out of their business until they need a handout. Suck it up and get another job. Two if you need to. Deliver pizzas or papers, flip burgers, whatever. Get it done.

The problem is that these people, like most, live hand to mouth. They are absolutely maxed out. There is no emergency fund to fall back on in case of illness or job loss. No savings at all, usually.

Now they want to blame the govt. Blame yourself. Stop going out and acquiring mortgages that you cannot afford. Contrary to the lie that the marketing machines sell you, you CANNOT have it all.

You should ALWAYS borrow at least 15%-20% less than you can currently afford when buying a home, car, or any other major purchase. If you lose your job, become ill, or have other setbacks you will need that 15-20% income/savings cushion to stay solvent.

The bank are not your friends. Their brokers & affiliates are not your friends. Once they sell you a product, they're done. Don't come running back to them once you hit a wall. They don't care. They're in business to make money.

If you can't make your car payment, they're going to take your car. If you can't make your mortgage payment they are going to take your home. You know this going in. Plan accordingly. Leave room for life. Crap happens to all of us that we cannot foresee. Make allowances for it in your finances. Stop looking to the government (the rest of us) to bail you out. I did not support the bail outs of the banks and Wall Street either.

I work in this industry and have seen so many ridiculous stories of people expecting the government to fix the mess that they've created in their finances.

Some of these people applying for loan mods live in half million dollar homes. They have three high-end cars, 60" tvs throughout the house, and refuse to cut down on their expenses. They have $300 cell phone plans and $2,000 worth of car payments a month, but they want a handout to keep them in the lifestyle they simply cannot afford anymore. Instead of getting cheaper cars, selling off some items, and downsizing their lifestyle they want the banks to "work with them." Not going to happen.

Then they begin to rail at the government. It's not their fault either. You folks did not go out and ask the government's permission when you signed up for a home you could not afford. Why blame them?

Not everyone in trouble is in half million dollar homes, but the same principals apply. Live within your means. Well within your means--whatever those means are. Perhaps you will have to wait before buying a home. Perhaps you need to buy a more affordable home. It is up to you to manage your life and finances. Just because some slimy broker or loan officer is willing to sign you up for a loan does not mean that you should do it. Live within your means, people. It is not the taxpayer's responsibility to keep you in a home you cannot afford.

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11havinmysay(155 comments)posted 6 years, 1 month ago

*President Obama is suggesting a large number of financial reforms in the banking industry to protect ignorant Americans who are too uneducated or stupid to read the fine print and protect themselves against greedy banks. Let's see how many of you Tea Baggers and Party of No members will go on talk radio crying about socialism, birth certificates, and how the banking industry will be harmed by regulations.

One last thing * You can't have it both ways: Don't blast the President for trying to regulate the banks, who are out of control, yet cry about government staying out of business. Put your thinking hats on this time, folks. Don't be misled by rich Republicans and who are the ones who benefit from a lack of government regulation. These are the people who own stock in these companies, are on the boards of these banks, and who are in bed with the financial industry. Think this time.

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12E328(15 comments)posted 6 years, 1 month ago

How exactly does one come to owe $177,900 on a house that has probably never been worth half of that???

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13Stan(9923 comments)posted 6 years, 1 month ago

We are now facing the backlash of easy credit . Many who bought houses didn't question the price . The sellers were making fortunes .The buyers only concern was the payment . Today many repo's sit deteriorating and waiting to be tore down . Nobody is interested in buying them .

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14moringlory(16 comments)posted 6 years, 1 month ago

because they refinanced the home a couple times and rolled their credit cards into it

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15FormerYtowner(96 comments)posted 6 years, 1 month ago

"Amazing how everyone wants the gov to stay out of their business until they need a handout. Suck it up and get another job. Two if you need to. Deliver pizzas or papers, flip burgers, whatever. Get it done."

How many houses can you afford by having the jobs you mentioned?

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16mother4earth(3 comments)posted 6 years, 1 month ago

ESOP would be able to assist, an office in Warren and now services are being offered in Columbiana County @ The Family and Community Resource Center.
Even if you walk away..the lender may come after you for the monies, which is why ESOP would be a great resource to get in touch with before walking away. Getting a lawyer to explore options is good too-legal aid is free if you qualify.
Credit counseling would be another option for those who live off of credit cards and take loans out against their homes due to the lack of budgeting knowledge or monies.
Exploring other educational options which would give you better paying jobs. Eastern Gateway Community College has a free Career Assessment workshop which allows one to do so. Especially for those who are displaced workers due to unemployment or job closings. Many answers to the situation but are people willing to listen or follow through? Sitting around blasting people nor offering solutions is not solving the problems in a constructive manner.

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17prodgodq(172 comments)posted 6 years, 1 month ago

These posts are very interesting. The one cuase of this modern day depression is the same as what brought on the great depression of the 1930's:
Society's attitude towards debt. Not just the consumer's attitude or just the attitude of business. My belief is that over the last 20-25 years, our society's attitude towards an acceptable level of debt changed dramatically. From the consumer who thought nothing of having two mortgages, several credit cards and high end car loans, to large corporations carrying tremendous amounts of debt leverage through buying out their competitors. In the 1990's, this was called "consolidation". Either way, it means unsustainable levels of debt, both for businesses and consumers. It seems that about every 70 to 100 years, economies need to re-learn this lesson.
Ours arrived right on schedule. Point the finger at whomever you want, but the reality is that we are all to blame.

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18cambridge(4152 comments)posted 6 years, 1 month ago

I don't want to seem heartless but this woman is not the victim she claims to be.

If she ran up credit cards and paid them off by refinancing her home as moringlory wrote that is more the typical reason people find themselves in this situation.

When people spend more than they make and put that extra spending on credit and then refinance their home and end up paying for that pizza they ate last year for the next thirty years this is the result.

What is truly mind boggling is that his woman is determined to find a way to pay a $177,900 loan on a $62,500 home. If you want to live in a $62,500 home just go buy one. Run, don't walk, away from that house and buy another $62,500 home and your payments will be less than the $600 you say you can afford.

Oh, and read the comments from havinmysay and prodgodg over and over again untill they sink in.

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19Jake(112 comments)posted 6 years, 1 month ago

Why am I not surprised that someone who goes by "UnionForever" would see "walk away" and default on the loan as the solution? The entitlement mentality never ceases to amaze, and the failure to see the long term consequences of that kind of thinking - we call it the Mahoning Valley - will continue to doom this region.

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20dreamcatcher52(140 comments)posted 6 years, 1 month ago

How did these people find a lender to loan them more than the house was worth? Houses in this area have not dropped that much in value. Ihave had equity loans and was never able to borrow more that 80% of the EQUITY (not the home's value) that I had accrued. It's a shame people in this country are not better informed about financial matters, but I don't think the rest of us should be bailing them out. I say let the lender have the house. They will lose and they deserve to lose because they had no business making a loan like that. These people should just go rent somewhere. It is not worth the stress.

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21Springman(274 comments)posted 6 years, 1 month ago

"How did these people find a lender to loan them more than the house was worth? " Because the lender made money on the deal! The loans were sold!

The sellers knew better.

So did the mortgagors.

The mortgage company got an appraisal. The appraisal should be covered by error and omission insurance.

The mortage company sold the loans as credit swaps, probably knowing the loans had been "fixed." If they didn't know, they should havre insurance coverage.

Brokerage firms packaged the loans and sold them, in many cases, to their own customers knowing full well that the underlying loan is worthless.

If there is an action for a deficiency judgment against the buyer/mortagee, the apparaser, the mortgage comapny and the rest should be joined.

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