State lawmakers are pushing a measure that would protect future homebuyers from risky and high-cost mortgages. But their proposal doesn't address the thousands of South Carolina homeowners who are struggling to make monthly payments right now.
State governments across the country have stepped in to help families facing foreclosure by creating emergency loan funds and designating millions of dollars for counseling efforts. The response stems from a lack of action from federal lawmakers, who have yet to agree on a plan.
However, South Carolina lawmakers have rejected a $3 million request from local nonprofit groups who say they need more money to help families who face foreclosure.
"It's very disappointing because we count on our politicians to do what's right for our community, and foreclosure is a very large problem in South Carolina as well as other parts of the country," said Debbie Kidd, executive director of Family Services Inc., a North Charleston-based nonprofit that provides foreclosure counseling.
Lawmakers cite a tight state budget and say it's the federal government's responsibility to help homeowners, not theirs.
The state has a budget shortfall this year of several hundred million dollars, "so it's going to be hard for us to do anything," said Sen. Robert Ford, who added that he didn't know of any state proposal that gives relief to strained homeowners.
Federal lawmakers have kicked around several foreclosure-relief plans, including a recent proposal that would allow homeowners facing foreclosure to get cheaper, government-backed loans for which they might not otherwise qualify. Some lawmakers want to freeze interest rates, while other government leaders are trying to find a way to convert adjustable- rate mortgages to fixed-rate mortgages.
Meanwhile, foreclosure rates have soared nationally and in South Carolina. Last month, foreclosure filings across the country rose 57 percent compared with March 2007, according to RealtyTrac Inc., a private company that tracks foreclosures.
In Charleston and Berkeley counties, foreclosure filings rose 62.5 percent during the same period, according to a Post and Courier analysis. Dorchester County, which reports the number of properties set for sale, recorded a 105 percent increase.
Other states act
Such statistics have prompted some state governments to take action. "They have had to act," said Kil Huh, who helped write a Pew Charitable Trusts report on how states have tried to fix the foreclosure crisis. "They are on the front lines of dealing with the aftermath of the subprime crisis, which has turned into the foreclosure problem that we now face. Not only are people in danger of losing their homes, but their neighborhoods are losing value."
The report found that many states have passed tougher regulations for lenders, similar to the proposed South Carolina Mortgage Lending Act, and committed millions of dollars in relief funding.
Lawmakers in Michigan, for example, set up two loan funds and a statewide education campaign. Maryland lawmakers extended the foreclosure process from 15 to 150 days, giving homeowners more time to work through their financial difficulties. Ohio lawmakers set aside extra funding and launched a 24-hour hotline that offers foreclosure counseling for struggling homeowners.
"In Ohio, they have millions of dollars to help save families from foreclosure," Kidd said.
Foreclosure counseling already is available to local homeowners through Kidd's organization.
Counseling is simple but it works, she said. Homeowners who approach their lenders within 90 days of their first missed payment usually can work out their financial difficulties with their lender, and counseling helped 350 Charleston area homeowners keep their properties last year, Kidd said.
This year, they already have worked with more than 250 homeowners, including Charles Jenkins of North Charleston.
The 48-year-old Dorchester Terrace resident said he was "shocked as hell" in December when his monthly mortgage payment rose by more than $120. It didn't help that his wife, who works as a home health aide, lost her client.
Afraid he wouldn't be able to make the payments, he turned to a Family Services foreclosure counselor who helped negotiate the terms of a new fixed-rate mortgage with Countrywide Financial Corp.
Jenkins recommends that homeowners who face a similar situation also contact the group.
"They need to drop their pride and do what they got to do," he said. "Sometimes pride gets in the way of things. I was that way once, but I wasn't going to get stuck in a position where I would lose my house. I've worked hard for this house. I raised my children in this house."
More homeowners have been calling the nonprofit, and the demand for services caused the group to apply for federal grants, which allowed them to hire extra help. Through a $180 million relief bill passed by federal lawmakers in December, the group secured about $300,000, allowing it to increase the number of counselors from eight to 38.
Plea to lawmakers
But Family Services Inc. wanted more money for additional foreclosure counseling and an emergency loan fund. So, earlier this year, it joined other nonprofit groups to ask state lawmakers for $3 million, said Bernie Mazyck, president and CEO of the South Carolina Association of Community Development Corporations.
State lawmakers said they couldn't help. Because state revenue has fallen below expectations, lawmakers have had to cut millions of dollars out of next year's budget. Schools will likely see $60 million less in state funding, and that doesn't include the $20 million cut that lawmakers had pledged to buy new school buses.
Sen. Larry Grooms, R-Bonneau, said lawmakers have been busy addressing other concerns this year, including the tricky issue of immigration reform. Others said foreclosures are a problem for federal, not state, lawmakers to tackle.
"It's more of a federal issue because you have people who own property who live in South Carolina, people who own property in South Carolina who live elsewhere. You have mortgage companies that are based here and you have mortgage companies from all over the country," said Rep. Bobby Harrell, R-Charleston. "It's an issue that crosses state boundaries."
But Mazyck disagrees that lawmakers on the state level are helpless. "We've been told that this is something that the state cannot impact because it deals with banking laws and financial systems that are regulated by the federal government ... but when you're talking about services like financial literacy, those are critical tools and services that do impact the foreclosure rate, so it is something that the state can impact and affect."
As a result, Family Services Inc. had to tap into its own operating budget to create an emergency loan fund.
The rescue fund gives money to homeowners who have worked out a payment plan with their lender but need money up front to start the plan, Mazcyk said. The money is awarded on a case-by-case basis, and homeowners have to match the amount they are awarded.
Similar funds in other states netted $450 million from state governments, according to the Pew study. "We were confident that if we didn't go into (our own funding), people were going to lose their homes," Kidd said.