WINSLOW — The Choates’ home on Bassett Road has been foreclosed on before.

Shari Gregory, a neighbor, said in her 16 years living on the road, there have been four owners.

The neighborhood is desirable, Gregory said. If the Choates lost their home to foreclosure, she said another family would likely move in.

If you ask Barbara Fields, the New England regional administrator for the United States Department of Housing and Urban Development, foreclosure is a problem communities need to take on — and be nervous about.

“If they are to lose their home, it affects their neighbors,” she said. “It affects the communities we live in.”

Gregory, who called herself a liberal Democrat, said though the government can’t bail out all homeowners who overextend themselves, those in trouble need aid.

“I can understand it’s hard in this economy,” she said. “Yeah, they deserve some help.”

A quiet rural road not far from Carter Memorial Drive, Bassett Road is a mix of mobile homes, modest one-story homes, large, brand-new homes and older farms.

Like so many back roads in Kennebec County, pieces of Bassett Road are densely populated — but the narrow road dips over hills, often tapering into views of fields, acre upon acre.

“People (from outside the neighborhood) actually park their cars on the end of the road and walk their dogs here,” Gregory said.

The other day, Gregory said she saw a man walking three goats past her house.

The Choates’ house has a three-story silo built onto the front of it. It’s big and notable, yet modest.

Assessment records show it sits on nearly 10.5 acres of land, and the town values it at $169,000.

On the surface, it’s a scene of rural domestic stability.

Loans for all

Before the housing bubble burst, home prices in the nation were rising dramatically — fueling demand for larger loans, even for borrowers with shaky credit.

Housing market watchers identify two waves of foreclosures — the one that set off the market bust from 2006 to 2009; and one that lingers now in a fitful economic recovery.

“The first wave in this country was due to predatory lending,” Fields said. “The current situation — we’re looking at people who, through no fault of their own, have extended periods of unemployment.”

The vehicle for most predatory lending was the adjustable rate loan, typically given to borrowers with low credit scores.

With such loans, the interest rate either floats based on an interest rate index, or automatically resets higher after certain time periods.

Such loans made up 20 percent of the mortgage market in 2006, according to a 2007 National Public Radio report, with 80 percent of subprime borrowers opting for such mortgages.

The Choates went with a lender called Achieva Home Loans Inc.

Achieva representatives told the Choates in May 2006 they were eligible for an adjustable rate loan with a 9.25 interest rate for the first two years, with no money down.

Because they were buying a house for less than appraised market value, the representative said they would be eligible for a 30-year fixed loan, dropping the interest rate to 3.5 percent after a year, because of the equity in the home.

“The reason I fell for it, I guess, was he said because I paid so much less than what the house was worth, that we would have enough equity in our house to qualify for a lower interest rate,” Lynne Choate said.

That loan, with easing terms, never materialized.

Instead, rates went up.

“This is a common mortgage scheme — or it was at that time,” said Casey Bromberg, the local mortgage-aid administrator for the Kennebec Valley Community Action Program. “You wouldn’t have enough equity in your home at that time. But someone working outside this industry wouldn’t know that.”

In September 2006, Massachusetts shut down Achieva and 10 other mortgage firms after investigators determined “brokers steered prospective home buyers into mortgages they couldn’t afford, and lenders looked the other way,” according to published reports.

The Choates’ phone calls and letters now come from Litton Loan Servicing.

Documents show Litton — an arm of investment giant Goldman Sachs until earlier this summer — has received its own federal bailout. Documents show it has been given $50.6 million under the Making Home Affordable program since 2007.

According to a Bloomberg News report, Litton had about $41.2 billion in unpaid principal mortgage balances as of March 31.

Published reports say the Better Business Bureau in Houston, where Litton is based, received 800 complaints about the servicer between July 2007 and July 2010. Litton left the bureau as a result.

The second wave

Winslow is hardly the center of Maine’s foreclosure crisis. That distinction belongs to southern Maine, where housing prices boomed for much of last decade.

In 2009, the average home price in the Portland-South Portland-Biddeford labor market area was $199,000 — down from $219,000, 10 percent, in 2005.

It’s no wonder that now, foreclosures are coming most rapidly from Maine’s southern tip.

A July release from RealtyTrac.com said in the first half of 2011, one in every 177 housing units in York County received a foreclosure court filing — 2.2 times higher than the state average.

And 1,765 properties throughout Maine received filings during that time period — a 2 percent rise from the last six months of 2010.

“Now, we’re seeing a second circumstance — not that the loans are predatory, but that it’s now due to people’s personal circumstances,” said William Lund, superintendent of the Maine Bureau of Consumer Credit Protection, adding that now that home values have dropped, refinancing a mortgage is difficult to do.

Kennebec County, relatively speaking, has been barely touched — median home prices dropped from $129,000 in 2005 to $124,900 in 2009.

Those familiar with the capital area real estate industry say the impact has been minimal.

“There have been a few foreclosures, but not many,” said Earle Kenney, an agent with Sprague and Curtis in Augusta. “It’s a pretty stable market.”

Moe Fortin, an Augusta home appraiser, said the market has been affected by foreclosures, but homes usually can be sold, stabilizing the market.

“Most of them have been picked up pretty quick,” he said. “If they’re in a nice neighborhood, they usually get snatched up by auction time.”

The meeting

At a recent meeting, Carol Homer, a loan counselor for Kennebec Valley Community Action Program, entered financial data for the Choates into a program that spit out an estimate of how the program would help them — if they were accepted.

Bromberg said Lynne Choate currently is one of 102 at this stage of the process in Maine. Hundreds more are expected to receive aid, Bromberg said.

But, thus far, not a single Maine family has obtained an aid loan.

The Choates earn a little more than $3,000 per month. The mortgage chews up approximately half that. Banking industry guidelines once frowned on making a loan if it would result in payments to the borrower of greater than 33 percent to 40 percent of income.

The office was quiet as Homer left the office to retrieve a printout of the estimate.

Lynne Choate snatched it.

Her eyes widened. It said she would be on the hook for $953 per month, down from her current $1,326.

“That would be so much more manageable,” she said. “I would cry if I had a mortgage rate like that.”

Bromberg told her that, if all payments are made, the Choates could be caught up by November.

But, as of Sunday, it wasn’t final: The Bank of New York Mellon, the federal agent finally approving applicants, still had to review the application, and Lynne Choate still had to fill out more paperwork.

THIS WEEK: An answer is expected on the Choates’ acceptance into the Emergency Homeowner Loan Program.

Michael Shepherd — 621-5662

mshepherd@mainetoday.com

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