Foreclosures Loom Large For Middle Class New data out this week show that foreclosures keep rising despite government efforts to prevent them. Foreclosure filings in July were up 32 percent from a year ago. As the crisis expands, it's dragging down more middle-class Americans, like a family in Springfield, Mass.
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Foreclosures Loom Large For Middle Class

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Foreclosures Loom Large For Middle Class

Foreclosures Loom Large For Middle Class

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From NPR News, this is ALL THINGS CONSIDERED, and I'm Melissa Block in Washington.


I'm Madeleine Brand in California. Foreclosures keep rising, even as the government tries to prevent them. That's according to new data this week from RealtyTrac. As the crisis expands, it's dragging down more middleclass Americans. Many of them are homeowners who've been paying their mortgages on time for years. NPR's Chris Arnold has the story.

CHRIS ARNOLD: Ronald Crochetiere is scraping the grill at his corner diner and sandwich shop in Springfield, Massachusetts.

Mr. RONALD CROCHETIERE (Diner Owner): Thanks, Brenda. I'll see you tomorrow morning.

BRENDA: All righty.

ARNOLD: So you scrub down your own grill here every day, huh?

Mr. CROCHETIERE: Yeah, you know, I'm one of those little guys on the corner. You know, I've been here for just over 17 years.

ARNOLD: But with the recession, business has been much slower.

Mr. CROCHETIERE: All fall and all winter and early spring, I just, you know, it was going down, down, down, usually when it should have been busy, busy, busy. I mean, it's not as though I'm not able to turn a small profit. The problem is, is that it's kind of a small profit compared to, you know, what I've seen in the past.

ARNOLD: Crochetiere says he's taking home about $1,000 a month less. On top of that, his wife hurt her back and has had to cut back on her hours. She's a nurse. And for the first time in 21 years of marriage, the couple is having trouble paying their bills, and suddenly can't afford their mortgage. A lot of other long-time responsible homeowners are in the same boat.

Is that sort of a changing nature of the foreclosure crisis?

Ms. MICHELLE JONES (Vice President, Consumer Credit Counseling Service): That really is a change that we've seen.

ARNOLD: We called up Michelle Jones, a vice president of Consumer Credit Counseling Service, which works with homeowners around the country.

Ms. JONES: We are talking with more clients who have never had serious financial difficulty before in their life. They've always held a job. They've always paid their bills on time.

ARNOLD: Jones says there used to be a whole bunch of reasons that people were facing foreclosure: divorce, costly medical expenses. Of course, many had gotten into high-interest subprime loans that they really never could afford in the first place.

Ms. JONES: And just plain old-fashioned overspending or a lack of education about budgeting. Those were often just as frequently the culprit, and not anymore.

ARNOLD: Jones says in June of this year, the agency tracked the people that were facing foreclosure and calling to ask for help.

Ms. JONES: Seventy-two percent said that they were in the situation due to a reduction in income or a loss of employment. And that's huge.

ARNOLD: Back in Springfield, Ron Crochetiere's two kids are splashing around in a big inflatable kiddy pool in the backyard. Six-year-old Christina and five-year-old Mason definitely are not shy about showing off their pool skills.

Ms. CHRISTINA CROCHETIERE: I jumped right in the middle of the pool. It was really hard, and I don't even hurt myself.

(Soundbite of splashing)

ARNOLD: Sandi Crochetiere, Ron's wife, loves the house. It's not a mansion. It's a raised ranch worth about $200,000, though they owe about 250 on it. Since they're upside down like that - owing more than it's worth - some people say they should just walk away from the house. But they've been here 12 years, and the couple says they want to pay what they owe, and they just don't want to leave.

Ms. SANDI CROCHETIERE: I mean, we've worked hard for everything that we have, and I grew up on welfare. I was the youngest of 10 children. We built this house. I mean, this is what we've always planned on.

ARNOLD: Their biggest problem right now is a large home equity loan. The Crochetieres used to be able to afford it, but the interest rate is at 11 percent. Ron's been trying to get a mortgage modification to get that interest rate lowered. A lot of economists say for a lender, doing that to avoid a costly foreclosure is a good business decision. The Obama administration is pushing a program to encourage lenders to do that more.

Mr. MARK ZANDI (Chief Economist, Moody's Well, for that person, the president's mod plan is perfect. It'll work for him because he wants to stay in that home.

ARNOLD: Mark Zandi is the chief economist at Moody's He thinks that preventing foreclosures is crucial, and he worries that the president's plan doesn't go far enough. He'd like people to get more incentive to stay in their homes by getting the size of their loan reduced. The president's plan lowers people's payments, but it often still leaves them owing a lot more than their house is even worth.

Mr. ZANDI: There are a lot more folks who think that that just doesn't make any sense, and they're just not going to do it.

ARNOLD: The Crochetieres' lender, a company called Green Tree, says it is considering a loan modification for the couple, though a recent report from the Treasury Department shows that Green Tree has so far only modified only four percent of its problem loans through the president's plan.

Chris Arnold, NPR News, Boston.

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