Updated: 11/17/2008 8:50:19 AM Posted: 11/14/2008 10:50:02 AM
AKRON -- More than 100 Summit County homeowners are stepping forward to help save their homes from foreclosure by allowing a program backed by government bonds to buy their homes from the banks that own the mortgages.
American Homeowner Prevention (AHP) first offered the program in September after the Summit County Port Authority approved the sale of bonds to provide the capital for the program.
All this week, those homeowners are stepping forward to agree to terms with AHP.
"It's a win-win for everyone because the lenders don't want to foreclose," said Rob Fredericks, AHP Executive Director. "It costs them far too much money to foreclose on a home, especially in the winter time when the house is vacant."
To qualify, a homeowner needed to owe more on their home than its appraised value. AHP then offers the lender 75 percent of the home's appraised value to buy the mortgage. By buying more than 100 mortgages at a time, AHP is able to leverage mortgages away in bulk.
The homeowner then begins paying AHP a much smaller monthly mortgage until their credit improves. They'll then buy back their homes based on the amount AHP paid the lender to secure the mortgage.
The idea is to keep those on the brink of foreclosure from leaving their homes and to keep banks from accumulating even more empty, foreclosed properties.
"We bundle together the number of mortgages for each lender," Fredericks said. "We take a dozen or two dozen to each lender and we have much more leverage for negotiation at that time because they could remove all of these bad loans from their books before the end of the year."
Here's an example of how it works:
If you owe $125,000 on a house that's appraised at $100,000, AHP will offer to buy your home from the bank for $75,000 (75 percent of the appraised value). If the bank agrees, you begin paying a smaller monthly payment to AHP which is applied to the new $75,000 debt until such time as your credit improves and you can take out a new mortgage for whatever is left of the $75,000.
For Dave Droge, AHP is a safety net he didn't think existed. A father of four who lost his job in February, Droge was at the end of his financial rope. He owes nearly $200,000 on an Akron home now valued at $160,000. Nearing the day when he would walk away from the mortgage and expect foreclosure, Droge heard about AHP's program and stepped forward for help.
"Right now, it's crucial," Droge said. "This could change a lot for me and my family. The ability to look at putting funds away for school and for college -- look at funds for just the everyday getting around and doing things. As it is, we're just scraping."
While AHP is beginning the program in Summit County, the Greater Cincinnati area is considering a similar program, Fredericks said.
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