State Delays Aid While Families Lose Homes
With nearly $2 billion to prevent foreclosures, the program has yet to accept applications
Benjamin Chavarria, an unemployed construction worker, has fallen $20,000 behind on his mortgage. If he does not pay the full amount by Jan. 6, his lender, the California Housing Finance Agency, said it will seize his four-bedroom home in Richmond, which is fast becoming the epicenter of the region's foreclosure crisis.
Since February, the state-run finance agency has received nearly $2 billion from the federal government to help people like Chavarria avoid losing their homes. But nearly a year after President Obama announced the delivery of the first $700 million installment for the Keep Your Home California initiative, the Housing Finance Agency, which administers the program, has not taken applications or compiled a waiting list for qualified borrowers.
“It's terrible; usually government doesn't act the day after, but for it to take this long is surprising,” said Orson Aguilar, executive director of the Greenlining Institute, a nonprofit organization that promotes nondiscriminatory lending. “Had they put out the money sooner, it wouldn't have solved the foreclosure crisis, but it would have helped a few thousand families by now.”
Since the initial allocation of $699.6 million to the Housing Finance Agency in February, the Treasury Department has twice granted additional money to the state. In August, the agency received $476.3 million through an expansion of the Troubled Asset Relief Program's Hardest Hit Fund to support states with unemployment greater than the national average.
In September, the Housing Finance Agency received $799.5 million more to expand the program, even though the agency had yet to modify a single loan.
Diane Richardson, legislative director of the Housing Finance Agency, said the federally funded program -- which is designed to subsidize mortgage payments for unemployed borrowers and to reduce debt for people whose homes significantly declined in value during the housing crisis -- is scheduled to accept applications next month. Richardson said her agency, which issues loans and works with private lenders to provide financing for low-income borrowers, is running a limited test with 300 troubled homeowners.
If the test is successful, Richardson said, the agency will begin accepting applications with the goal of eventually delivering assistance to more than 100,000 borrowers.
“You wouldn't want to launch a program and then have lots of problems,” Richardson said.
The effect of the delay is visible on the streets of Contra Costa County, where homes are falling into foreclosure at alarming rates. The county recorder reports more than 10,000 such cases since Obama announced the assistance program 10 months ago at a news conference with Senator Harry Reid.
Over all, the number of foreclosures in Contra Costa County has ballooned to more than 12,200 in 2010 from 777 in 2005.
Many of those foreclosures are in new developments on the urban fringe of Antioch and Brentwood, where people purchased tract homes with subprime mortgages, then walked away when the interest rates reset, creating higher payments they could no longer afford. Others are in inner-city neighborhoods of Richmond, where longtime residents took equity out of their homes when the market was at its peak, only to see their home values plummet when the market collapsed.
A city report released in April found that more than 2,000 homes and apartments in Richmond were in some stage of foreclosure. In the city's hardest-hit ZIP code, 94801, which encompasses much of the central and northern sections of the city, almost half of all homes were “in foreclosure or financed with subprime mortgages and thus as at risk for foreclosure.”
In two other central Richmond ZIP codes, 94806 and 94804, where Mr. Chavarria lives, the city estimated that more than a third of all homes are at risk.
“We're talking about the postal worker who's lived in this community for 20 or 30 years,” said Lynette Gibson McElhaney, the executive director of Neighborhood Housing Services of the East Bay, a nonprofit organization that helps troubled borrowers negotiate with their lender. “These are not greedy people.” Some families needed money to pay medical bills, repair their homes or bail their relatives out of jail, she said, while others are simply out of work.
From her front porch on Hoffman Street, just north of Interstate 580 in Richmond, Rosalind McMiller can point out a half-dozen homes that have recently been lost to foreclosure. “Everyone's depressed and drained physically and emotionally because they don't see a breakthrough coming,” McMiller, said.
The neighborhood feels empty, McMiller said, and is not as friendly as it once was.
"The fact that there's so much suffering and they're just sitting on this money, how can they sleep at night?” she said of the Cali fornia Housing Finance Agency.
On Oct. 26, United States Rep. George Miller, a Democrat whose district includes Richmond, initiated a letter signed by 27 California House Democrats to L. Steven Spears, the agency's director, demanding a briefing “about how exactly you intend to carry out this important program and ensure its success.”
The letter stated, “It is critical that this program begin helping homeowners as expeditiously as possible, given that many of our constituents have been struggling for over two years.”
On Dec. 7, officials from the finance agency flew to Washington and promised to begin the program in early 2011. But Miller said he is still disappointed. “There's no sense of urgency,” he said.
During the delay, the agency has foreclosed on borrowers at a record rate. Between January and November, the Housing Finance Agency foreclosed on 2,244 homes, up from 1,515 for all of 2009, and 491 in 2008, the agency reported.
Andrea Risotto, the Treasury Department spokeswoman, said California is not alone. Of the 18 states and the District of Columbia that received TARP money to fight foreclosures, only five -- Arizona, Michigan, North Carolina, Ohio and Rhode Island, -- have their programs fully operating. “The mortgage industry wasn't set up to help struggling homeowners,” Risotto said.
Dustin Hobbs, communications director for the California Mortgage Bankers Association, agreed that the delays were not surprising. “You're creating a brand new dynamic and a brand new relationship between a government agency and private sectors that never existed before.”
Lender participation in the program is voluntary, Hobbs noted. Many of the nation's largest banks, including its largest mortgage originator, Wells Fargo, have yet to sign on.
“We are anticipating that we will participate but these issues are complicated,” said Tom Goya, a Wells Fargo spokesman.
In the meantime, homeowners like Chavarria, 38, have watched their homes slip away.
“The hardest part is letting go,” said Chavarria, who came to the United States from Mexico when he was 16 and has lived in Richmond for most of the last 22 years.
In 2007, after decades of renting, his family put $90,000 down on the $425,000, four-bedroom house where Chavarria lives with his wife and children, 12 and 6. His wife, who teaches at a local nonprofit group that helps low-income children, has had her salary cut and her hours reduced.
Chavarria said work has been sporadic, causing him to fall behind on his mortgage payments and preventing him from saving enough money to pay off his $20,000 debt. “Today I worked two hours, yesterday I didn't work, the day before I worked four hours,” he said.
“I keep telling myself it's only material,” he added. “I guess it can be rebuilt. That's why I'm resigned.”
This article also appears in the Bay Area edition of the New York Times.
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