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Minutes from July 2008 - Department of Planning Services

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Minutes from July 2008 - Department of Planning Services

    STOP INITIATIVE MEETING

    WEDNESDAY, JULY 23, 2008

     The first meeting of the Stop Taking Our Properties (STOP) Initiative began at 3:03 p.m.

Introductions - In attendance were:

     Pat Geissman - Commissioner

     James Kimbler - Common Pleas Court Judge

     Tom Decker - Commissioners’ representative

     Dianne DePasquale-Hagerty - Creative Housing

     Tim Phillips - Westfield Bank

     Tom Lee - Farmers Savings Bank

     Ed McKeon - Western Reserve Bank

     Tim Hagerty - Commissioners’ representative

     Ron Denbow - Coldwell Banker Hunter Realty

     Lynda Bowers - Allen & Hartzell, Inc.

     Ron Paydo - FirstMerit Bank

Foreclosure perspective - Pat Geissman

     Mrs. Geissman expressed her concern with the worsening foreclosure statistics in Medina County

    and her desire to help Medina County residents facing financial setbacks (such as unemployment, divorce,

    illness or injury) that could put them in a pre-foreclosure situation. It really “hit home” with her when she

    was traveling to Hinckley and saw four homes for sale on a short stretch of S.R. 606, and three of them

    were vacant and overgrown with weeds. She wondered where these families ended up living and what

    happens to the properties. There was a foreclosure task force that had been formed in January that had

    fallen apart and she felt she needed to try to address this problem because it really bothered her. She knew

    Judge Kimbler was also interested in it because he sent her an email last year to make her of aware how

    high the foreclosure numbers were climbing. She decided to call some bankers, brokers, and people

    together who she thought might have an interest in meeting, coming up with some solutions, and making

    a difference.

     Mrs. Geissman presented some alarming statistics:

    ? There were 856 foreclosures in Medina County last year.

    ? Last year at this time, they were at 457 foreclosures.

    ? This year, there are at least 571 foreclosures.

    ? Last week alone, there were 21 foreclosures.

She pointed out that these are not just numbers; they are families being pushed from their homes. People

    are giving up and they are very depressed. She asked the bankers if there was any way for these people to

    stay in their homes because then they would be maintained and the utilities would be paid. She asked if

    people were permitted to stay in their homes if they paid just the interest on the mortgage in order for the

    homeowner who lost his/her job enough time to find another one. She asked if they would take a smaller

    payment to keep someone in that home so it doesn’t get repossessed. She asked what could be done, as a

    community, to help with this problem that affects everyone and brings everyone’s property values down.

Foreclosure Perspective - Judge James Kimbler

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     Judge Kimbler added that most people do not realize the ancillary costs involved with

    foreclosures. People who are economically stressed commit more domestic violence offenses, drive under

    the influence of alcohol more often, do drugs or find difficulty recovering from drug use, and there have

    even been instances of vandalism and arson. There is also the human cost that increases the demand on

    the social services.

     Judge Kimbler said one problem is getting people who are behind in their mortgages to realize

    that lending institutions will work with them. The courts have been trying to do mediation on foreclosures.

    Court Mediator Bruce Francis has told them that if they can get people and their lawyers to come to

    mediation and not just walk away from the house, they can oftentimes work out settlements with the

    lending institutions because the lenders do not want to spend money on lawyers and they want their

    money. Also, if a house goes into foreclosure and no one takes care of it, it will decrease in value and the

    bank’s security interest will be jeopardized. It is not the banks that the courts have a problem working

    with - it is the homeowners who are behind in their payments. By the time they get around to admitting it,

    they have developed a defeatist attitude and do not respond. Then there are default hearings, the default

    judgments are issued, and the people must move out.

     Another problem is that not all lending institutions are local. For many of the loans, especially

    with adjustable rate mortgages, the lending institutions are not local and the notes are being sold two or

    three times. There are several of these mortgage firms in Cincinnati and they do a lot of foreclosure work

    on the County docket. It is hard to get out-of-county lenders to come to Medina County for mediation

    because many times the homeowners don’t show up.

     Judge Kimbler said it is truly a problem that takes up 40% of the Common Pleas Court’s docket. Additionally, they must pay more for law clerks to make sure the paperwork is completed appropriately

    and there is clear title to the property.

     Two things the courts have considered were: (1) offering private mediation services with their

    court-funded mediator. The problem with that is that the Commissioners fund the Mediation Office;

    therefore, they do not know if they can use their court’s mediator legally and ethically to mediate a

    private dispute in advance of the court case. The other concern is if he could handle the business because

    he has a full schedule now. The courts have also considered: (2) sending notices for foreclosures with

    instructions on what the homeowner could do. Kathy Fortney, Clerk of Courts, put a stop to that though

    because that put her in a position looking like she was offering legal advice, and he can understand that.

     Judge Kimbler recommended starting pre-lawsuit mediation services (not affiliated with the

    courts) and advertising the fact that there is a mediation program to try to get people into the process pre-

    litigation. He also recommended working with the Prosecutor and Clerk of Courts’ Offices to see what information the Clerk could legally and ethically disburse with foreclosure notices.

Brokers Perspective

     Lynda Bowers said the real estate brokers get the call to sell the house when the homeowner

    knows that they are going to be in foreclosure. By then, it is usually a short sale, but the fees are so top-

    heavy that it does not sell. (In real estate, a short sale is when a bank or mortgage lender agrees to

    discount a loan balance due to an economic or financial hardship on the part of the mortgage holder. The

    home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan and

    turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the

    lender would have the right to approve or disapprove a proposed sale.) It is the people that are not

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returning the phone calls to the bank; they are not acknowledging the notices that they have been getting

    and they are in absolute denial.

     Lynda Bowers suggested that they put some mechanism in place to educate the public to keep in

    contact with their lenders to work things out before it gets to the foreclosure stage. Also, it is not that

    lenders, both in- an out-of-county/state, are not interested in helping; they have a policy that it has to be in

    foreclosure and, until then, “their hands are tied”. Perhaps, that is something that needs to be dealt with legislatively.

Creative Housing Perspective

     Dianne DePasquale Hagerty said she is a firm believer in the value of mediation. They need the

    two parties working things out, but they would also want to have that foreclosure process staid while they

    are in the mediation process. Judge Kimbler said they do postpone foreclosure cases if the parties are

    making progress toward mediation. Mrs. Hagerty pointed out that the cost for the mediation process is

    something nobody wants to pay.

Bankers Perspective

     Mrs. Geissman asked the bankers what they are doing now to help keep people from going into

    foreclosure and what would be legal for this group to do to help.

     Tom Lee said they are an independent community bank that does not sell mortgages. Part of the

    problem has been the secondary market. He has worked with people that are very behind in their

    mortgage payments that are making attempts. They will lower the payment or make it interest only; they

    will do what they can. The situation happened to the industry because the lending standards were relaxed.

    His banks still requires 20% down. If people have more of their own money tied up” in the house, they

    might not walk away as easily and would show up for mediation. Many people don’t care about their credit rating at the point of foreclosure.

     Judge Kimbler discussed “no document loans” that some Vietnamese “grow houses” obtained

    that were foreclosed on. People pay a substantial amount of money down in cash; their loans are given

    different requirements, but they pay a higher interest rate. Mr. Lee added that even when a person gets a

    loan and their income and employment are verified, people change jobs regularly these days; therefore,

    there is no guarantee with a 30-year mortgage that the homeowner is always going to have the same

    income or that they are not going to lose their job, not going to have marital problems, and not going to

    have alcoholism or drug abuse issues. Ron Paydo said there are also stated income loans for people that

    have good credit; they just state what they made for income.

     Judge Kimbler commented that it would be interesting to go through the foreclosures last year to

    see what percentage were made by out-of-state banks; that report might prompt people to use local banks

    more often. Mrs. Bowers said local banks aren’t careless with their lending and that is why those people

    go to out-of-county banks that create documentation to make a loan work. Ed McKeon said he would

    think that the predominant portion of all mortgages that were foreclosed on last year were secondary

    market because, in most cases, banks can’t match-fund a 30-year mortgage and a 30-year certificate of deposit. He predicted that over 80% were not local banks. His bank has had very few foreclosures, but in

    those instances, they try for as long as they can to work things out. Large national operations may get

    frustrated trying to deal with the people that don’t return calls and with the documentation issue,

    especially when the loan has changed hands many times.

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     Mr. McKeon discussed the problems with foreclosures in Cuyahoga County and the banks not being able to maintain the homes until they get ownership of them due to the backlog in their court system. Judge Kimbler discussed a vacant house going through foreclosure in Summit County that was torched and the insurance company would not cover the loss because there was a change in conditions of the policy that was not reported. Tim Phillips said the insurance premium for a vacant house is three times as much as an occupied house

     Mr. Lee said another problem with forecloses is that it takes four to five months to get the deed. Mrs. Bowers said real estate brokers are not permitted to market the property until they have an owner and when they can’t get the deed, they do not have an owner. That results in a two to three month delay until it is sold. There is legislation moving through the House that could back up the confirmation date and speed up the process of getting the homes out of “limbo”. Judge Kimbler said someone asked him if the court system could appoint a receiver to take control of the property until it actually transferred to a new owner. The receiver would make sure the property was maintained and properly insured. Tom Decker asked if the County could assume the back taxes and it was assumed as doubtful. Mrs. Bowers said she had heard that a Community Housing Improvement Program (CHIP) might be available for a low-interest rate loan fund project that would help people, at least, to clean up houses.

     Mr. Phillips said many investors buy homes and rent them out. When they get into trouble, there are multiple foreclosures related to one specific individual. He said he would be curious if this was a large issue for Medina County. There was a short discussion about the number of empty houses for rent that have sat vacant for months. Many people are leaving the County because they cannot afford to live in Medina County any longer. Many displaced people are moving to Summit County; that county has the highest foreclosure rate in the nation that perhaps caused relaxed rental requirements.

     Mr. Phillips said they had their first foreclosure this past month that went to Sheriff’s sale. They

    worked with this person for 1-1/2 years, set up interest-only payments, and they did a “soft” mediation

    without attorneys. The person ended up turning over the house anyway. He said any banker in the room would do anything to keep people in their homes. Mr. Paydo said the key is getting to the borrowers early. He has seen that some people these days are willing to pay their credit card before their house payment because their credit card gives them access to cash. Mr. McKeon agreed and said it is the opposite of what it used to be - they pay the credit card first, the car payment second, and the mortgage third. The reason is also because they need the car to get work and they can still remain in the house while they delay the foreclosure process. Tim Hagerty said these people know that they can get another mortgage in a relatively short period of time, but that trend is changing. Mr. Phillips agreed and said 42-43% of the people that could buy a house last year cannot this year; the demand and supply of homes is out of alignment. The contrast with local banks to Countrywide, for example, is that national lenders have people that, as part of their compensation and part of their incentive packages, see how quickly they can turn and move these houses. The dollars involved are so huge that 100 homes in Medina County does not mean much to them.

     Mrs. Geissman said it is disturbing to see vacant homes; they are open to vandalism and torching and it affects everyone. Judge Kimbler asked how much it would cost to pay a receiver to take care of a single-family home and pay utilities, and the group guessed about $1,000 per month. Mrs. Geissman asked if they could allow the families to stay in the houses in exchange for maintaining them and paying utilities. Mr. McKeon asked if a municipality has the right to do the mowing or maintenance and then charge it to the taxes. Mrs. Bowers said the township trustees do not have the legislative authority to do that and townships are where the majority of the foreclosures are taking place. Judge Kimbler added that townships are home-ruled and they can only do what the Ohio Revised Code gives them the power to do.

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Mrs. Hagerty said they can do that in the cities and tack the costs on with a lien. Mrs. Bowers said she has

    had some luck getting the banks and Countrywide to maintain some homes before foreclosure because

    they have an interest in keeping that property presentable. Tom Decker said there is a company called

    Maxim that will maintain and repair houses. Mr. Lee said they have a property that has been on the

    market for over a year so they will just put it up for auction.

Public Perspective/What is possible legally?

     Mrs. Bowers said most people they are dealing with in foreclosure are not deadbeat people;

    something has happened and their circumstances have changed. She asked if they could negotiate a deed

    in lieu if there was a possibility that those people could stay in the home on a lease agreement until their

    situation changed. Mr. Lee said absolutely, if they thought they would pay the rent, with the

    understanding that there could be a buyer that may not want them to stay as tenants. Mr. Hagerty said the

    deed in lieu could go to a funded entity/investment group that could act as landlord for as long as 24

    months, for example. The people might have the chance to get the house back if they make all their

    payments on time. If they don’t make the payments on time, the entity would end up being the owner. In

    the hopes that it might become a good mortgage again, the bankers might see how much they are losing

    over time and see that something less than that amount could help to fund this group. The intermediary

    would need to have incentive to do this; therefore, they would need to have profitability or reward at

    some point in time. Based on what Mrs. Bowers said that many are not deadbeat people, the

    circumstances have changed things, and they need more time. On a much larger scale, he has been

    hearing a similar situation with the Bear Stearns scenario. At that snapshot in time they had to go

    bankrupt, but given some time, perhaps they would not have had to. If there is a way to create that time

    for these people, they might not have all of the vacancies and people without a place to live. An ancillary

    cost not mentioned is when something goes into foreclosure or a short sale, the value of the property goes

    down, which means the value of all the properties in the neighborhood goes down and the tax base goes

    down. He asked if the ownership could be put into a trust, knowing that if the people didn’t make their

    rent payments for 24 months that the trust would own it and the bank would not own it any longer. At that

    time, the trust would get sold to the bank, the entity, or a private concern.

     Judge Kimbler asked if there were areas that were “foreclosure-prone” to target communication

    to those people about what their options were before foreclosure. Mrs. Hagerty said they did that in the

    Foreclosure Task Force that was a spin-off from the Housing Network. Kathy Fortney assisted and they

    found that foreclosures were disbursed throughout the County and there were no pockets where the

    problems occurred more than others. Mrs. Bowers said high-risk is where people put less than 20% down

    on their loans. Summit County’s having the most foreclosures might be because they experienced a significant amount of higher-end job loss all at one time that caused the “perfect storm”. When one of the those factories closes down, it is not just those jobs; it ripples down to the electricians, plumbers, grocery

    store owners, etc.

     Mr. McKeon pointed out that a hurdle is that the national lenders are motivated to cut a deal and

    remove those mortgages from their non-performing assets. They will take a billion-dollar beating to take

    it off the quarter because of Wall Street. Judge Kimbler added that he was told that bank regulators do not

    like banks to own a lot of real estate because banks cannot trade their liquid assets quickly. Mr. Lee said

    bank regulators, the State, and FDIC put pressure on the banks to foreclose and get the mortgages off the

    books regardless of the circumstances.

     Mr. Hagerty asked if there would be enough money made from a national bank’s short sale

    purchased by an entity that would pay off the existing mortgage at a reduced rate and turn the loan into a

    local loan after the 24-month period. Mr. Paydo said that bankers are sometimes writing down loans now

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to help customers who have problems. They do an amendment to the original note, reducing the mortgage

    and interest amounts, which is basically an internal short-sale with the original buyer. Mrs. Bowers said

    this group could immediately begin educating the public on making sure they are communicating with

    their lenders and turn around their defeatist thought process. Mr. Hagerty added that they could formulate

    a plan to tell people the different banks’ alternatives to foreclosures.

More Brokers’ Perspective

     Judge Kimbler said there are attorneys picking up the banks’ listings and calling delinquent

    homeowners. Ron Denbow said, much like attorneys looking for bankruptcy cases, the real estate sales

    industry has sprung up a whole new field - the short sale specialist - who is not much of a consultant. They identify and specialize in people who really need to get out of a property in a hurry. Mrs. Bowers

    said the banks cut their loss before foreclosure, but the seller loses all of their equity. There are good ones,

    but there are also sales people who are vultures. Mr. Denbow said they have professional, experienced

    agents who handle real estate owned (REO) properties for banks who are also certified relocation

    specialists. They are under pressure to get those properties priced right and get out from under them in a

    short period of time. The banking industry would do well to identify those agents and try to work more

    with them because they are better skilled. They have the experience and the training to get the Fortune

    500 companies who are their clients out from under those homes quickly. He is a concerned about where

    the real estate industry is starting to go.

     Mr. Denbow said that he is a veteran and they structured their realty company as a veteran-owned

    enterprise; they do a lot of work with veterans. The Veterans Association (VA) has set up loan consultants

    to work with veterans in trouble and it offers them another resource and liaison for their VA loan. Ohio

    has the sixth largest veteran population in the U.S. and many veterans had no-down-payment mortgages.

    The VA has taken a step to recognize that so they have set up liaisons to offer consultation to them. If all

    else fails, they will work with the real estate company in conjunction with the lender to try to do a short

    sale and get the veteran “out from under it”. The lack of incentive is in the impact to their credit rating;

    there is little difference (a couple of points) between a short sale and a straight up foreclosure.

How best can this group serve the public?

     Mr. Paydo suggested that the County communicate to the citizens that they care about them and if

    they are feeling stressed and having a hard time meeting the monthly mortgage payment and are behind,

    that they should call a designated phone number. Have the number staffed by people that have

    connections in the real estate market and banking industry who would know the proper questions to ask to

    help these people. Then that staff person would call the bank, provide the information given to him, and

    the bank can see what they can do. The person is afraid to call their bank and they are afraid to go to an

    attorney; to them, that is another bill to pay. The people need an advocate whom they can trust, and he

    thinks they would trust the County. Mr. Lee asked if the County had credit counseling and Mrs. Hagerty

    answered that the Ohio State University Extension offers it and there are also Legal Aid and 2-1-1 First

    Call for Help. Judge Kimbler echoed that the person would trust the County because they know it is

    someone that isn’t trying to get their business, they are not on commission, and it doesn’t cost them

    anything. Mr. McKeon said it could be complicated to locate the proper person that could “cut the deal”

    since the notes are sold many times.

     Mrs. Geissman said she liked the idea of the County being a source for people to call. She doesn’t

    know how many calls they would receive or how complicated it would be. Mr. Hagerty said the

    Foreclosure Task Force ran out of ideas, but perhaps they have people that could work on this idea. Mrs.

    Hagerty said the Task Force dissolved so they sought someone to take charge and get it going again. They

    found someone and that person’s expertise was in reverse mortgages. Their idea was to send a letter in the

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    pre-foreclosure stage to educate people to contact their lender, but because of privacy issues, they could not identify those people. Mrs. Bowers said a well-published phone number could provide direct assistance and 2-1-1 needs a resource to send calls to. Mr. Decker suggested a marketing campaign to let the public understand that there is a resource to call. Mrs. Geissman said it sounds like she would have to hire a new employee. Perhaps she could assign the duty to an existing employee instead. Mr. Paydo said the person would need an understanding of mortgages, negotiation skills, and contacts. Mrs. Hagerty said they would be the mediator between the lending institution and the individual. Mr. McKeon suggested that they call cities that have high foreclosure rates such as Naples, Las Vegas, or Phoenix to see what they are doing. Mr. Paydo said it could be staffed with retired banker volunteers who want to help and make a difference and do not have a vested interest; he suggested recently-retired George Paidas. Mrs. Geissman said that was a wonderful idea; she would only have to furnish a telephone and an office. Mr. Paydo said Mr. Paidas could build a team of 10-20 people, train them, and rotate them. Mr. Hagerty commented that if there were 856 foreclosures last year, there are probably four time that many people that are in trouble. Mr. Decker said they would want to talk to people that are just starting to get 30 days past due. Mrs. Geissman said they would need to get publicity out on this, give it to the real estate companies, and put it on the cable channel. Mrs. Bowers suggested they have a clean, crisp message included with utility bills.

     The group brain-stormed and Mr. Paidas came up with the name of STOP Initiative that stands for Stop Taking Our Properties that they decided to adopt. Mrs. Geissman said she would invite to the next meeting some bankers that have more mortgages involved in foreclosures and the Chair of the Foreclosure Task Force. Mr. Paydo offered to contact Mr. Paidas and start working on the message. Mrs. Bowers offered to create a contact list of potential agencies that could send that message.

Are there any funds available?

     Mrs. Geissman said she had some conversations with a couple of the people in the group earlier

    that day and there is a possibility of some State funding that could be available to help these people. She will invite a State official to the next meeting as well. Also, Mr. Decker discussed land banks with her earlier and told her what Michigan is doing keep people in their homes and prevent the process of foreclosure. Mr. Decker asked if there was any way that they could find out the buyers with less than 20% down payment and it was said to be doubtful. Mr. McKeon said the other cause of foreclosure is the equity line lender.

    Mrs. Geissman said the real estate market has always been a strong market in Medina County and it is very important to our local economy. She is happy they put their thoughts together to come up with some ideas that are “doable”. She said she appreciated everyone attending.

Regular meetings?

    The next meeting was scheduled for Wednesday, August 6, at 3:00 p.m.

Closure

    The meeting ended at 4:35 p.m.

     Respectfully submitted,

     Pam Vereb, Clerk

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