PEP, March 2008: She could have lost everything

By DIANE S. WILLIAMS

“Why rent when you can own?” asked Local 1549 member Peggy Devlin as she purchased her first house with the proceeds from selling her Queens condo and help from her mother. But in November when the payments on her adjustable-rate mortgage jumped $600 to an unaffordable $2,700 a month, Devlin called DC 37’s Municipal Employees Housing Program.

“I read the articles in PEP about the union’s housing program,” said Devlin, a 16-year Sanitation Dept. employee. Her home is eight minutes from work and her spacious yard allows her “family” of three dogs and two cats to roam.

“We are a family of proud union members,” she said, listing her father, brother and even her grandmother, who was in District Council 37. “The union and New York City are in our blood.” Still, Peggy never believed the MEHP program would work for her — until it did. “Peggy had a horrible interest-only loan that put her in a financial bind. She could have lost everything,” said Assistant to the Associate Director Henry Garrido, who runs the housing program.

“I wanted to be independent,” said Devlin. “I would have taken another job to save my house.”

Subprime loan crisis
Peggy Devlin is not alone. In the last five years millions of Americans who did not qualify for conventional loans purchased homes with subprime and adjustable-rate mortgages. As lenders adjusted lowball introductory rates, homeowners got saddled with payments they could no longer afford. Over one-third of the Brooklyn, Queens and StatenIsland homeowners who refinanced recently were forced into subprime loans, according to New York University’s Furman Center for Real Estate and Urban Policy.

Foreclosures doubled from 2006 to 2007. Hardest hit in the Big Apple is Jamaica, Queens, where lenders foreclosed on 319 homes in December, up from 169 in 2006, reports RealtyTrac.com.

In the subprime lending crisis gripping the nation, housing prices have plummeted, sales have plunged, thousands of people are flat-out losing their homes, and millions of homeowners are stuck in houses they cannot afford — and cannot sell. Banks have tightened their lending restrictions, slamming the door on owners who need to refinance.

Under pressure to help Americans cope with the crisis, the Bush administration announced a rescue program that aids mainly banks and excludes the majority of families in trouble.

DC 37’s housing program “has implemented an FHASecure initiative, a temporary program designed by the federal Housing and Urban Development Dept. to give borrowers the help they need before they lose their homes to foreclosure,”explained Garrido.

The new initiative allows borrowers who became delinquent after an interest rate change took effect to refinance their adjustable-rate mortgages to fixed-rate loans through GMAC Mortgage, LLC, that are backed by the Federal Housing Administration.

Before she refinanced her home through the union program, Devlin’s payments had fluctuated by only $20 or $30. But when the bank said her payments would jump by $600, she said, “I had to do something fast.”

“I never liked ARMs. I thought they were too risky. But rent was close to $1,000 a month for a one-bedroom apartment, and I thought I could scrape together $100 more and own a house,” she said. A divorce had marred Devlin’s credit, so she bought a house through her mother in an arrangement where Devlin made the mortgage payments — always on time, she said. Home ownership helped rebuild her credit history.

“I am delighted that I’ve kept my house and my independence,” she beamed. “I started the new year with a fixed-rate mortgage. I did not have to go begging at other banks, or take out a second mortgage or get another job or ask relatives for a loan. It took about three weeks. I can’t thank my union enough. DC 37 was the light at the end of the tunnel.”

Union’s solution
To refinance an adjustable-rate mortgage at MEHP through the FHASecure initiative, eligible applicants must demonstrate that before the reset or adjustment of the ARM, they were paying their mortgage on time, and they must have at least 3 percent equity in the home. In some cases, an eligible borrower may be permitted to include past-due mortgage payments in the new FHA loan. These fixed-rate loans do not emphasize the borrower’s FICO score.

For more information, call MEHP counselors Tracy Lewis or Jorge Ortiz at 212-815-1814. DC 37 members who may be victims of predatory lending should also contact the union’s Municipal Employees Legal Service at 212-815-1800 for legal counsel.