(News-Press) Volunteers, donors and the low-income people the group serves have a misconception about Habitat for Humanity. Many believe the nonprofit organization gives away homes. Or, at the very least, it sells the homes at what it costs to build them.
Habitat's goal, however, is to provide affordable housing. When it comes to Habitat for Humanity of Lee and Hendry Counties Inc., that means the monthly mortgage is affordable. The home is anything but.
Habitat homes in Lee sell for the appraised value, meaning many of the people who donated 250 hours of labor, saved up a $1,200 deposit, and attended hours of homeownership classes in order to qualify, ended up getting a home with a purchase price of as much as $250,000.
And in many cases, those people lost their homes when Habitat for Humanity foreclosed.
INTERACTIVE MAP:Habitat for Humanity foreclosures in Lee County
According to Habitat's records, the Christian-based nonprofit organization foreclosed or took back deeds on homes of 134 low-income families who had participated in its programs. The number represents more than 10 percent of the 1,274 homes the group has built, rehabilitated and sold since the local affiliate began in 1982, and a foreclosure rate nearly 10 times higher than other Habitat for Humanity affiliates in Southwest Florida.
Habitat's president and chief executive officer, Katherine "Kitty" Green, attributes the problem to a bad economy and said it is a reflection of the foreclosure frenzy that hit Lee.
When Green took the helm in March 2010, she was dismayed by the higher-than-normal foreclosure rate.
"We never had those kinds of numbers before and we were all concerned about it," Green said. But, she noted, the rate was lower than when compared to the overall market. "So I started to calm down a bit about the numbers."
The recession was a factor in Habitat's ballooning foreclosure rate since 2004. All the foreclosures were in the last nine fiscal years and 77 percent were since 2008.
But a News-Press investigation shows there were other factors that contributed to the foreclosure rate that had nothing to do with the economy and everything to do with how Habitat for Humanity operates in Lee. The investigation showed Habitat's foreclosure rate attributable to:
•Inflated sale prices- Although the mortgage payments were only 30 percent of the buyers income, because the home value appraised at the sale price, the taxes and insurance increased the first year of home ownership, sometimes increasing mortgage payments by 50 percent.
•Lending practices- Habitat qualified the applicants based on a mortgage that did not take into account the inevitable increase in taxes and insurance payments. Habitat, which services the loan and holds the mortgage on the property, refused to adjust loan balances and write down principal for homeowners who were going through default.
When she signed the mortgage papers on Sept. 15, 2006, Heidi Davis' hands shook. The mortgages totaled $223,875. Later Davis stood in front of a group of Habitat for Humanity staff and volunteers welcoming her into her new home in Cape Coral. Habitat called it a dedication ceremony. Davis was on the verge of tears.
"I'm looking at all these church people and thinking, 'They don't know what I just did.' They donated their money and time and they prayed over this house. They're good people, but they were told that this is a Christian organization doing the right thing for people," Davis said. "(Habitat) is taking advantage of low-income people because we are too stupid and don't know any better and we're desperate enough to do it."
Davis, a 52-year-old fitness instructor, earned about $12,000 a year and with other sources of income included she met the minimum requirements for home ownership. Payments fluctuated each year, Davis said, ranging from about $550 when she signed to $700 a month.
When Davis bought the home her mortgage was calculated to be 30 percent of her income including taxes and insurance. But after the home was sold to her with a $224,000 price tag, taxes increased on the property from $448 to $3,043 annually, making the mortgage, insurance, taxes and utilities more than half her income. She had a daughter and disabled son to support and she fell behind, she said.
The Habitat home prices reflect the appraised value and in most cases included a "silent" second or third mortgage the homeowner didn't have to pay unless the home was sold. If the homeowner pays off the first mortgage, she can petition the Habitat board to forgive the others, Green said. Of the 1,274 Habitat homebuyers, 118 families have paid off their mortgages.
Davis would have to live in the home for 30 years before she could petition for forgiveness of the second and third mortgages.If she died before paying off the $121,398 first mortgage, her estate would owe $90,000 for the second and third mortgages. At the time of the foreclosure the home was valued at $66,398, according to the Lee County Property Appraiser.
In 2006, the appraisal done for Habitat for Humanity valued Davis' house at $230,000.
The three homes chosen to compare to Davis' had the same number of bedrooms and comparable square footage. But they didn't look like Davis' house, which stands out in the neighborhood like a peasant at a royal garden party.
Habitat homes are frame construction with vinyl siding and linoleum floors. This type of building is "volunteer friendly," Green said, not requiring construction skills. Kitchens have inexpensive cabinetry, laminate countertops and no dishwashers, in keeping with Habitat's goal to provide, "a modest home of quality at the lowest cost possible," Green said.
The cost to build a Habitat for Humanity home in Lee varies depending on land costs, how much of the material is donated and how much paid versus volunteer labor is used. Costs vary from $60,000 to $120,000. But that is not what the Habitat homebuyer pays.
Instead, Green said, "The appraised value is always the sale price."
From 2005 to 2008 Habitat for Humanity sold low-income buyers 145 properties with a sale price between $150,000 and $250,000. The homes were often built in low-income neighborhoods in Lehigh Acres, Dunbar, Rosemary Park in Bonita Springs, North Fort Myers and north Cape Coral.
Because the homes were sold at appraised value, which wasn't determined until it is nearly completed, Habitat homebuyers didn't find out the cost or mortgage terms until shortly before closing. This could be a year or more after they had been accepted into the program, had saved up $1,200 as a down-payment and donated 250 hours of work to Habitat.
Habitat calls the work requirement, "sweat equity." Homeowners can help build other homes or their own or do other work for Habitat that doesn't involve construction. Habitat for Humanity considers "sweat equity" a demonstration of commitment to the program.
Green contends the sale price and amenities don't matter as the initial mortgage payments are set at below 30 percent of the homeowner's gross income. And it's a zero interest loan.
"Where else is she going to live for $600 a month? Think about it. Low-income families have to live somewhere. It's still a great deal," she said.
Need to sell
It's not such a great deal if you ever need to get out of it, as Susan McDaniel learned.
McDaniel had lived in her home for nearly 10 years, she said, yet had no equity when she lost her job and needed to sell.
McDaniel's mortgage payments started out at $425 a month. But with an increase in the property value, taxes and insurance went up. Within a few years the monthly mortgage payment was $700. McDaniel worked two jobs - as a school bus driver and a limousine driver - but brought home only about $400 a week.
Within two years - which exceeded Habitat's home warranty by a year - the kitchen cabinets fell apart.
"The way they built it, it's all screwed up. They build it cheap and then they want to sell it for a lot of money to poor people like us suckers," McDaniel said.
McDaniel couldn't work, after being diagnosed with diabetes and arthritis. Struggling to pay her mortgage, she asked Habitat for an adjustment in her payments. Habitat cut her $600 a month payment in half for one year. What McDaniel didn't understand was after a year, she'd have to make up the shortfall in a lump sum and resume regular payments. Her application for Social Security disability had not been approved yet. And Habitat started the foreclosure process.
McDaniel owed $56,000 on her first mortgage to Habitat, and believed she could sell the North Fort Myers home for that amount, but she had miscalculated.
"There's three mortgages on my house," McDaniel said. "I was paying on the $86,000, but the other mortgages were taken out. Nobody explains that to you until you try to sell it. I can't sell it. I can't rent it out. They (Habitat) won't even let me."
One of McDaniel's mortgages contained a clause that required her to occupy the property as a principal residence. If she failed to do that, the mortgage could be foreclosed on and she would forfeit any equity.
"It's not even mine," McDaniel said. "I'm just sitting here paying the mortgage for them."
Habitat for Humanity's 1,500 affiliates are independent of the national organization, Habitat for Humanity International, based in Americus, Ga. There are 58 affiliates in Florida and the one in Lee is among the largest in the nation with gross revenue of $7.3 million in fiscal year 2011-12, the most recent year reported.
Yet even bigger affiliates have not been plagued by foreclosures at the same rate as in Lee.
Habitat for Humanity of Greater Miami has built about 1,000 homes since 1989 and foreclosed on about eight, said Casey Angel, director of communications.
Angel said the homes cost between $100,000 and $130,000 - what they cost to build - and with taxes and insurance the mortgage payments are $600 to $800 a month.
Miami's Habitat doesn't put second mortgages on the homes to increase the value and deter "flipping" or predatory lending. If a home is sold within the first year it's purchased from Habitat, 90 percent of the profit in the home must be turned over to the organization. The profit sharing percentage goes down over the time the homeowner lives in the home.
Lee's Habitat has set up a similar structure, Green said, including a first right of refusal for any sale. Those restrictions on resale had been used in the past but not consistently, she said, until she took over.
Habitat for Humanity of Collier County has had 14 foreclosures in its 35-year-history and fewer than 10 deeds in lieu of foreclosure in which the agency gets the home back without a foreclosure judgment.
Lisa Leskow, executive vice president of Habitat for Humanity of Collier County, said her group has never sold a home for more than $175,000. Unlike Lee, the sale price is not always the appraised value. When prices fell homeowners still had value and sometimes equity.
Collier's Habitat modifies mortgages when a person loses their job, Leskow said. For example, a person with a 15-year mortgage can have it restructured to a 30-year mortgage. When the person gets a job and recovers financially, they can go back to a 15-year-mortgage, Leskow said.
Habitat has restructured mortgages too, said Charles Idelson, who was chairman of Lee's board of directors for 15 years, leaving the organization shortly after Green became president. But, he said, Habitat restructures mortgages for people who have legitimate hardships, not for those who have made bad financial decisions.
"Anyone foreclosed on by Habitat it's their issue," Idelson said. "The last thing (Habitat) wants do is foreclose on somebody."
Liketha Martin said she had good credit before buying a Habitat home. Pregnancy complications forced her to go on bed rest, so she couldn't work or make mortgage payments on her home in Fort Myers. She was about six months behind, she said, when Habitat first sued for foreclosure in 2004, three years after she bought the home.
Unlike most other Habitat homeowners, Martin had a lawyer. Prior to becoming ill Martin said she had regularly paid her mortgage. She was given a chance to catch up so her aunt paid several thousand dollars to Habitat, staving off foreclosure.
Because of increases in the property value and insurance, Martin's payments had nearly doubled. She tried to get Habitat to renegotiate her payments. "I wanted to pay them half until I could get back on my feet," Martin said. "But Habitat doesn't reason with you."
Reports of Habitat's intransigence were echoed by Eddie Felton, former executive director of the Home Ownership Resource Center, a Fort Myers housing counseling agency specializing in foreclosure prevention.
Habitat homeowners began approaching his group for help a few years ago, Felton said, and he reached out to then-CEO/President Vernon Archibald. "I went over to talk to him about people who were having difficulty getting the loan modification and it fell on deaf ears," Felton said. "They said there was no reason why people can't make the payment. We offered to go in and assist Habit for Humanity and they didn't want anything to do with us at all."
But Green defended the policy. "Don't make it sound like Habitat is a bad lender because it's not writing its mortgages down," she said. "Nobody writes down their mortgages. It's not as though we're unusual."
Felton said banks are asked to do that and have. He cited two instances where banks forgave $80,000 and $100,000 in mortgage principal on homes in which the value was far less than the purchase price. Some banks are cutting mortgage payments in half for five years, in hopes the economy and home values can recover.
Felton said he didn't want to seem critical of Habitat and understands every organization "has procedures and policies to follow." But, he said, "We have to be creative."
Habitat board of directors member William Valenti is market president for Lee County at Iberiabank. He was surprised to hear complaints about Habitat's unwillingness to adjust mortgages. The agency wants to keep people in their homes, he said, and gave an example of how Habitat will suspend payments while people wait for a tax refund, as an example of its flexibility.
Writing down mortgage balances is practiced among for-profit lenders. Iberiabank has on occasion adjusted the value on mortgages of its customers rather than foreclose, Valenti said. "We don't want to put people in the street."
Yet that's what happend to Neila D'Amico.
Habitat sold D'Amico a four-bedroom, two-bath house in North Fort Myers for $171,300 in 2006. She paid $550 a month on the first mortgage of $150,877 and paid nothing on the $20,348 second mortgage.
D'Amico knew the house was overpriced. But, she said, "They get you with, 'It's yours.'"
Now it's not hers. After making payments for more than five years, D'Amico lost her job and she wasn't getting her child support payments. Habitat agreed to let her catch up with an expected $5,000 tax refund due to arrive in early 2012.
D'Amico didn't get her refund. She, like thousands of others, was a victim of tax fraud identity theft. Someone had claimed a refund using D'Amico's Social Security number to file a fraudulent return. The IRS required an investigation before it could release her money, and she was told it could take a year.
Counselors at Habitat advised D'Amico to apply for the federal government program for distressed homeowners facing foreclosure.
"Finally I got approved (for a mortgage modification) and Habitat rejected it, and I had to move out," D'Amico said.
D'Amico is sad about losing her home but resigned to having made a prudent financial move.
"I didn't need the debt," she said. "The house wasn't worth it."
It was not.
Habitat won a $126,790.15 judgment against D'Amico in October 2012. The property was put up for auction and Habitat got it back in January. The group put on a new roof, replaced the air conditioning system and in September Habitat sold it for $80,000.
The new owners pay a $350.88 mortgage, about $200 less than D'Amico paid. They have a second silent mortgage, but it's not included in the sale price. The first mortgage term is 20 years. D'Amico's was a month shy of 32 years.
Instead of kicking D'Amico out and putting in a new family, why not give her the same deal? Green said the people who broke their agreements don't get another chance.
"Right now we have 50 families in the program who are qualified. They've done their bit and they're waiting for a home," Green said. "And it's not really fair to give somebody else a free ride if there are other people that are willing to uphold their part of the partnership."