Real Estate

Staying Afloat

WASHINGTON — There's a marketing blitz under way aimed at the homeowner in denial — the one missing mortgage payments, dodging calls from the lender and hoping for the best.

Several groups have launched initiatives to educate the public about mortgages. Most are heavily funded by the mortgage industry. All focus on stemming a recent surge in foreclosures that threatens to destabilize entire communities, if not the U.S. economy.

"People are alarmed by what they're seeing in the paper, on the street and in their neighborhoods," said Colleen Hernandez, president of the Minneapolis-based Homeownership Preservation Foundation, which counsels people about foreclosure prevention. "There are a number of nonprofits and other groups that see a need in the community that's compatible with their mission, and they feel a need to respond."

Among them is the Washington nonprofit organization NeighborWorks America, which teamed up with the Ad Council to produce public service announcements that will be distributed to 30,000 media outlets nationwide.

The three-year campaign, announced this week, encourages financially strapped borrowers to contact their lenders or federally approved housing counselors at the first sign of trouble. The slogan for the $5 million campaign: "Nothing is worse than doing nothing."

The advertisements feature the Homeownership Preservation Foundation hot line (888-995-4673). The hot line operates around the clock, seven days a week, manned by about 100 counselors in various parts of the country.

Callers are not charged for the counseling sessions, which usually would cost about $100. The foundation picks up the tab using grants from lenders and from Washington-based Fannie Mae, one of the nation's largest investors in mortgages.

Meanwhile, Fannie Mae's largest rival, Freddie Mac, of McLean, Va., has paid for production of a Spanish-language soap opera that encourages financial literacy. The 13-episode telenovela, called "Nuestro Barrio" ("Our Neighborhood"), was created by the nonprofit Community Reinvestment Association of North Carolina. The series started running in June in about a dozen markets on a Spanish-language network called V-me. Nationally, it airs on the Dish Network.

"The soap opera weaves homeownership and financial literacy into the traditional plot line of romance, jealousy and greed," said Patti Boerger, a Freddie Mac spokeswoman. For instance, one character manages to work out a payment plan with his lender after he gets a foreclosure notice.

Some mortgage lenders are sponsoring broadcasts of "Nuestro Barrio" in several cities. Bank of America, Bank of Texas Mortgage Group, Chase Home Finance, Harris Bank, Bank of Albuquerque and Countrywide Home Loans will use DVDs of the series for community outreach.

Countrywide and the National Association of Realtors also contributed money to print a 24-page booklet in English and Spanish with tales of Latinos buying homes and avoiding foreclosure.

Former housing secretary Henry Cisneros and U.S. Rep. Joe Baca, D-Rialto, joined the Congressional Hispanic Caucus Institute at the Capitol to unveil the booklet, which will be distributed nationwide by housing and advocacy groups such as the National Council of La Raza.

Late, foreclosed loans costly

For lenders, supporting such initiatives makes financial sense.

Servicing a healthy loan costs lenders about $50 a year, but managing a delinquent or a foreclosed loan costs about $1,000 or $2,000, respectively, according to an analysis by Banc of America Securities.

Add to that the costs to homeowners and local communities, and the cost of each home foreclosure climbs to $78,000 on average, according to a report by Congress' Joint Economic Committee.

The effects are compounded as foreclosures multiply in some neighborhoods, dragging down property values and slashing local government revenue as property taxes, utility bills and fees go unpaid, the report said.

That helps explain why two regulatory groups have issued consumer alerts, urging homeowners with adjustable-rate mortgages to plan now for upcoming increases in their monthly payments. These mortgages typically start with low introductory rates that later spike.

The groups, the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, also issued a letter urging companies that manage mortgages to contact borrowers whose loans will reset this year.

"Servicers should provide information on when the (reset) will occur and how much the monthly payment will adjust," Michael Stevens, a senior vice president at the bank supervisors group, said in a statement.

While some nonprofit groups work to educate consumers, others are working to inform policy-makers.

The Pew Charitable Trusts recently announced that it would grant $1 million to the nonprofit Center for Responsible Lending.

The center, headquartered in Durham, N.C., plans to use the money to promote policies that curb abusive lending practices in the subprime market, which caters to borrowers with blemished credit or other factors that make them a risk to lenders.