Issue #150, Summer 2007
Homeowners under threat of foreclosure suffer a level of trauma that's largely invisible to most Americans, while professionals working to keep people in their homes are often overwhelmed by the complexity of the crisis.
By Desiree Fields, Francine Justa, Kimberly Libman, and Susan Saegert
By now, most Americans have heard about the country's
growing foreclosure crisis and seen the statistics showing the growing
numbers of mortgage delinquencies nationwide. But while the numbers
are startling, even frightening, they do little to convey the hardships
and despair of the households that experience delinquency, default,
When foreclosure threatens, the attendant trauma
often isolates homeowners from the very information and support they
need; the shame they feel discourages them from contacting organizations
that could help them, even leads them to withdraw from the support of
their friends and family. Fear of foreclosure undermines family stability,
parent-child relationships, and the ability to make long-range plans.
In many cases, homeowners in trouble feel that their life is ruined.
In 2006, the Housing Environments Research Group
at the City University of New York Graduate Center undertook a series
of focus groups in five cities - New York, N.Y.; Waco, Texas; St. Louis,
Mo.; Duluth, Ga.; and Hamilton, Ohio - to learn more about how low-income
homeowners go into mortgage delinquency, how they decide to deal with
the crisis, and the results of their efforts to avoid foreclosure. We
conducted three focus groups in each city: one with the nonprofit professionals
who come into contact with homeowners at risk of foreclosure; one with
delinquent homeowners who sought help from a nonprofit counseling agency;
and one with delinquent homeowners who did not seek help from a counseling
agency. In all, we spoke to 88 homeowners and 39 professionals. The
conversations yielded a vivid picture of the devastating effects of
the foreclosure experience and the difficulty many professionals have
in supporting the emotional needs of these homeowners.
"You feel sick to your stomach and scared every time the phone rings."
o A woman named Naira, before breaking into tears, told us, "Truthfully, it feels like you're walking down a one-way street, a tunnel, dead end, no way out. None. What's left? Death? You consider it. You consider it why? You've got life policies. They'll take care of your kids." When she separated from her husband, they agreed that Naira would care for their children and pay for their day-to-day needs if he maintained the mortgage. She only learned about the delinquency when their lender gave up on collecting from her husband 15 months after he stopped making payments and turned to her for remittance.
o Marion, a young single mother, explained that she left her job to attend to her mother's illness. Marion became delinquent on her mortgage after a few months of caring for both households. Still, she felt that providing this care was important because "if it happened to me, she'd do the same thing for me."
Even when overspending is the root cause of difficulty, people described
feeling a loss of self control in the face of the consumerist values
of American culture. One woman in St. Louis described how her efforts
to "keep up with the Joneses" led her into delinquency. Regarding
the powerful media images, she said, "They show you this big American
dream and we're trying to obtain it, and we can't even afford it."
Home gives cohesiveness to the daily lives of individuals and their
families and serves as a marker of stability and accomplishment. Thus,
foreclosure represents a cascading series of economic and emotional
losses that interfere with people's day-to-day lives.
The impact of, and stress from, being mortgage-delinquent interferes
with homeowners' abilities to strategize and make rational decisions
about how to deal with financial crises. For example, a New York woman
who refinanced to avoid foreclosure acknowledged that acting while she
was in an emotionally charged state led her to engage in a fraudulent
process that involved signing her home over to a straw buyer. Other
homeowners agreed with her assessment of the disastrous consequences
of decision-making under extreme stress. A St. Louis woman remarked
that "we're not looking at it, we're just looking for a way out;
we're just looking for something to say you're current, to stop the
late charges, to stop the little sheets of paper."
A Duluth, Ga., woman in her 50s lost her job, went into delinquency
after using up her savings, and became depressed. Like many homeowners
we spoke to, her depression interfered with her ability to find work
and address her finances. She said, "When I get depressed, then
I don't have any motivation, or energy, and it's like it's all I can
do to just go get the mail out of the mailbox." She eventually
became so overwhelmed by the collection notices and calls that she stopped
opening them or answering the phone.
Nonprofit foreclosure-intervention counselors characterize this kind
of reaction as a typical "head-in-the-sand" response, explaining,
some people don't want to face that they're in trouble."
Many in the housing-finance sector believe that between 30 percent and
50 percent of homeowners who go into foreclosure fail to make any calls
for help. Professionals said such homeowners turn to nonprofit assistance
only when it is too late to help them to stay in their homes.
However, some professionals acknowledged that they rarely take the
initiative to connect with clients after they became homeowners, noting,
"We have to figure out the best way to do that, because I think
that's going to be one of the keys to preventing foreclosures."
Yet nonprofit professionals also expressed reluctance to reach out to
those in need of assistance "because the phone might ring, and
then we won't know what to do because we won't have enough staff."
In particular, one high-ranking professional noted that "Stable,
competent staffing is hard to do because demands of the job are not
at all like pre-purchase counseling."
As foreclosures have surged recently, professionals have indeed found
themselves unnerved by the demands of assisting homeowners with the
financial and emotional dimensions of foreclosure prevention. A professional
in St. Louis remarked that delinquency "is not their only problem,
they have other issues, too." Another professional compared working
with homeowners in danger of losing their homes to working with disaster
victims. Addressing the complex needs for assistance, counselors become
"overwhelmed." This complicates the process of providing help,
sometimes resulting in missteps that affect homeowners. The executive
director of one nonprofit said, "They [foreclosure counselors]
feel they must do everything to save each person, and then they complete
Policies and practices of lending institutions are also intertwined
with how homeowners cope with the threat of foreclosure. Until the scope
of the problem became evident, financial institutions resisted offering
early assistance to mortgage-holders in trouble because most homeowners
managed to get current with their mortgages before it was necessary
to foreclose. Indeed, many homeowners respond to delinquency by cutting
costs. Often this means cutting back on basic expenses like utilities.
One man in Texas went to so far as to turn off his gas for six months.
Working for additional income is another common way of trying to resolve
delinquency. A homemaker from Ohio described this strategy as, "You
just live with no money and you don't get to do things, but you just
work really hard work - two, three, four jobs." In her family's
case, her husband was injured and out of work for more than a year.
She would "work two jobs at two offices and clean apartment buildings
on the weekend. My kids would help and I just worked really, really
hard." She also home-schooled her three children in part so that
they would not need to spend money on shoes and clothes. After a year
of struggling to make monthly $1,000 mortgage payments, it was a tax
refund that helped the family catch up.
Other homeowners reach a limit to what can be done, like one older
woman who found, after taking extra jobs that still brought in little
money, that she did not have the physical fortitude to keep up the effort,
and resigned herself to whatever would happen. At the time we spoke
with her, this woman was still behind on her mortgage payments and unsure
if she could get caught up.
The experience of struggling to prevent foreclosure can create a home
environment dominated by fear, tension, and stress between parents and
children and between spouses. In Ohio, one mother told us that her daughter
wanted new school clothes but that she couldn't even go to consignment
stores because there was no money. She said, "Your whole house
becomes depressed because all they hear is we can't, we can't, we can't,
Taking on extra work and going without means making tradeoffs that
affect the entire family. Janice, a single mother in Texas said, "I
could make as many hours as I needed to if I needed them, but that'd
mean I have two teenagers at home all night by themselves unattended."
Deciding to work overtime meant that her children would have to feed
themselves. The exhaustion of being "up five, six days working
overtime" meant that she would come home too tired to talk to her
children. Overall, she regretted feeling "too stressed out,"
explaining, "They tell me 'Mommy, what are we going to eat today?'
and I go all crazy on them."
Becoming a homeowner is often viewed as a means of creating wealth
and providing for the financial future of one's children, which makes
the pain of possible foreclosure worse. One mother said of her children,
"I want them to be those people sitting on the side of the table
that have the clout to negotiate what they really want up front and
not have to fight just to get the little tidbits that people are willing
to throw out there." Delinquency represents the possible dissolution
of a once-secure future for one's family: "If you have a baby,
and you want them to have a stable home where they can grow up and have
some stability in their lives, it [delinquency] really adds a lot of
"You asked some people for help, but then they looking down
on you for asking."
In Texas, Janice became delinquent on her mortgage after she and her
husband divorced. As a newly single mother of two teenage boys, she
was struggling to take care of her kids and work enough overtime to
get caught up on her mortgage. Her monthly payments had recently increased
as a result of her working out a forbearance agreement with her lender.
She was reluctant to seek public assistance but said, "I'm making
money, I pay my bills, just feed my kids. That's all I ask." When
she applied for food stamps, she said she was asked, "Why are you
asking for help when you got gold on your neck?" Janice walked
out feeling angry and disrespected.
Some people had similar experiences when they sought help from nonprofit
organizations that offered foreclosure intervention services. Talking
about her efforts to budget well and get current on her mortgage, Charlene
revealed that she had already cut back expenses on food, work transportation,
and other necessities. She said, "I'm not a high-maintenance kind
of girl or anything like that, you know, where
I got champagne
tastes with beer money." But foreclosure intervention counselors
often expressed the belief that their clients had "Champagne tastes
on a beer budget." Delinquent homeowners seeking help picked up
on their attitudes. Jim, an older man who had fallen behind on his mortgage
because of mounting late fees, was frustrated by his experience with
a foreclosure-intervention counselor. He said, "They take the attitude
that everybody's got money and everybody's rich that you don't have
any problems. That guy evidently has never been there. They need to
change their attitude."
Homeowners frame their spending on a set of needs and values that are
sometimes different than those held by the professionals who strive
to help them. Juan is a father of two who had already been in and out
of jail, as had his father during Juan's youth. In justifying expenses
that seemed frivolous to debt counselors, Juan said, "Every one
of my kids are spoiled, you know. But the big picture is the big cycle.
I mean, if spoiling them and being hard on them and being late on a
mortgage is going to keep my son from going to prison, well then."
Mortgage delinquency can also promote feelings of shame. Jackson, a
man living in Waco, Texas, with a wife and children, said, "I tell
you, there's nothing worse than a man feeling like he's not providing
for his family." Feelings like Jackson's prevent some homeowners
from seeking help or even talking about their delinquency with family,
friends, and coworkers. Jackson cautioned, "Those same people you
try to talk to, that you think would bring you up, will be the ones
that bring you down." He worried that people he confided in would
tell others in his community about his financial situation. One woman
kept her delinquency a secret from her family because "everybody
is living kind of paycheck to paycheck" and "you don't want
anybody just feeling sorry for you."
The shame and silence surrounding mortgage delinquency may prevent
the kind of word-of-mouth networking that nonprofits tend to rely on
to get the word out about their programs.
Homeowners seeking help felt misunderstood, ashamed, and excluded from
resources they believed were a part of the American social safety net.
When trying to obtain temporary financial assistance, food stamps, or
emergency grants, many found that they were not eligible because their
home was an asset that counted against them. Others found that being
unemployed or being single without children also made it difficult to
obtain assistance. Such bureaucratic roadblocks left some people facing
foreclosure feeling unsupported by government agencies and nonprofits
because they were not the poorest of the poor. A man from Hamilton,
Ohio, commented, "Our government won't let us get out of debt."
Many homeowners on the brink of foreclosure see racial discrimination
as a factor in their plight. Cheryl was a homeowner in New York who
felt that as an African-American woman, she was given an unfair deal
at closing, despite her good credit history. She said that although
she was quoted a great interest rate, at the closing she was presented
with a mortgage that was two points higher than the original quote.
She described this as "a hurtful thing, 'cause you know the black
people just get higher rates. I mean, why would I have such a high rate
when I had a perfect credit score, perfect, perfect, perfect?"
As many people do in hot markets like New York City's, Cheryl purchased
a multifamily home and planned to use her tenants' rent to help cover
the mortgage. She accepted a tenant receiving Section 8, but fell behind
on her mortgage after receiving no Section 8 payments for six months.
In an attempt to sell the property, she signed a contract with a real-estate
broker who colluded with a lawyer to drag her into foreclosure by using
their contract to prevent her from selling in time. Cheryl filed for
bankruptcy in an unsuccessful last-ditch effort to prevent foreclosure.
When we spoke with her, Cheryl lamented that as a result of the bankruptcy
and the foreclosure "now, five years later, my credit is absolutely
destroyed." Beyond the loss of her home and the savings she had
invested in it, she lost her hope for a secure financial future. She
said, "Well, what am I going to do? I mean
, it's going to
stay on my credit report for like seven years, 10 years they say. By
the time I get that [the bankruptcy] off, if I was going to buy a house,
then - I mean I'll be too old." The home that had been foreclosed
had become the only home that she felt she would ever own.
Foreclosure: More Than Dollars and Cents
Intervention strategies by nonprofit homeownership counseling and education
agencies must take a more holistic approach that considers the psychological
and social dimensions of delinquency. Similarly, prevention strategies
must be predicated on a rethinking of what individuals and communities
have to gain and lose through efforts to increase homeownership.
The experiential dimension of delinquency and foreclosure points to
an immediate need for new forms of counseling, outreach, and community-level
interventions. The isolation and emotionality inherent in the threat
of foreclosure may be more readily addressed through a peer-support
approach than solely through one-on-one counseling. Our focus groups
proved a unique opportunity for homeowners to come together and share
their experiences, challenges, and strategies. In fact, people who have
lived through these challenges may be more aware than professionals
of the full range of available local resources, and a group setting
encourages the exchange of valuable information. With homeowners providing
this kind of social support for one another, service providers may be
better able to concentrate on the practical and financial aspects of
foreclosure prevention without becoming overwhelmed by their clients'
need for this kind of assistance.
Homeowners and professionals expressed the need for strong policy and
regulatory intervention. Professionals fear that the rise in foreclosures
means that their "work in increasing home ownership in our neighborhoods"
is at risk.
For homeowners, their families, and communities, a great deal more
is at risk. Increased protections for consumers aimed at stopping foreclosure
before it starts are needed to preserve their dignity, health, hope,
and social cohesion.
Taking into account the full scale of what is at risk in this crisis
also requires us to reevaluate the risk/benefit ratio of our current
all-or-nothing ownership paradigm. Preventing foreclosures and the human
tragedies they produce may require developing new ownership schemes
that limit risk while allowing families to experience the stability
and asset-building potential of ownership.
Kimberly Libman and Desiree Fields are research associates in the Housing Environments Research Group at the City University of New York Graduate Center and Ph.D. candidates in environmental psychology at CUNY. Francine Justa is executive director emeritus of Neighborhood Housing Services of New York and one of the founders of the Fifth Avenue Committee of Brooklyn. Susan Saegert is the director of the Center for Human Environments and a professor of environmental psychology at the City University of New York Graduate Center. Her new book with James DeFilippis, The Community Development Reader, will be available from Routledge in early 2008.
Understanding Responses to the Threat of Foreclosure Among Low-Income
Don't Borrow Trouble (Freddie Mac's predatory lending awareness campaign)
NeighborWorks America's Center for Foreclosure Solutions
Americans for Fairness in Lending