JUSTIN JOB (Green Certified)

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It's a situation facing hundreds of thousands of people and the numbers are growing rapidly. Foreclosures aren't just happening to people who over-leveraged themselves and got into risky loans. They are happening to homeowners who are getting divorced, facing health issues, needing to relocate for a job, and numerous other reasons. Regardless of how you may end up falling behind on your mortgage, knowing what to do next is critically important.

I spoke with Carla Douglin, a leading expert in the field and CEO and founder of The Douglin Group and Foundation, to learn more about solutions to the ever-growing problem. Her foundation gives free seminars and workbooks to the public for homeowners facing foreclosure.

There is a lot of information out there about foreclosures, but one thing that the news media tends to tout as being the first action step should actually be postponed, why?

"A lot of the news media is talking about the first thing you need to do is contact your lender. However, if [homeowners who are] facing foreclosures contact their lender first, the first person they interact with is the customer service agent who may threaten them and tell them 'We're going to foreclose on your home right away' and scare them into not taking action. If they get to a loan mitigation person and they are talking to them, they may agree to a workout that they cannot afford just to get the phone calls to stop. However, if they agree to a workout they cannot afford and they miss a payment, [the homeowners] have essentially lied to their loan agency and that's not something good."

Homeowners generally fall into a panic mode shortly after they realize the severity of their foreclosure circumstances. What do you recommend they do first?

"People need to back up, really stop panicking. … [They need to] look at their finances, look at their income, look at their expenses, and any liquid cash and then call their lender with that information so that they can workout something that's really going to help them and not break them."

What can homeowners say to their lenders to help influence them to work out a mutually beneficial arrangement?

"If you have gone through the steps of understanding what your deadlines are and then facing your finances and you still see that you're short, that's where you do need to communicate with your lender and say 'I need to work out some other agreement with you because right now I don't have it.'"

How receptive are lenders when homeowners say they can't pay their mortgage?

"What people are finding is that lenders are willing to work with them. It will take a whole lot of persistence on the part of homeowners. They really need to make sure that they're not intimidated by the conversation they need to have with their lender but they need to step up and say 'I am not going to be able to make this. What can we do to suspend the payment or lessen the payment or modify the payment until I get back on my feet?'"

Homeowners should also look for other sources of money. Where can they find this help?

"There are some employers who have a five-thousand-dollar loan that they are able to give their employees with low interest. They can pay it back through their pay over time; that's one. Two, there are grant programs through housing counselors like HUD; there are grant programs that are available to people who are going through foreclosure. [Homeowners] can reach out and be able to get some money that way."

You advise homeowners to also think outside of the box to help come up with money; what are those creative strategies?

"A lot of people are taking in boarders and renting out rooms. Some people are renting out their entire house and they are staying with family so that they can make the mortgage payment. These are all things that homeowners need to do—think a little bit outside of the box when it comes to a solution. Another thing is, with the gas prices being as high as they are and people having to commute back and forth to work, you may want to ask your employer if you can cut down to a telecommuting schedule and think about selling your car."

"There are plenty of other alternatives and people just need to look for them and apply them as quickly as possible."

Looking for solutions to an emotionally and financially draining situation such as a foreclosure is fatiguing and frustrating. However, if you realize there are options then you can begin to build momentum to rectify your situation. Ultimately, it's critical to consult with experts on this matter, to be open about your financial dilemma, and to seek help immediately. For instance, real estate agents can either help you sell your home in a short sale, if necessary, or rent it out to help you pay your mortgage. Trying to do it alone can be a painfully disastrous experience -- seek the help you need.

Make way for the "androgynous" multi-family housing development in which the "sex" of the property -- for sale or for rent -- won't be known until six months prior to the marketing phase begins.

With the glut of unsold condominiums on the market, and the extended period it takes to win approvals and develop multi-family projects, more and more builders are waiting until the last possible moment to declare their properties a rental or a condo.

In most places, it's legal to go through the approval process without informing the zoning board which way the property will turn out.

As long as the local authorities know the size and number of the units, it usually makes little difference to them, according to Ronald Terwilliger of Trammel Crow Residential, which is just one of many developers that are waiting as long as possible these days before declaring its intentions.

But the "either/or" multi-family project does require a certain amount of faith, comfort and patience on the part of construction lenders and equity investors.

When the property is sold as condominiums, construction lenders typically are paid in bits and pieces as buyers close on their individual units. But when units are rented, construction loans usually are not paid back until the entire property is sold or refinanced.

Investors, who share in the profits as each unit is closed when the property is a for-sale condo, also must wait for their upside returns if the developer decides to make the place is a rental.

But in either case, giving developers the ability to "go either way" amounts to the "better part of valor," Terwilliger said at the National Association of Home Builders' Multifamily Pillars of the Industry conference in Hollywood, FL, earlier this month.

To give itself total flexibility in the face of the unknowns that lie ahead, Trammel Crow tries to stay within a certain footprint that appeals to both buyers and renters. For example, unit sizes range from 850 to 1,150 square feet, and the unit mix is usually one-third one-bedroom units and two-thirds' two-bedroom units.

"Since it takes long and longer these days to get a property entitled, it's better to wait as long as possible" to decide whether to market it for-rent or for-sale, Terwilliger said. "Otherwise, you can get buried" by changes in the market that could not be foreseen when the entitlement process began.

The long-time developer said it often takes four or five years for builders to gain the necessary approvals to start construction, and a lot can change during that time. He also said that in some cases, developers spend more money in legal fees than they have invested in the land by the time they can turn the first spade full of dirt.

Trammel Crow invests early on in the approval process in a set of condominium documents that spell out the rules and regulations under which owners agree to live by. But just in case the decision is to rent the apartments instead of sell them, the condo documents also allow for just such a contingency, and provide for the return of deposits put up by would-be buyers.

In markets like California, where developers must secure a condo map in order for multi-family units to be sold on an individual basis, the company obtains the map in advance just to be on the safe side.

Trammel Crow, which expects to start more than 15,000 market-rate rental units this year, isn't the only multi-family developer going the "either-or" route, though it may be the largest. Another is the Forest City Residential Group, which comprises the multi-family residential ownership, development, management and financial activities of Forest City Enterprises, Cleveland, Ohio.

"We're not smart enough to figure out what the market will be next year, let alone four years from now," said Ronald Ratner, who heads Forest City's residential division, which builds mainly urban properties with as many as 6,000 units.

"We prefer to do our projects as rentals in order to build values. But we make the decision of whether to be a rental or a condo on a project-by-project basis, and we wait as long as we can before we have to choose."

Post Properties, Atlanta, is yet another major apartment developer which is putting off the rent or sell decision to the last possible moment. "We will switch depending on the market," said Executive Vice President Thomas Senkbeil.

Post doesn't ever intend to abandon the for-sale sector. But with the huge inventory of unsold condos hanging over the market, Senkbeil said he doesn't think condos will ever again represent more than 25 percent of the company's offerings.

As the 2008 condo market continues to unfold, one thing is for sure, skittish would-be buyers will remain renters for the time being. That one fact has multi-family developers seeing green, as in higher retention rates for their condo dwellers.

Rich Cavenaugh, president of Chicago-based Fifield Companies, a multi-family developer, comments to MultiHousingNews.com that renters are looking for stability in their home life, but want an ownership feel to their rental. "For more and more people, the rent-vs.-buy debate will be pretty simple, and they'll opt to rent for a longer period of time," he says. "Thus rental developments will see higher resident retention rates and, with that, an increased demand for developers to create lifestyle choices and a sense of place."

Another high-rise developer in the Chicago area agrees. John Eifler of Marquette Companies says the new apartment development will be competing with condos on the market. "Since the pool, fitness center and club house are exclusive amenities, residents know each person they meet will be a neighbor," he says. "Beyond the clubhouse, we've updated the apartments to a level today's renters would find in for-sale condos."

These developers' sentiments seem to coincide with the National Association of Home Builders confidence survey released last week, showing builders' low confidence in condo development through 2009. NAHB Chief Economist David Seiders said in a release on the group's website, "Given that the condo market became so overheated during the peak of the housing boom, it is not surprising that the market now continues to struggle, considering the difficulties in the mortgage sector and the fears about the economy in general," noting that it's going to take time for the extra inventory to be absorbed.

According to a report today from RealtyTrac, an Irvine, Calif., company that tracks foreclosures, apprx. 2,200 homes in San Diego county were seized by banks, while an additional 3,000 homes received notices of default, the first step in the foreclosure process. The number of foreclosures are 2 percent lower than June's foreclosures, but, 125 percent above levels a year ago