Fighting foreclosure

WINDOM — Yvette and Kai Gray love their cozy, two-bedroom, Tudor-style home on 57th Street and 1st Avenue, and someday, plan to fill the place with kids. But until then, they only have to worry about caring for their tiny white shih tzu, Macy — a nice relief after a year of constant fear over losing their house.

About four years ago, the Grays unwittingly took some terrible advice. They had just gotten married in September 2003 after meeting at the Electric Fetus music store in Minneapolis and were trying to find a house. With their combined incomes, the couple qualified for a $200,000 loan with 6 percent interest — not quite enough to live in their desired neighborhood.

But then a committee member at Young Life, an international Christian organization of which Kai and Yvette were members, told the couple that she could help them qualify for a bigger loan.

“We were in a trusted relationship with her,” Yvette recalled. “When someone like that comes in and says, ‘I’m going to help you,’ your guard is down.”

The woman gave the Gray’s information to a mortgage company, and when it came back, they were approved for a $239,000 adjustable rate mortgage.

“She told us that the rate would go up, but only by maybe $100 or $200 a month, and that was in three years,” Yvette said. “So we were like, OK, we can handle that.”

In June of 2006, Yvette lost her job. The couple had some money saved, and figured they’d be OK for another six months, but in November 2006, three years after purchasing their house, they got a call from the mortgage company. Their interest rate had adjusted and their normal $1,800 mortgage payment was now $2,500.

“I had lost my job, my unemployment insurance was running out, so we had cut our income in half twice since June,” Yvette remembered. “I didn’t think we would be able to save the house.”

After doing some research online and realizing that many other homeowners around the country were also suffering from foreclosure scares, the Grays decided to get help. Had they stayed with the original loan, their mortgage would’ve eventually gone up to $3,300 — almost double their initial rate.

Last April, Yvette found a full-time job working for the Minneapolis Park & Recreation Board’s Youthline program in addition to Kai’s job as a special education assistant at South High School. They also picked up part-time jobs and met with a counselor from Habitat for Humanity to discuss their options.

“What we learned was that the paperwork says your rate might go up, but what it means is that it will go up,” Yvette said. “Every time it says, ‘might,’ it means, ‘will.’”

The counselors at Habitat for Humanity worked with the Gray’s mortgage company on a loan modification plan that would reduce and fix the interest rate. Once the modification is finalized, which Yvette expects will happen soon, the couple will have a mortgage of $2,400.

“Our main goal is to try and save the house and to avoid having to pay $3,300,” said Yvette. They plan to continue working part-time jobs until the housing market gets better.

The Grays haven’t spoken to the women who helped them get their original loan. They later found out that a family of five in South Minneapolis who had also taken the woman’s advice lost their home last year.

“We were embarrassed, and we felt like it was our fault,” Yvette recalled. “We trusted this woman who told us that this was a good thing to do, but really, she’s the one that should be embarrassed, not us.”

A common story

According to Melissa Hansen, a mortgage foreclosure prevention counselor at Habitat for Humanity, many factors can cause an otherwise responsible, normal family to fall into foreclosure. Taking bad advice, failing to closely read paperwork, or hoping to refinance before the interest rate adjusts can all play a part, she said.

Ideally, homeowners struggling with foreclosure will be able to fix their interest rates through loan modification plans like the Gray’s, Hansen explained. But more often, they’ll have to work out a repayment plan in which the delinquent amount is spread out over a number of months. They can also opt to sell their house or, in special cases, apply for financial assistance, which comes in the form of a 0 percent loan, deferred until the maturity of the mortgage.

Financial assistance ended up being the only workable option for one Kingfield resident who spoke to the Journal on the condition of anonymity.

“I thought I was getting a good deal,” he said of his adjustable rate mortgage. “After a while, my employer stopped paying me [. . .] I got into a pretty bad place.”

Like the Grays, the Kingfield resident fell behind on his mortgage payments and turned to Habitat for Humanity for help. After getting financial assistance, he’s been out of foreclosure for a few months and realizes now that the adjustable rate mortgage wasn’t in his best interest.

“Understanding the loan and the program that you’re on is key to succeeding as a homeowner,” he said. “The worst thing you can do it sit back and wait for something to happen.”

Contact Mary O’Regan at moregan@mnpubs.com or 436-5088.