Neighborhood Housing Services of Chicago
The Home Ownership Preservation Initiative (HOPI)
NHS provides the following through HOPI:
 Post-Purchase Education. NHS offers workshops to borrowers of HOPI partner
lenders and servicing companies six times a year throughout the city to provide
them with valuable information about how to maintain and protect their
investment. In addition to the HOPI partner workshops, NHS offers a four-part,
eight-hour curriculum to address the post-purchase education needs of existing
homeowners every other week in two locations. The curriculum includes
information about home maintenance, credit and budgeting, taxes and insurance,
escrow accounts, financing home repairs responsibly, and what to do when one
cannot pay the mortgage. These classes are taught by NHS staff.
 Loss Mitigation Counseling. NHS helps customers avoid foreclosure by working
with their lenders to develop repayment plans, loan modifications, or forbearance
agreements. In preparation for working with the lender, NHS counselors help
delinquent borrowers explore all options available to them and assist them in
gathering the documentation the lender will need to accurately judge individual
situations. Several HOPI partners have established expedited communication
between their loss-mitigation staff and nonprofits to increase the likelihood of
successful resolutions.
 Foreclosure Prevention Loans. Approximately 20 percent of “saves” are
achieved with a new loan, usually made affordable with the assistance of NHS
grants and special forgivable loans. These small “catch-up” loans are frequently
paired with a refinance, rehab, or reverse mortgage loan to ensure homeownership
is sustainable over the long term.
 Reclamation of Foreclosed and Vacant Properties. NHS’ real estate
development arm, the Redevelopment Corporation (NHSRC), acquires
foreclosed, vacant properties from The U.S. Department of Housing and Urban
Development (HUD), HOPI partners, and The City of Chicago for purchase by
homeowner occupants. NHSRC takes steps to ensure affordability to the end
user.
 Purchase Rehab Loans. Another resource for reclaiming vacant and troubled
buildings is NHS direct lending. NHS provides purchase/rehabilitation loans and
major rehab services to owner-occupant borrowers. Individuals interested in
purchasing a home in need of major improvement are assisted by an NHS
construction specialist who works with them throughout the rehab process to
make sure that the work is completed safely and properly.
WHAT TO DO IF YOU’RE FACING POSSIBLE
FORECLOSURE
1) Don't abandon the property. From the time you first receive notice of mortgage
delinquency from you lender, the foreclosure process can take over 1 year before you will
be physically removed from your home by the Sherrif. Most banks and mortgage lenders
will not even consider your application for assistance if you abandon the property.
2) Don't ignore correspondence and other notices sent to you by your mortgage
lender or the legal representatives (attorneys) of the lender. Contact your lender as
soon as possible and keep in constant touch.
3) Don't make partial mortgage payments to your mortgage lender, unless you have
received specific written approval from your lender to do so. Once you are in default
(Over 60 Days Past Due on you loan) partial payments will be applied to
interest/penalties only, or put into a special "suspense account". These partial payments
will not reduce your principal balance. You should only make partial payments if you
have made prior arrangements for a "mortgage loan work-out program", and make
absolute certain that you have all of the details about these payment arrangements in
writing.
4) Don't believe the promises of for-profit "Foreclosure Counselors" or "Loss
Mitigation Specialists.” Deal only with a HUD-Certified Housing Clounseling
Agency. The complete list for Illinois is located at:
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate
=IL
5) Don't fall victim to the various consumer scams that promise to "settle your
mortgage debt for pennies on the dollar."
6) Don't attempt to qualify for a repayment plan or forebearance if you cannot
afford it. Work-Out programs are designed for short-term financial difficulties that can
be cured in six months to no more two years. If your financial situation is not likely to
improve in that time, or if your home is in need of significant structural/ mechanical
improvements in the near future, it will probably be better to sell your home now, rather
than allowing it to deteriorate further (and sell for even less) in the years to come.
8) Don't become "greedy" when you do attempt to sell your home under a “ShortSale". Your objective is to sell the home at the highest price that the market will allow
and get out from under your mortgage.
10) DON'T panic!!! This is the most important point of all!! As mentioned, the
foreclosure process can take up to a year, and even longer in many cases. If you remain
calm, and take the necessary steps as early in the process as possible, you and your
mortgage lender may very well find an acceptable common solution to your mortgage
delinquency/foreclosure problem.
Here are some options that will help borrowers keep their homes:
Loan Modification - At least one term of the mortgage will be changed, depending on
the lender’s decision and its suitability to your current circumstances. Examples of such
modifications to make your loan current are; capitalizing the delinquent interest,
extending the fixed period on an ARM loan and reducing the interest to reduce your
monthly payment.
Repayment Plan - A formal written agreement that you will bring your loan up to date in
an agreed period of time; usually in less than 18 months.
A Forbearance Agreement - The lender reduces or suspends your loan for a certain
period of time; usually up to 3 months.
If you’re unable to strike a deal with your lender and must leave your home; two
other options are:
Pre-foreclosure Sale This has two major benefits for the owner which are; to preserve
his credit score and to have some money back if their property has an equity.
Deed-in-lieu-of-foreclosure If you don’t have enough equity in your property to yield a
profit, this is a better option than going into foreclosure; which can result to a poor credit
score. You simply turn over your property to the lender. You gain nothing but you don’t
lose more.
PRO FORMAS OF TYPICAL BORROWERS AND LEVEL OF ASSISTANCE
NEEDED
Summary taken from NHS of Chicago clients during months of July and August of 2007
I.
Group 1:
Borrowers
Low Level of Assistance, 20% of All Delinquent Subprime
Average Household Income: $4085.00 /month (80-100% of AMI)
Average Loan Balance: 110,756.78 (41% of Median Home Purchase Price)
Average Monthly P & I Payment: $1003.50 (25% housing ratio)
Months Delinquent: 5.4
Borrowers in Group 1 tend to have sustainable loans and are suffering from a temporary set
back in their financial affairs such as a job loss or illness. For them, light assistance such as
traditional forbearance agreements, repayment plans, or small “catch up” loans should allow
them to remain sustainable moving forward. Most of these homeowner’s credit scores are
probably in the low 500’s.
II.
Group 2: Moderate Level of Assistance, 45% of All Delinquent Subprime
Borrowers
Average Household Income: $4090.78 /month (81% of AMI)
Average Loan Balance: $212,378.09 (78% of Median Home Purchase Price)
Average Monthly P & I Payment: $1780.20 (44% housing ratio)
Months Delinquent: 3.1
Borrowers in Group 2 have relatively good income but have gotten behind on their
mortgage due to the size of their mortgage payment and/or some economic set back such as
job loss, medical expense, or non-paying tenants. In order for their mortgages to be
sustainable, moderate assistance in the form of loan modifications to reduce the housing
ratio to a sustainable level, assistance increasing income, or a small “catch up” loan is
necessary. Their credit scores are probably in the low 500’s to high 400’s.
III.
Group 3:
Borrowers
Heavy Level of Assistance, 35% of All Delinquent Subprime
Average Household Income: $2323.75 /month (46% of AMI)
Average Loan Balance: $243,739.47 (90% of Median Home Purchase Price)
Average Monthly P & I Payment: $2192.92 (94% housing ratio)
Months Delinquent: 3.1
Borrowers in Group 3 currently have very few options. Credit scores are most likely in the
high to low 400’s. None of the traditional loss mitigation options is available to them.
Furthermore, due to their high LTV’s and a slow housing market, selling the home poses
challenges. In order to be sustainable, the monthly mortgage payment must be permanently
reduced to at least $840. This would mean a reduction of principal to $137,000. Under a
restructuring model, if the $243,739.47 note were purchased at 30 cents on the dollar, it
would cost $73,121.84 to purchase. Thus, the difference between purchase price and
restructured loan balance is $63,878.16.
For more information, please contact Michael W. van Zalingen, Director of
Homeownership Services for NHS of Chicago at (773)329-4104 or email him at
mvanzalingen@nhschicago.org
© 2007 Neighborhood Housing Services of Chicago, Inc.