Up until about two years ago, life was pretty good for LaRayne Morgan.

The 51-year old Canton, Ohio resident had lived in the same house for 16 years, paying the bills with her salary as a restaurant manager with help from a regular child support check.

The, one day, the owner of the restaurant fired her and gave the job to his cousin. She took a job as a restaurant server for less money and lost her medical insurance. And then, her child support payments stopped coming.

“When I saw that I was going to be late on my mortgage, I contacted (the lender) and had a hideous experience. They were not willing to help and they started yelling at me and completely intimidated me,” she recalled. “After that experience, these were the last people I was going to call for help.”

Morgan began falling behind on her mortgage payments. As she got different jobs, she started sending in different amounts of money. Then, she received a letter telling her the house was being foreclosed upon.

“The house is worth $52,000 and I owed $19,000,” she said.

According to the latest figures from Foreclosure.com, a Boca Raton, Florida-based company that features foreclosure listings, the number of residential foreclosures has been rising slowly.

In the past five years, nearly 3 million households have experienced foreclosure, with an average loss of $30,000 to $80,000 per foreclosure. Foreclosures on all loans have increased by more than 50 percent since 2000, according to figures provided by NeighborWorks America, a non-profit network of more than 240 community development organizations working more than 4,400 urban, suburban and rural communities across the country.

And that number could jump further. According to Inside Mortgage Finance, a mortgage industry digest of data and information, nearly $150 billion of the almost $670 billion of mortgages originated in the first quarter of 2006 were ARMs that didn’t require any payment of interest.

When those loans adjust, the payments may become unmanageable for many homeowners, who may then start to fall behind on their monthly payments.

“The continued rise in interest rates, which affects monthly housing costs for owners with adjustable-rate mortgages, is triggering a rise in foreclosures and a softening of home sales across the board,” explained Brad Geisen, Foreclosure.com President and CEO.

While lenders are supposed to work with homeowners to restructure their mortgages, that doesn’t always happen the way it should.

Morgan was ultimately referred to the Department of Housing and Urban Development (HUD). Through HUD, she was referred to NeighborWorks America, which connected her to Liz Atkinson. Atkinson is a housing counselor and foreclosure prevention specialist with the Portage Area Development Corp, a non-profit housing agency based in Ravenna, Ohio, worked with Morgan to help her patch together enough funds to get her home refinanced with a new HUD-backed loan.

NeighborWorks America’s foreclosure initiative deploys triage strategies to help homeowners on the brink of losing their homes avert foreclosure. Atkinson offered Morgan $2,100 on the spot.

“We offer loans up to $2,100 with zero percent interest that are paid back when the owners sell their house. But they can live in their house for as long as they like until they sell it,” Atkinson explained. “We fill out a personal profile, get copies of bank statements, pay stubs, W2 forms and give the information to our loan committee. They decide if they will give out the funds or not.”

Morgan was 10 months behind in her mortgage when she started to work with Atkinson. With Atkinson’s guidance, the Portage Area Development Corporation’s grant, and some cash borrowed from her sister and her mother, Morgan was able to bring her home out of foreclosure and then refinance it with a HUD-backed loan – with an 11.5 percent interest rate.

It isn’t the path Morgan would have chosen — “You can’t have as much pride in a situation like this and you have to do whatever it takes.” – but at least she didn’t have to leave the home she’s been in for the last 18 years.

Atkinson says Morgan’s situation is a common one. “People are laid off, or in between jobs, or they have an adjustable rate mortgage where the payments go up.” And the mortgage bills slip by unpaid.

Atkinson suggests that if you’re going to be late or default on a mortgage payment, you should contact a HUD-certified housing counselor in your neighborhood as soon as possible.

“We would try to help work out a plan with the mortgage company but the idea is to safeguard the house and help the person maintain their payments. We work on a repayment plan and then we review their application and their budget and take it to the loan company,” she explained.

The big problem is that homeowners wait to long to call the lender, or they give up, as Morgan did, if the initial person they talk to isn’t friendly.

But when you’re in financial trouble, you need more contact with your lender, not less.

“When you go through foreclosure, people great you like a leper and your credit is shot,” Morgan said. “They (NeighborWorks America) were a God save. This agency really helped me out.”

For more help on fighting foreclosure and to find a HUD-certified housing counselor, go to HUD’s website (www.hud.gov/foreclosure) or go to the NeighborWorks America website (www.nw.org).

July 12, 2006.