Stanley Young, of Landover, Md., got behind when the payments on his adjustable rate loan went up by $300 a month.
Even though our local housing market is picking up, many homeowners are still living with the effects of the recession and housing crisis. And increasingly, scam artists are seeking to turn a profit from those homeowners' desperation, especially targeting people who don't speak English as a native language, such as Luis and Margarita Garcia, immigrants who moved to Montgomery County from El Salvador in 1999.
When they first arrived, they lived with their two young children in a single bedroom. After six months, they worked their way up to a basement apartment, then a larger apartment above ground. Then, just five years after coming to the United States, they were able to purchase their own home.
"We had the opportunity to have the American dream, to have our own house," says Margarita. "We came from nothing. From nothing and then... your house. It's amazing."
"I will say, it was like a pretty, pretty amazing feeling," says Luis. "Like one of your goals was done."
That was 2004. They got an all-interest loan, and bought a modest townhouse in Germantown. When the recession hit, they were in the wrong lines of work: Margarita cleans houses, and Luis is a heating and cooling technician. His company cut his hours, and she lost clients.
Hanging on to the 'American Dream'
Suddenly, between the two of them, they had the income of one part time job. They got behind on their mortgage payments, but they were determined not to lose the house. Margarita researched programs to help homeowners, and she applied for a loan modification to lower their payments.
Scam artists are increasingly seeking to turn a profit from homeowners' desperation, especially targeting people who don't speak English as a native language.
It was not an easy process — almost a full-time job just keeping track of the reams of documents the bank wanted. At one point, they found a man who promised to help — a realtor.
"It was $500," Margarita recalls. He made them pay upfront. And while he did help them with paperwork, he also lied to them.
"We found that he was doing our signatures. He falsified those signatures," says Luis.
He botched their application, and he made them pay for services that nonprofit, government-backed groups provide for free.
The Garcias eventually turned to the free housing counseling services at the Latino Economic Development Center.
Manuel Ochoa, who runs the housing counseling program at LEDC, says the majority of his clients have been already scammed by the time they find their way into his office.
Ochoa's group worked with the Garcias, who finally, after four years, were granted a loan modification late last year.
Beware of scams
Montgomery County, where the Garcias live, is among the jurisdictions with the highest foreclosure rates in Maryland, making it a target for scammers. They're also targeting Prince George's County — ground zero in the local foreclosure crisis.
"I got the number off the TV. They had a commercial on TV," says Stanley Young, who got behind on his payments on his Prince George's house in 2008. He was in a pinch, and didn't know where to turn.
"I called the number, and the guy was asking me for my routing number to my checking account. And I said, 'Why do you need my routing number to my checking account?'"
Eventually, he saw an ad for a free — and legitimate — housing counselor, who helped him work with the bank. Just this month, he got the news: he was approved for a loan modification -- extending the loan, but bringing down his payments.
"I'm back on track. That's what I needed. I needed a fresh start."
He's one of the fortunate ones. In his zip code in Prince George's County, one in five homeowners has gotten a foreclosure notice in just the past year or so.
"It's just the bubble hit this county very hard," says Mary Hunter, who directs the counseling program at the housing non-profit HIP Services, in Hyattsville. In the peak of 2005, 2006, the prices were so high, and now they are really half of what they were at the height."
Getting back on track
In the past few months, foreclosures in Maryland have spiked, after two years of much lower rates. In the last quarter of 2012, foreclosures were up 80 percent compared to a year earlier.
Hunter says that's in part because of a law passed in Maryland in 2010, requiring banks offer in-person mediation to homeowners before foreclosing.
"Banks had to retool their mechanisms to comply with that mediation law, so in that year, we saw this unofficial moratorium," says Hunter. "Gave us a chance to really work with the banks, under less pressure of the foreclosure sale."
Borrowers like Stanley Young and Luis and Margarita Garcia were able to use that unofficial moratorium to get help and work out a solution with their lenders to keep their houses.
But housing counselors worry there are many more homeowners who aren't doing that — instead, they're just getting further and further behind.
Marian Siegel runs the non-profit Housing Counseling Services in D.C., where, as in Maryland, a mediation law temporarily dampened foreclosure activity.
"Our biggest fear is that once lenders begin to use the mediation process and begin foreclosures again in D.C., homeowners will be so far behind, that very little good will come out of a very good law."
[Music: "Hold On (Originally Performed by Tom Waits)" by Vitamin String Orchestra from Per_Versions]