A portrait of a Dane County foreclosure, and a look at the local housing market

Jan. 31--Bill Schroeder has no trouble picking out the lowest moment in the nine-month ordeal he and his wife, Dawn, experienced as they tried -- and ultimately failed -- to save their home in Lodi.

Hands down, he said, it was the 72 hours he spent in UW Hospital's psychiatric ward on an involuntary hold in November.

An Associated Bank representative helped put him there, Schroeder said, after an ill-advised remark Schroeder, 47, made as the two men talked on the phone about the couple's missed mortgage payments and the growing likelihood that the bank would take the house where the couple had raised two children and lived for the past 17 years.

As Schroeder recalls it, the conversation grew heated. He says the bank rep at one point called him "worthless" and said he didn't care what happened to the house because the bank would get its money when it was sold out from under them.

"I made an offhand response," Schroeder said. "I said, 'Maybe I'll just go get my gun and shoot myself and you can have my life insurance.'"

They hung up and Schroeder made a trip to the grocery store. When he got back, a police car was in his driveway to take him to the hospital.

The bank rep had called the police. Schroeder says he wasn't serious about harming himself, but he said the hospital stay, after so many months of "stress and severe anxiety" in dealing with the bank and trying to avoid foreclosure, wasn't without value.

"It helped in that I finally found exactly where my breaking point was," Schroeder said. "We finally decided to just get up and move out of the house, whether it sold or not."

Associated Bank Senior Vice President and Public Relations Director Janet Ford declined to address questions about Schroeder's experience with the bank, noting the company "cannot get into specifics about any customer's account."

Foreclosure numbers growing

Schroeder's case, while extreme, illustrates the difficulties faced by a growing number of homeowners facing foreclosure. In Dane County, the number of new foreclosure filings has more than quadrupled since 2004, and experts expect more pain in the next few years.

State and local officials may be unable to reverse the foreclosure trend: large mortgage loans, lowered home values, and relatively high unemployment are among factors that trigger increased defaults. But they aren't sitting on their hands, either.

In the Legislature, a task force appointed by Assembly Speaker Mike Sheridan, D-Janesville, spent five months last year holding public hearings and drafting four new laws aimed at easing foreclosure woes.

The task force, which included lawmakers, bankers and community housing activists, submitted its final report in September. Three of its recommendations were approved by the Assembly -- improving state standards for personal financial literacy, state licensing of appraisers and requiring mortgage brokers to put clients' financial interests above their own.

"We're working to make sure we don't ever face a challenge like this again," said task force member Noel Halvorsen, executive director of NeighborWorks in Green Bay, a nonprofit organization aimed at strengthening neighborhoods. "Financial literacy is a key part of it" for consumers, Halvorsen said. "There's some opportunities for us to change some thinking, and what's called for is a back-to-basics approach with understanding borrowing and credit, so you save up, take care of your credit and put money down when you're buying a house."

Senate approval must occur by March 25 for the measures to advance for Gov. Jim Doyle's possible signature.

Rep. Leon Young, D-Milwaukee, who chaired the task force, said the work done by his group was a "good start" to a difficult problem. He said the task force would continue to study the issues and develop solutions, noting members were moved by testimony during the hearings.

"I had tears in my eyes many times, as people would get up and just explain their stories," he said. "I know it was tough for people to do that in front of a room full of strangers, to talk about their own personal experiences, because it's very private. It was just a touch of reality for us."

Divisive' actions avoided

Young said stronger actions -- such as imposing more delays in the foreclosure process or requiring lenders to enter into mediation sessions with homeowners they are foreclosing on -- would have been too "divisive," given the makeup of the task force, though he said he personally favors some form of mediation.

"We wanted to do more, but this is what we were able to get out with 100 percent support, or nearly so," Young said. "We only have so much power, so much we can do with the banks here in Wisconsin, and we were really waiting on what the feds were going to do."

Task force member Bob Jones, public policy director for the Wisconsin Community Action Program Association, said he felt the presence on the task force of several financial institution representatives. While valued for their expertise, the reps also constrained discussion in some areas, such as looking at extending the legal time line of the foreclosure process to give homeowners in default more breathing room.

"We had an awful lot of discussion about that, but it was just like spinning wheels because (that topic) was a non-starter from the beginning for a lot of people from the financial institutions," he said. "There didn't seem to be a willingness to look at how something might work."

At the same time, Jones said he "absolutely" believed the task force did good work, especially given that national economic factors affect many aspects of the foreclosure issue.

"Wisconsin is being buffeted by national forces, and everybody realized that the problem is so enormous," Jones said. "Really, we felt we just scratched the surface. There's so much more that needs to be done."

Kurt Bauer, president and CEO of the Wisconsin Bankers Association, said he generally supported the work of the task force, but he also believed its power to effect lasting change was limited.

"It is awfully hard to do something" about foreclosures, Bauer said. "There are times when somebody just can't afford the house they're living in, and loan modifications could be just delaying the inevitable.

"The broader objective needs to address the unemployment problem," Bauer added. "You solve that problem and you solve the foreclosure problem."

Besides the task force, lawmakers have sponsored a variety of measures regarding home-loan foreclosures, but just two have become law so far. One mandates tenant protections when rental buildings face foreclosure; the other strengthens licensing requirements for independent mortgage brokers to match national standards. Both measures were approved after they were quietly wrapped into the state's budget repair bill in February.

Among pending measures, most notable may be the bill sponsored by Sen. Lena Taylor, D-Milwaukee, to require circuit courts to make "good faith" mediation an option between lenders and homeowners in foreclosures, though lenders would not be compelled to accept the mediation settlement. A public hearing on the measure was held in October. No other action has been taken on it, apart from an amendmet offered by Sen. Jon Erpenbach, D-Waunakee, to limit the mediation requirement to lending institutions with a record of more than five foreclosure judgments in the previous year.

Taylor's office did not return calls seeking comment on the bill.

Local group is active

A coalition of public agencies, nonprofits and other community partners known as the Dane County Foreclosure Prevention Taskforce has been active for months, providing resources and services to residents.

In August, it offered free, one-on-one help to about 150 families seeking modifications of their mortgage agreements through a federal program. More recently, it formed three working groups -- prevention, intervention and stabilization -- to tackle the county foreclosure problem more systematically, members said.

In addition, four public workshops -- focused on providing tools and information rather than hands-on help with modification applications -- will take place this year, beginning possibly in March, county task force member Kate Nardi Sullivan said.

And last week, the task force announced one of the biggest local developments to date: Dane County Circuit judges approved a rule that makes mediation an option for homeowners in foreclosure.

Schroeder, who had both a first and second mortgage on his Lodi home, said mediation could have been a valuable tool in his situation.

"My biggest wish is that we could have gotten together face to face with somebody from Associated Bank and somebody from the second mortgage company, sat down together and tried to come to an agreement, all three of us," he said. "But Associated Bank wouldn't meet face to face. It was all over the phone (with several different representatives in the bank's Stevens Point office), and the phone calls got worse and worse."

Ford, the public relations director, said the bank would "definitely try to accommodate" any customer's request to meet face to face with a personal banker at a local branch. But she said bank specialists trained to handle complicated cases are not available in every location. She said the bank "must comply with Fannie Mae and other government standards and regulations regarding any loan modification and short sales."

How it happened

Schroeder, who earns about $65,000 a year as a technology specialist at American Family's Madison headquarters, started having trouble making his mortgage payments in early 2009, after running up high medical bills from a bout with cancer that his wife, now 46, suffered in 2006.

The couple declared bankruptcy -- a version that left their mortgages intact -- to get out from under the bills and were debt-free by the middle of 2008, Schroeder said. But more trouble came early last year, when his wife's business, a Curves women's workout center franchise, lost more than half its customers as the worsening recession forced more people to eliminate extras like gym memberships.

The couple closed the business in January 2009 because they couldn't afford to keep it open, Schroeder said, and his wife didn't find another full-time job that matched what she had been earning until September. Throughout last year, the couple eliminated luxuries and cut expenses, he said, but there still wasn't enough money to pay both the home mortgage and the second mortgage they had taken out in 2004 to buy the Curves franchise.

Meanwhile, Schroeder was told he made too much money to be eligible for a federal loan modification program, and Associated Bank told Schroeder it couldn't combine and refinance the two mortgages because the couple had a bankruptcy on their record, Schroeder said.

The couple began falling behind on mortgage payments in March and stopped paying entirely in August, Schroeder said, and they could find no buyers for the franchise or their home. By law, Associated Bank was well within its rights to foreclose by early December, but that's when Schroeder finally got an offer on the house, though it was for less than what he owed.

The bank accepted the deal, known as a short sale, which does less damage to a home seller's credit rating than a foreclosure would. Schroeder also was required to make up the deficiency of $31,256, which he figures will take him seven years to pay off.

Though banks can forgive deficiencies, they aren't required to do so, and Schroeder didn't complain in an interview about what he owed, noting the couple's finances are on the mend and they are happy in their rental condo in Sauk City.

But he can't help being a little wistful.

"If the housing market had been OK, we could have sold the house (at an amount sufficient to pay off both mortgages), and everything would have been OK," he said, noting he wound up selling the home for $189,000, down $66,000 from its $255,000 value in 2004.

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