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Description
[ILLUSTRATION OMITTED]
Ohio savings banker Howard Boyle, sitting in a trade group committee meeting in Washington, noticed that he had an important message coming in over his Blackberry. Boyle, president and CEO of Home Savings Bank, Kent, opened the message:
"Just a quick e-mail to thank you and Scott [Stiegemeier, one of Boyle's lieutenants] for your help. One of the most embarrassing experiences of our lives. I don't know where we would be if you hadn't stopped me in the street."
Rewind the tape a moment--or backup your DVR--because this is the happy ending, to an unhappy story.
Waiting for ax to fall
It all began when one of Boyle's employees was scanning the local legal notices, a routine practice at Home Savings, $105.6 million-assets. Boyle says that one foreclosure notice jumped off the page.
The notice concerned the home of a longtime customer, whom we'll call The Smiths. However, the "Smiths'" mortgage wasn't from Home Savings, but from an out-of-town lender, one of the country's premiere mortgage firms.
[ILLUSTRATION OMITTED]
"We thought, 'Why don't we give this guy a call and find out what's wrong?'," says Boyle. Stiegemeier tried a couple of times, but they weren't calling back.
A few days later, Boyle was driving around town and noticed "Mr. Smith" driving towards him. So he waved him down and both lowered their windows. Boyle said he had a good guess that the customer had an expensive subprime mortgage that had reset beyond the customer's means. Home Savings wanted to try to help.
Smith and his wife--both professionals making good money--had been more or less paralyzed with fear and worry. They had been watching their situation unravel.
How did such a couple get into such a mess? They had lacked the downpayment for a conventional mortgage and instead took an appealing exotic loan. Boyle says when he talked with the husband, the fellow couldn't even explain what kind of loan he had. They had watched their monthly payment jump from $800 to $2,200 in an afternoon. The whole experience caught them off guard, and as their minds reeled, panic set in, then paralysis, then the foreclosure. Now, with the bank reviewing the situation, things looked hopeful for the first time in ages.
But the happy ending wasn't quite there, yet. Boyle says that the larger lender that had made the subprime loan was anything but helpful in processing the takeout loan his bank made. It wasn't attitude, but simple inundation. Boyle says this lender was involved in so many Ohio foreclosures that it took two weeks to send the payoff letter, the official statement of exactly how much the borrower owes, in order for the new lender to expedite the transaction.
By the time you read this, the salvage will have been completed. "We stretched a bit and got these people into a payment they can afford," Boyle says. He expects to see more such situations, and do more takeout loans, as borrowers in his state who squeezed themselves into new homes end up in the red.
The salvageable and the hopeless
Other bankers expressed similar feelings and intentions to those of Howard Boyle. But calls to some of the hottest foreclosure spots around the country indicate that while sometimes this is doable, more often, situations were bad from the get-go. Also, some situations that might have been saved deteriorated too far.
"People are ashamed to come in and admit, 'I need help'," says Boyle.
And, in some cases, it is simply fear that rules.
In the New York City suburb of Long Island, rising foreclosure rates, much of the problem driven by subprime lending, has had lenders watching the market closely. So far, $1.4 billion-assets Suffolk County National Bank has not had many inquiries from troubled borrowers.
"Many are going to the nonprofit organizations for guidance," says Debie Simonetti, vice-president, residential mortgage originations for the bank. Right now, the agencies look like the right place to go, she explains, to people deathly afraid to talk to their lenders or servicers. Further on, Simonetti continues, these troubled borrowers may be ready to approach local bankers for refinancing, and she expects the volume of inquiries to pick up in the first quarter of 2008.
Not every borrower can be helped, by any means. In some cases, Simonetti and lenders in other parts of the country report, the best solution for borrowers whose mortgages have reset beyond their means is simply to sell, if they can, and get something out of... |
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