New Hampshire Legal Assistance

Helping to balance the scales of justice for everyone since 1971.

NHLA works with NH Foreclosure Relief Project to protect homeowners facing foreclosure

Program to help homeowners stay put during financial crisis extended

From Concord Monitor, January 3, 2016

By Jeremy Blackman, Monitor staff

After 23 years in a crowded Concord trailer park, Carl and Pauline Johnson dreamed of two things: some solitude and a backyard big enough for a garden.

So when they pulled up to the quaint clapboard bungalow on 1½ tree-lined acres in Loudon in 2005, they knew instantly it was where they wanted to spend the rest of their lives. Pauline, now 64, still lights up just talking about it.

“I couldn’t sleep,” she said. “I was so excited.”

They couldn’t afford the down payment, but that hardly mattered. A bank was offering to get them in for no money down. The monthly payments would be difficult, but, barring any major surprises, the couple figured they could manage.

And for a while, they did.

But like tens of thousands of families across the country, the Johnsons had unknowingly entered a maelstrom of shady lending, one that left their most prized asset – their home – susceptible to the slightest financial pinprick. Which, for them, came a few years later, when Pauline blew her knee out and lost her job.

The Johnsons very nearly lost their home, and with it, they say, their pride, dignity and sense of security, on top of a host of other emotions. But they didn’t, thanks to the work of a motley assemblage of lawyers and housing experts, coalesced with help from the landmark 2012 settlement between the federal government, 49 states and the country’s five largest lenders.

Unlike some states that diverted their settlement portions to non-housing expenses, or others that distributed them directly to homeowners in need, New Hampshire chose to direct its windfall in a different direction: expanding and improving low-cost aid for struggling homeowners.

The initiative, known as the Foreclosure Relief Project, was launched in early 2013 and sponsored jointly by the Department of Justice, the Banking Department and the Housing Finance Authority. In the years since, it has helped hundreds of struggling New Hampshire homeowners stave off foreclosure, and hundreds more at least fight until the end, according to project officials.

It did so largely by more than doubling the number of full-time “housing counselors” in the state, from 5 to 12, and erecting a network of attorneys trained in federal and state foreclosure law.

“What the funding has enabled us to do is to really have a battle plan, with real tools,” said Stephanie Bray, the project director and a staff attorney with New Hampshire Legal Assistance. Today, lawyers have access to trainings and are connected through an online listserv, where they can pose questions, share court rulings and solicit help with individual cases.

While the number of foreclosures has dropped steadily since the height of the state’s housing bust – down to 2,000 last year from a peak of 4,000 in 2010 – project attorneys continue to process dozens of cases each month. And though their work is not necessarily a direct cause of the decline, it has contributed in definable ways, perhaps most notably by establishing an infrastructure for homeowners to turn to in future crises.

The project was originally set to sunset at the end of 2015, but Bray said there is enough cash left to carry on at least through this year.

Legal tools

On the legal side, the project is divided into tiers. Homeowners facing immediate foreclosure are sent to the New Hampshire Legal Advice and Referral Center, whose lawyers help walk them through the steps of delaying a foreclosure long enough to determine whether immediate reliefs are available – a remodification, for instance – or if they have legal grounds to challenge the action in court. LARC provides homeowners with the tools and legal jargon to pursue short-term action on their own.

Longer-term relief is typically referred to Legal Assistance, which then either takes it on or farms it out to private attorneys on a pro bono basis. Before 2013, Bray said, Legal Assistance had the resources and subject expertise to only occasionally take foreclosure cases – and even then, most were Chapter 13 bankruptcy cases applicable to just a small percentage of struggling homeowners.

“A lot of our work on foreclosures consisted of telling them what was going to happen, which was pretty sad,” Bray said. “I think the best we were able to do was to tell them you don’t have to walk out your door the day the hammer falls – which a lot of people don’t know.”

As the project has evolved, Legal Assistance has tried to target cases with the biggest potential effect – cases whose outcome can improve how foreclosures are handled and help ensure that homeowners are afforded every chance to stave off eviction.

There have been wins and setbacks, and some of the biggest cases are still weaving through state and federal court. Bray and others have been pushing for the New Hampshire Supreme Court to take up a central dispute over whether foreclosures can be conducted if the mortgage – which establishes a lender’s right to retake a property – has been severed from the promissory note – which establishes a borrower’s intent to pay off the debt.

The court seemed poised to weigh in this year, but declined in a widely-read decision last summer. It’s scheduled to hear oral arguments in a similar case this month.

For Bray, who joined Legal Assistance in 2008, the work has been deeply gratifying and represents the culmination of decades in public and private practice.

“It really is amazing to start out a relationship with a client who is crying and wondering what they’re going to do with their cats, and you go to that first hearing and they find out that maybe they don’t have to go anywhere, maybe there’s a way out of the mess,” she said.

Outside of the project, Bray was instrumental last year in advocating for legislation that requires banks to issue foreclosure notices 45 days before they hold a foreclosure auction – nearly double the time frame they have been held to in the past. Until the start of this year, loan providers in New Hampshire were required to send notices 25 days before a sale, which was 12 days fewer than homeowners have under recent federal law to apply for a loan modification.

The legislation, which just took effect, was no small feat in a state with a robust and highly influential banking community. Proponents had initially pushed for a 65-day notice, but opponents, including the New Hampshire Bankers Association, countered that a longer a period would unfairly delay the foreclosure process and could potentially increase mortgage costs for new homeowners.

In the end, they arrived at a compromise.

More than anything, the project has connected people across professions – namely attorneys working on foreclosure law and housing counselors trained to help homeowners navigate the loan process. Connie Rakowsky, executive director of LARC, described the collaboration as crucial, as lawyers are conduits to the courts and counselors are conduits to the bank.

Bray offered the same observation, noting that she now speaks with housing counselors “sometimes more frequently than I talk to my own coworkers.”

Asked if she used to work with them, Bray responded, “I didn’t know what a housing counselor was.”

Paving the way

The Johnsons were characteristic of many homeowners trapped early in the foreclosure crisis. They had fallen prey to lending tactics that sounded great on paper, but that came attached with all sorts of hidden costs.

To stay afloat, they would need every penny of their two modest salaries – Pauline’s from cleaning hospitals, Carl’s from doing hospital maintenance work.

Even after Pauline’s career-ending injury in 2010 they thought they might be able to keep up with the payments, if they scrimped. Pauline was pulling in short-term disability – less than her full paycheck, but still something – and Carl, who is four years younger, began picking up extra work shifts. But his health was also tenuous, and later that year he suffered his own injury, tearing a rotator cuff on the job. It put him out for six months.

Around that time, he was diagnosed with chronic obstructive pulmonary disease, a lung condition that requires him to be on oxygen at all times.

When he finally did return to work, Carl tried to conceal the oxygen from his employer, which worked for a time. But the stress was wearing on him, and he soon suffered a third blow: a double hernia, which required surgery.

“It was like there was a black cloud over the house,” Pauline recalled.

Carl was forced to stop working. He applied for Medicaid, but was told it would be a year before benefits arrived. In the interim, he and Pauline were slapped with ballooning health insurance premiums. They had already cut back on living expenses. Something else would have to give.

By early 2012, the Johnsons had fallen far behind on their mortgage payments. That April, their loan servicer issued a foreclosure notice, indicating that an auction would take place within a month. They contacted CATCH Neighborhood Housing, which helped string together a last-minute request for a loan modification. It was immediately turned down.

That’s when Legal Assistance got involved. They argued that the servicer had violated state law by failing even to consider the application, an act considered in legal terms as “good faith and fair dealing.”

But beyond a legal argument, advocates claim it’s in the mortgage holder’s interest to at least consider helping homeowners like the Johnsons stay put.

“This makes so much more sense than having to foreclose on the house, having to mow the grass, drain the pipes, protect it from vandalism and try to resell it and pay a Realtor something,” Bray said.

The court agreed, at least on legal grounds, and they eventually reached an agreement with the bank (which precludes them from discussing financial terms or other details).

When the case finally closed in July 2014, Bray called them into the office to sign a last few required documents. She brought a bottle of sparkling apple cider and played them a voice message from an attorney in Michigan who wanted a copy of the court order in the case, to help prepare for a similar case.

“By deciding to fight and sticking with it even when it was tough, the Johnsons really did pave the way for a lot of other people to stand against the banks who made such a mess of the mortgage market,” Sarah Palermo, a spokeswoman for Legal Assistance, wrote in an email.

The Johnsons were ecstatic. They had lost so much sleep since the case began. Carl had felt humiliated. They had told their son, now grown and living in the trailer park, that they might have to move in with him.

“I could never repay what these guys did for us,” Carl said.

Of course nothing is guaranteed, and the Johnsons’ health continues to be a concern. But for now, they are getting by.

In an interview just before Christmas, they sat at their dining room table, repeating thanks for all the help they had received. Carl’s oxygen machine hummed in a corner nearby. A small fern stood decorated in the living room. Family pictures covered the walls.

Asked if they had many holiday plans, Carl said no, not really.

“This house is our Christmas present,” he explained.

*Photo by Sarah Palermo, NHLA staff