Say it again: Most are not to blame for foreclosure

It was something that did not surprise me - I have reported it many, many times.

Yet because a minuscule number regularly accuse people facing foreclosure of somehow deserving it, the fact needs to be repeated:

The vast number of people confronting foreclosure in the Philadelphia region are in such dire straits because of job loss, unexpected medical and other bills, or significant changes in relationships (divorce, death of a spouse).

Those are the findings of a study conducted in early July at the behest of the Pennsylvania Association of Realtors. The conclusions confirm what mortgage counselors have been telling me for months and affirm the stories from homeowners I relate here just about every week.

About 1,000 people were interviewed - people who had gone through foreclosure, or averted it, or are now in the process, or who live in areas with a significant number of affected houses.

These results are for Philadelphia and the four Pennsylvania suburban counties:

Seventy percent had owned their houses for five years or more when they fell behind on loan payments and foreclosure began. They were not new, unqualified buyers who got in over their heads.

Unemployment in the 12 months before foreclosure was the primary reason for 59 percent of them; illness was the reason for 45 percent. (That adds up to 104 percent, but people who are very sick sometimes cannot work.)

About 39 percent had low-risk prime loans. Just 6 percent had subprime mortgages, which illustrates a couple of other points: One is that the majority of people who took out risky subprime loans were in other areas of the country, where housing prices were higher. The second is that people with subprime loans also make payments regularly - you can't assume otherwise. (That those with subprime mortgages are more likely to default than prime-loan holders is true, since subprime borrowers tend to be less affluent, thus affected more by economic dislocation.)

Most surveyed, especially those who lost their jobs, said they did not think temporary financial help would have done much to ease their plight.

Most people who write to me with problems complain about lenders' unresponsiveness. Though 24 percent of those surveyed reported that working with lenders helped them, most blamed banks for the foreclosure crisis.

As to reasons the crisis isn't going away, the survey's results highlight the inability of the typical borrower to work with a lender, a frustrating labyrinth of bureaucracy, and lack of knowledge of options available to avert foreclosure.

One thing most respondents agreed on was that the government had done a poor job handling the crisis, despite the Obama administration's "monthly scorecard on housing" touting its success.

The reason, the survey suggested, is that the majority of people facing foreclosure have no knowledge of the government programs designed to help them. Nearly 59 percent of those who were experiencing foreclosure had not heard of the Homes Affordable Foreclosure Alternative Program, which provides incentives to borrowers and lenders for short sales or deeds-in-lieu transactions.

Most also had never heard of the Pennsylvania foreclosure mediation program or homeowners' equity recovery offered by the Pennsylvania Housing Finance Agency, nor had they seen, the feds' massive resource for borrowers in trouble.

Let me help with that:

Making Home Affordable Program: or 1-888-995-4673.

Pennsylvania Housing Finance Agency: or 1-717-780-3800.

In New Jersey: or 1-888-989-5277.


Contact Alan J. Heavens at 215-854-2472 or

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