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Anti-foreclosure program may be coming to Lexington

The Brugh family's story has become all too common.

After Jeremy Brugh was laid off from his job and got sick, he and his mother, Linda, who lives with him, got behind on mortgage payments on their house in east Louisville. Foreclosure loomed, threatening the loss of the house they'd lived in since 1988.

Linda Brugh tried talking to the mortgage company about modifying the loan, but it was "constant phone tag and you could never get the same person twice."

So she went to the Legal Aid Society of Louisville, which put her in their program to bring homeowners and lenders face to face.

The two sides met and changed the mortgage to a 40-year loan with 2 percent interest, bringing the mortgage payments down to affordable limits.

"It worked out just fabulous," Brugh said. "It's a great program."

The program has taken root, thanks to Legal Aid and Jefferson County's Circuit Court, where foreclosure notices are first filed, and which brings the force of law to such conciliation hearings.

Legal Aid attorney Ben Carter estimates that since last summer, 63 percent of about 60 cases have finished with positive outcomes.

"There are very few winners in foreclosure actions, so if we can avoid it, I think we're all better off," said Carter, who got the idea from Philadelphia, which requires conciliation hearings in all foreclosures.

Now, the program is coming to Lexington. Fayette Circuit Court Judge Ernesto Scorsone has started a pilot project.

In one year on the bench, Scorsone said he's seen a lot of people lose their homes. One of the main culprits, he's noticed, is that homeowners and lenders rarely speak in person to look for solutions.

"The biggest problem we've heard is that people who have a shot at loan modification have been unable to talk with the bank or mortgage company with the authority to help them," Scorsone said.

Many lenders are willing to be part of the conciliation process because they're already burdened with undervalued property. Homeowners want to stay where they are.

"The loss of foreclosure is to the lender and the borrower and to the community," Scorsone said.

The one case he handled in Lexington was successfully settled before the conciliation hearing could take place.

Because Kentucky didn't go through the big housing booms that occurred in many parts of the country, its foreclosure rate is relatively low, about 1 in every 1,800 homes as opposed to the highest national rate of 1 in 119 in California, according to RealtyTrac.

Still, Fayette Circuit Court Master Commissioner James Frazier, who oversees all foreclosure actions in the county, says foreclosures are up to about 1,300 this year, more than twice as many as usual.

He likes the idea of the program, although he noted that Scorsone is doing much of the work himself because there aren't enough employees to run it.

In Louisville, the courts work closely with housing groups who help homeowners with the complicated paperwork required to request a loan modification. Carter's position, for example, is funded by the Making Connections Network, a Louisville advocacy group.

Sometimes, both Scorsone and Carter admit, the numbers simply won't work. But because foreclosure notices are first filed in circuit court, the courts can help people meet face to face.

Wendell Clark, an attorney with Christopher Hill and Associates in Frankfort, represents banks and mortgage service companies in foreclosure actions.

"So far I've been very impressed with the program in Louisville," Clark said. "It has really helped with loan modifications."

Clark said there's a misconception that lenders and servicers are not doing modifications, which they are, but some cases fall through the cracks.

"The conciliation process ... provides a net for borrowers who are doing everything they can to stay in their home," he said.

Chris Ford, president of Lexington's Resources Education and Assistance for Community Housing Inc. (REACH) hopes the program will grow in Lexington.

"I think it will be a good tool," Ford said. "Our homeowners have difficulty making connections with their lender, and this would also be a tool to those agencies like REACH who would wish to help."