The numbers are grim, even if they seem familiar by now. In 2007, lenders filed foreclosure notices on 90,782 homes in Illinois, up 25.3% from a year earlier. That tally puts the state among the top 10 nationally in foreclosures, says RealtyTrac, an online real-estate database. The figures are likely to go even higher in 2008. Subprime mortgages with adjustable rates—given to home buyers with less than pristine credit—will become more costly in 2008 as teaser rates expire. The Center for Responsible Lending predicts that in the next two to three years, 25,000 people in the Cook County area will lose their homes.
But homeowners aren't the only ones getting hurt. As home sales stumble, mortgage brokers and real estate agents are finding themselves out of work. Nationally, 86,000 mortgage jobs were cut in 2007 because of a sickening market. In Illinois, that meant 1,738 people were laid off, according to MortgageDaily.com, an online news publication. Some of these former brokers are moving into sales jobs, in retail or automotive, for instance, while others are finding work in the growing loss-prevention departments of banks. Another home for these mortgage refugees? Nonprofit housing-aid organizations.
Chicago has a half-dozen such groups—the biggest is Neighborhood Housing Services, which has 100 employees in 10 offices—and they all have similar programs: advising first-time buyers, lobbying for "affordable" housing, and, in the case of NHS, offering reduced-rate mortgages. Recently, they're spending most of their time in foreclosure counseling. That means meeting with homeowners who are months behind in their mortgage payments, helping them plan a budget so they can resume payments, and contacting lenders to try to work out more-lenient terms. The flood of calls to these nonprofits happened just as brokers and Realtors were being tossed out of work. And who better to help squeezed homeowners keep a roof over their heads?
Jose Pletz is a big man who is always crisply dressed—pressed suit, shiny shoes, clean, well-manicured hands. The 57-year-old can't help it: He has been in business since he was 20 years old. But he no longer has to dress the part. Since last July, he has been a loan originator at business-casual Neighborhood Housing Services, handling loan applications for refinancing, first-time purchases, and foreclosure avoidance. If someone has fallen behind in his mortgage payments, NHS can lend him the money to get back on track.
Pletz moved to Chicago from Laredo, Tex., in 1971 and settled in the largely Hispanic Little Village neighborhood. He had done well in finance and accounting classes in Laredo, and he got a job at a bank here a year later. It was the beginning of a life in banking, serving a largely Hispanic clientele. By 1979, he was a vice-president at Metropolitan Bank & Trust. He also picked up the nickname "Ticketmaster." He explains: "I was always selling tickets to Boys & Girls Club events, raffle tickets for charity. Giving back to my community has always been important."
After a series of jobs in finance, he hired on with LMC Mortgage in 2003 as a manager and loan originator. He worked with more than 40 banks to come up with mortgage funding, he says, but did most of his business with a few: Countrywide Finance (CFC), Wachovia's (WB) World Savings, Decision 1, and Banco Popular (BPOP). He helped clients apply for every kind of loan, including the now notorious "no-doc loans" and stated-income loans—risky products that required no proof of the borrower's income. Pletz tried, he emphasizes, to ensure that clients understood what they were getting into, but he passes responsibility for any problems with defaults or delinquencies onto the banks, which set the loan terms.
"Everyone tries to blame the brokers for this crisis, but you can't tell the future when you are a mortgage broker," he says. "You can't always predict that someone is going to have an accident and not be able to pay their bills. When people sign a contract, they have to abide by the terms of that contract."
Signs of trouble in the industry came for Pletz last March, when he closed a deal on a house purchase for a client, secured a loan from New Century Bank, and then waited for the funds to appear. They never did. New Century had gone under. Pletz and his colleagues began hearing about more and more home buyers left hanging after funding evaporated. "I remember thinking: I gotta get out." Pletz learned about a job as a loan originator with NHS and started in the Wicker Park office last July.
He speaks of his new work with rapture: "It's like a family here. We all help each other." He says his take-home pay is almost the same: At LMC he was paid some $50,000 a year; at NHS he makes about $35,000, but he also gets health-care benefits and a 401(k) plan. Asked if he will ever return to being a mortgage guy, he shakes his head no. "I want to retire here."
Brenda Reyes, 40, a soft-spoken woman with long brown hair and a gentle smile, grew up in Aguascalientes, Mexico. She spent her early years traveling back and forth between Mexico and Chicago with her family—her dad owned a funeral home in Mexico—until she settled in Chicago in 1992. After working for several years in sales at Harlem Furniture, she started working as a Realtor in 2002, working mainly on the South Side and in west suburban Melrose Park, Berwyn, Cicero, and North Lake.
During a good year Reyes sold 40 houses. With most of the homes going for $150,000 to $200,000, she earned about $120,000 a year in sales commissions. She received three awards from Century 21 for being a top seller. She stresses that despite the high volume, none of the people she sold homes to is in a mess now. "I am extremely cautious," she says, "and I always pushed people toward loans they could afford."
She started worrying in mid-2007 when she says she'd put a yard sign advertising a home for sale—and get no calls. "In the good days, you'd get 10 calls the first day. Now, I was getting nothing." The last home she sold, in September, belonged to a colleague—a real estate broker who couldn't afford her mortgage payments.
To make ends meet, Reyes began working part time as a private tutor for elementary school students but says she was consumed with worry about how she'd support her family. She has three kids under 10 and a husband who was making significantly less as a jail guard in McHenry County. "It started to become a question of, do I get diapers or put gas in the car?" She applied for a job as a foreclosure counselor at the NHS Fox Valley office in Elgin last summer. She finally heard back from the organization in December.
Reyes spends most of her day counseling homeowners who have fallen behind in payments to get them back on track. In Elgin, lenders filed 560 foreclosure notices in the first eight months of 2007. Her clients include a construction worker who lost his job when his homebuilding company went under. Now he's about to lose his house.
Although she loves the work, she says getting by on its $40,000-a-year salary is tough. She agonizes over every purchase, no matter how small, and says free passes for the Field Museum are the only outings her family can afford these days. "I'm walking on one leg now," she says, "just getting by."
Johnny Placeres is a short man with good posture, a firm handshake, and a flirtatious manner. When he was in his prime, from 2002 to 2005, he arranged mortgage loans for 50 houses a year to a largely Hispanic population in Elgin, pulling in $150,000 a year. It's easy to picture him wheeling and dealing, charming the grandmothers in Spanish, cracking jokes with the younger kids, seducing everyone into signing up for a home-buyer loan. "I'm so glad I'm out of that," he says. "I feel so much better about myself."
Placeres, 47, moved to Chicago in 1976 after a childhood in Puerto Rico. He spent four years in the Army, in Texas and Germany, and then settled down for good in Elgin in 1984. He worked as a cook at a Hyatt hotel, spent a year selling life insurance, then 10 years at a copier-repair company. He thought he could make better money and set his own hours working for a mortgage broker, so he moved into real estate in 2002, hopping from Banco Premier (now called Capital Bank) to Fox Valley Mortgage, to Platinum Mortgage, and to Grand Mortgage. He ended up as a loan officer at MidAmerica Bank, which later became National City (NCC).
During the boom, Placeres made about $150,000 a year in commissions. Guidelines were loose: "We were giving out loans to anyone with a pulse." The pace was grueling. His phone was on 24 hours a day because he was terrified of missing a call, which meant a sale would go to someone else. "I was a shark, always going for the kill."
In late 2006, he noticed a change. Typically, he says, he had been seeing eight to 10 people a week looking for home loans. Now, he was helping the same number obtain home-equity lines of credit so they could do home repairs or pay off credit-card debt. This meant much less money for Placeres. If he originated a $300,000 mortgage for a client, he'd get 1%, or $3,000. Home-equity loans were typically smaller, and, according to his bank's policy, his commission was limited to 0.5%. "It was over," he says. "I was spending a lot more time on Monster.com (MNST)."
He landed at NHS, as director of its Elgin office, last November. He oversees the group's counselors and puts together seminars, warning people about mortgage scams. He's also digging himself out of a hole: When business dried up last year, he took out a line of credit to support his wife and two kids in college. He'll have to repay it slowly, on a salary of $55,000 a year. But after a restless life and multiple career changes, he says he doesn't mind slowing down for a while.