By Jerry Davich, Post-Tribune staff writer
Argyo Tripodis and Nick Simmons are the local poster children for the national home foreclosure crisis, albeit for two different reasons.
Tripodis was one of millions of Americans who fell victim to a predatory mortgage loan, in 2002, that came with a fine-print adjustable rate. It eventually skyrocketed to nearly 15 percent, forcing her family into bankruptcy and looming foreclosure.
"We knew the rate would go up, but nothing like this," said Tripodis, a Hobart resident who is married with three children.
She and her husband, Yiannis, initially paid $1,300 a month for their home, now appraised, but not market valued, at $250,000.
After the rate increased, they tried to refinance but were denied repeatedly. In 2004, they filed for bankruptcy, thinking they could patch up their credit woes and get back on track. But their monthly mortgage payments kept rising, as well as penalty fees that are now up to $11,500.
Tripodis has contacted attorneys, government agencies, the Association of Community Organizations for Reform, and even the Indiana Attorney General's Office. No one has been able to help, she said.
She also has repeatedly contacted her latest lender, Litton Loan Servicing, to modify her mortgage. Late last year, she received a letter from Litton stating that her case "does not meet investor guidelines."
So, the couple haven't paid their mortgage since December, and they put up their home for short sale, under its market value, in a last-ditch effort to at least save their credit.
Even though the real estate agent has dropped the house's selling price by several thousands of dollars, it's still for sale and the Tripodis family will soon be boxing their things, she said.
Simmons, of Gary, has also filed for bankruptcy and is going through the foreclosure process after his home's ballooning property taxes caused his monthly mortgage to jump from $394 to nearly $1,100. He and his wife are losing their home of 21 years and they're planning on moving into a beat-up mobile home on a separate property next to his home.
"Taxes are the problem, not my loan, and people need to know this, said Simmons, who's 64 and not in great health. "Worse yet, the property that my trailer sits on is appraised at only $10,000 and my taxes for it are $4,300 a year."
When Simmons, a county maintenance man whose take-home pay is about $1,600 a month, asked his bank representative for guidance, he was told to get a better job, he said.
"The government has you coming and going with these new taxes, and the bank has you, too," he griped. "You can bet that after the bank gets my house --which I owe only $15,000 on -- it will turn around and sell it for at least $40,000 to $50,000. That's a tidy profit, isn't it?"
Regional ripples
The Lake County Sheriff's Department served papers to 66,327 households last year, nearly 1,000 more than in 2007. Also, the department's sheriff sales of homes went from 2,826 in 2007 to 3,960 in 2008, and roughly 300 foreclosed homes will be up for sale next month alone, according to county data.
In Porter County, home evictions went up 19 percent from 841 in 2007 to 1,083 in 2008. And foreclosures went up 18 percent, from 493 to 603, an average of 50 or so a month. This year, the average has jumped to 65 a month.
"We are very busy in the Civil Bureau," said Porter County Sheriff David Lain. "It's fair to say that foreclosures have seen the greatest increase."
It's so much busier that the bureau's part-time employees have had to work overtime, and police officers have had to assist the department's four process servers, he noted.
Bankruptcies, which are often tied to foreclosures, also have spiked in Northwest Indiana, with a 25 percent increase from 2007 to 2008. And a 23 percent increase in the first two months of this year, according to the Northern District of Indiana Bankruptcy Court.
"I have never seen so many people walk away from their homes as I have in the last 18 months," said Highland bankruptcy trustee Daniel Freeland in a Post-Tribune story last week.
Kathleen Day, a spokeswoman with the Center for Responsible Lending in Washington, D.C., said there is a provision in President Obama's pending mortgage crisis plan that would allow bankruptcy judges to modify a person's mortgage on a primary residence.
That mortgage legislation has passed the U.S. House and is now before the U.S. Senate, and Day hopes Indiana and Illinois senators vote to approve the bill, with that provision.
"If the law were in place today, it might have saved Ms. Tripodis' home," Day said.
The mortgage meltdown
There are essentially three types of people who have experienced a mortgage meltdown, according to Stephanie Shappell Katich, an attorney with Indiana Legal Services Inc. in Merrillville who is well-informed on the issues.
The first category includes buyers who got into it with the concept of purchasing real estate at low introductory "teaser" rates and adjustable rate mortgages, or ARMs.
"Their idea was to get into the mortgage and to refinance in one to two years before the ARM adjusted, using the rising home values to build equity," said Katich, who directs her agency's foreclosure defense unit in Northwest Indiana.
This concept was sold by mortgage brokers and the real estate industry because it was expected that real estate prices would continue their upward trend. Of course, they didn't.
The second category includes buyers who were sunk by the disastrous economy, mass layoffs or lost savings, and who didn't live beyond their means or take any unnecessary risks.
"People who are even in traditional 30-year fixed mortgages are experiencing foreclosure now," said Katich, whose agency covers Lake, Porter, Jasper and Newton counties.
The third category, which comprises the bulk of Katich's clients, includes buyers who, in her opinion, "are truly the real victims of the tragedy at large."
"My clients are people who purchased or refinanced a home with no mortgage because they were generally victims of the great mortgage scam," she said.
These people are typically on fixed incomes and whose incomes were often inflated by brokers simply to fill orders from Wall Street underwriters.
"This is the category of people for whom the term 'predatory loan' was invented," she said. "These are not people who purchased $450,000 homes with values inflated by a sky-rocketing market, or who bought as an investment strategy."
Katich cited a study showing that roughly 30 percent of home buyers who were accepted for these "subprime loans" were, in fact, qualified for the 30-year fixed-rate "traditional" loans.
"Why weren't they put into them? Because the lending industry, underwriters, brokers, (and) investors made more money off of subprime loans," she said.
The first category -- the risk takers -- did exactly what the market suggested they do, and many cashed in big time. The second category -- who were not risk-takers at all -- were blindsided by the national and global economic collapse. And those in the third category -- who could least afford it -- were targeted like sitting ducks based on their age, race, economic level and neighborhood.
Hope is out there
There is no clear-cut criteria defining how many monthly mortgage payments must be late before the foreclosure process begins. The average is four months, depending on the lender and the homeowner's situation.
To complicate the issue, millions of mortgage notes have been bundled and bought by large groups of investors through the securitization process and then sold as an investment.
"The process is simple in theory, but very complex in practice," Katich said.
A recent report by the not-for-profit National Training and Information Center stated, "The bulk of these loans were loans made to fail, and in 2008 they did." The report also noted the high rate of foreclosures was due in part to "reckless lending and unregulated financial practices."
However, Indiana Sen. Karen Tallian, D-Portage, has authored a bill, Senate Bill 492, to help struggling Hoosier homeowners find mediation remedies with mortgage companies.
Tallian expects the bill, and a similar bill, to be consolidated and pass through a conference committee without much argument before getting approved by the House in mid-April. The bill passed through the Senate on a vote of 47-3.
"I have on board bankers, housing advocacy groups, consumer groups, AARP and judges," she said.
Tallian also is a huge fan of the Hope Now Alliance, which includes a number of counseling organizations across the country providing borrowers with in-depth debt management and foreclosure counseling.
Robin Davis of Chesterton found help, and hope, through this program.
"We are in this situation due to financial changes that have happened this past year," said Davis, who likely would fit into the second category I mentioned earlier. "We felt like we were on a sinking ship with nowhere to go."
But a program counselor determined her case was a candidate and spent time going over her bills with a fine-tooth comb.
"The Hope Now program truly gave us hope," said Davis, who advises other clients to hire an attorney for the process.
Other under-fire homeowners across the country appear to be holding off the foreclosure process by asking their mortgage companies one simple question: Can you show me the note?
Yes, they are demanding that their lenders produce the original bank note for their property. And in several well-publicized cases, the banks can't locate it, at least not immediately, because the note was sold, resold and peddled to investors so many times by various lenders.
No one knows for sure just how many mortgage loans were bundled into these securitization trusts with obviously defective documentation or simply sloppy bookkeeping. But advocates for foreclosure victims suggest asking for it as a last resort.