Lost buyers finding their way back to home ownership

• Boomerang buyers are people re-entering the housing market after a foreclosure or short sale.
• Nearly 700,000 boomerang buyers are expected to buy a home this year, according to TransUnion.
• The mortgage lending system is difficult for many boomerang buyers to navigate, experts say.
• Experts say education and speaking to a mortgage lender before starting the homebuying process is key.

Joel and Amanda Fields just want a home to raise their 9-year-old son.

They rent a nice house in Kenwood. But they can't plant flowers in the garden. They can't paint the walls. They can't make changes to their son's room. There are no kids down the street for their son to play with.

"This is where I live, but it's not home," Joel Fields said.

Fields and his wife foreclosed on their Loveland home in 2012 after Fields had a medical issue, resulting in $100,000 in medical bills. The medical issue also left him unable to work as frequently as was necessary, and he was laid off. Fields and his wife were doing everything they could, but they couldn't keep their heads above water. After three years of trying to keep their home, they decided to move out.

"I had to explain to my son that this wasn't going to be our home anymore," Fields said. "He would say 'Daddy, why you pack? Why you put my stuff in boxes?' It's not something I would wish on my worst enemy. It takes an emotional toll on a family."

Now, Fields and his family are among the thousands of so-called boomerang buyers, or people who are re-entering the housing market after a foreclosure or short sale. Nearly 700,000 boomerang buyers are expected to re-enter the housing market this year, and an estimated 2.2 million home buyers could potentially re-enter the market in the next five years, according to a study by credit report agency TransUnion.

But the process isn't simple for a lot of people. Experts say the mortgage lending system is difficult for many to navigate. And getting a loan isn't the same for each boomerang buyer; it depends on the circumstance of the individual's foreclosure or short sale and their credit history since the event.

"It's complicated," said Shaun Bond, director of the University of Cincinnati's Real Estate Center. "There's a lot of variation. If you've had a foreclosure and you're trying to get a conventional loan again, you may have to wait up to seven years. But with a Federal Housing Administration loan, it can be as short as three years."

Returning to the market has been another emotional roller-coaster for the Fields family, which was pre-approved on a loan this year. They found a home, put their hard-earned money down, and enrolled their son in a new school district. Then they found out they didn't qualify for the loan.

"It was difficult to lose our previous home," Fields said. "But then to finally get back into that home-buying process and then nothing? It sucked."

Why now? Time, rules bring homebuyers back

Fields started getting mail from mortgage lender companies around a year and a half ago. "Hey, it's been a long time since you've been in the market," the flyers said. "Come out again." The timing was around two years after the foreclosure.

Many people are entering the housing market now because mortgage requirements call for a wait of two to seven years before people apply for a loan again. The timing for boomerang buyers makes perfect sense, experts say. It's been seven years since 2008, the beginning of the housing crisis. It has five years since 2010, when many people filed for bankruptcies and foreclosed on their home. It's been two years since 2013, when many real estate agents saw another jump in bankruptcies.

Dan Martin, a mortgage banker at Loan One, which is based in the suburbs of Columbus, said there are three different kinds of loans for potential homebuyers. A FHA loan is the fastest way back into a home after a foreclosure or shortsale, he said. Other loans, which may take longer to qualify for, include a conventional Fannie Mae or Freddie Mac loan, a U.S. Department of Veterans Affair loan, or a U.S. Department of Agriculture loan used for rural property owners.

Leann Starks, a real estate agent with Re-Max in Anderson Township, said she keeps track of financial reports to see their effect on buyers. She said she saw the most bankruptcies in 2010 and 2013.

"They jumped by 71,000 filings in 2013," she said. "It jumped from 309,000 to 380,000 bankruptcy filings in the area."

Joe Mock, president of the Cincinnati Area Board of Realtors, said lapsed time has also given homebuyers time to repair their credit. "It took people a long time to get to a financial point where they felt comfortable" looking to buy a home again, Mock said.

Experts say it's a good thing to have so many buyers entering the market. Bond pointed to the TransUnion study, noting that 700,000 people re-entering the market would have a positive impact on the industry.

"Additionally, they have purchased a home before," he said. "They are looking for a trade-up home."

Buyers have extra concerns, changed buying habits

Fields said he has a lot of concerns about getting a loan again, especially given how unfavorable the process has been so far. When Fields and his wife first began experiencing financial difficulties in 2009, they went to their mortgage company to see how to address the problem.

At that point, Fields and his wife had not missed a mortgage payment. Their mortgage company told them to miss a payment so they could qualify for a loan modification or other form of support, Fields said.

"That went against every fiber of my being," Fields said. "But we felt we had no other choice."

So Fields and his wife did as they were advised, but then they didn't qualify for the support they needed. The mortgage company made another suggestion – miss three payments to qualify for another similar program. But then Fields and his wife didn't qualify for that program either.

By 2012, Fields and his wife moved out. The lender wanted more for the house than it was worth.

The family never got a notice from the sheriff's office to move out of the property. Fields didn't want to subject his wife and son to a notice on the door as they came back from work or school.

Soon, Fields would find out that the mortgage company didn't place their Loveland home on the couple's credit report. That turned out to be good news and bad news. There wouldn't be a foreclosure on the couple's credit report moving forward. However, it also meant all of the couple's previous on-time payments weren't on their record.

Because of that experience, and their subsequent experience getting pre-approval – only to be denied later – Fields and his wife are nervous about getting a loan again.

"We aren't going to look at a home until we get full approval," Fields said. "It's very difficult and the banking world is not even remotely flexible with people who have reestablished their lives.

"It's not like we're trying to buy a $450,000 house. We're just trying to buy a reasonable house."

Chris Blankenship, a mother of three who is currently renting a home with her husband in Batavia, is looking for a home again after losing her home several years ago in a foreclosure.

The process has been difficult for her, too. She and her husband found a home that would be perfect for their family. The seller ended up going with a different buyer who had a conventional loan. Blankenship and her husband have a FHA loan.

"I don't blame anyone but myself for what happened originally," she said. "But it's frustrating losing that bid."

Experts say it's normal for people who have lost a home in a foreclosure or short sale to have concerns moving forward. Laurie Marra, a real estate agent with Coldwell Banker West Shell in Mason, said many boomerang buyers that she works with are cautious. They don't buy as big a home as they did originally. Sometimes, they even buy far below what they can afford, just to play it safe.

"People were pushing themselves to the limit more before the housing crisis," she said. "Now, they want to go below their means."

Art Reed, president of the Northern Kentucky Association of Realtors, said most people who lost homes want to own a house again. But for a select few, it's not worth it.

"It was a horrible experience," he said. "They are good buyers and they got caught in a bad situation."

Education is key, but

are other changes necessary?

Experts and real estate agents say it is essential for boomerang buyers to speak to a mortgage lender to get pre-approval before starting to look for a home.

Bond, from the UC Real Estate Center, said some loan underwriting standards changed as a result of the housing crisis, and those changes could affect whether a person qualifies for a home.

"They should start the process of pre-approval well in advance of when they intend to purchase," Bond said.

Mock, from the Cincinnati Realtors, said homebuyers should be upfront about their financial history and previous foreclosure or short sale. "Don't think a lender won't find out about a past financial struggle," he said.

Fields, who works in the banking and financial industry, said he did a lot of research about the mortgage process beforehand. You can ask the same question to five lenders and get five different answers, he said.

"After doing Google research and seeing reviews, you think it's OK," he said. "I did my education and still got fooled."

Because of that, Fields thinks there needs to be more transparency in the industry. Fields said the requirement to wait seven years after a foreclosure is ridiculous. Additionally, there are predatory lenders out there who claim they can help you, even though they can't, Fields said. Many of them make homebuyers jump through extra hoops that aren't necessary.

"They say they can help you," he said. "They need to be transparent and say 'Yes I can" or 'No I can't.' "

For the time being, Fields and his family are in limbo. They have met with a new mortgage lender who thinks the Fields will qualify for a loan. But the lender is also trying to be realistic, as is Fields.

"I just turned 40. We're not spring chickens," Fields said. "I have faith that we've learned from our experience. We just need the opportunity to get back in."