Foreclosing on Our Health?

In a dangerous cycle, medical bills are a common cause of foreclosure—and the stress and financial crisis of foreclosure causes an increase in serious health problems.

Carol Cocuzzi spent years working as a housing counselor in Pittsburgh helping disabled households find affordable, accessible housing. She frequently received calls from homeowners saying they’d been in the hospital for weeks and couldn’t afford to make a mortgage payment.

Never in a million years did Cocuzzi think she would have to make that call.

In 2003, when Cocuzzi was a partner at a company that provided disability consulting services, she unexpectedly developed a complication from an existing disability. The solution was supposed to be a fairly straightforward surgery with a three-week recovery period. Instead, it took five surgeries over many years and pushed her to the brink of losing the home that she and her mother share.

Cocuzzi knew that medical issues could snowball into major financial issues that could threaten homeownership, but said that it is hard to really know how that feels until you’ve gone through it yourself. “It is an awful feeling.”

Cocuzzi went on short-term disability in 2004 after her second surgery, which effectively cut her income in half. Later she returned to her company, but by 2007, due to the ongoing medical issues, Cocuzzi and her company parted ways. She was unemployed for about a year, which made it impossible for her to make her mortgage payments. By October 2008, Cocuzzi had opened up her own consulting business. But even as the medical causes of her brush with foreclosure were getting resolved, Carol was hospitalized several times for pneumonia. She believes the stress of the foreclosure process weakened her immune system.

Eventually, Cocuzzi reached out to ACTION-Housing of Pittsburgh. ACTION-Housing worked with Cocuzzi and her lender to try to negotiate an affordable payment, and eventually crafted an unusual solution. Using Neighborhood Stabilization Program (NSP) funding, ACTION-Housing, purchased Cocuzzi’s property from the lender and is setting up an affordable payment schedule that will allow Cocuzzi and her mother to remain in their home.

“Without ACTION-Housing I would have lost my house,” says Cocuzzi, and like any good advocate, she is already thinking of ways to help prevent others from going through what she had to go through.

Medical and health issues can both cause foreclosures and be a consequence of foreclosure, but most foreclosure prevention efforts don’t reflect either of those realities. The health community is increasingly focusing on the intersection of health and housing. Housing advocates and professionals need to join the leaders in the health community in recognizing the effects that health has on housing opportunity and stability, and how unstable housing can affect health.

Factoring Health In

Since 2007, approximately 6 million homes in the United States have been lost to foreclosure and 4 million more are somewhere in the foreclosure process (approximately 2 million houses entered the foreclosure process each year). Despite reduced foreclosures in 2011, experts expect the foreclosure rate in 2012 to be worse than last year and that the crisis will continue for several years.

In “Get Sick; Get Out: The Medical Causes of Home Mortgage Foreclosures,” a 2008 article in Health Matrix: Journal of Law-Medicine, researchers surveyed homeowners facing foreclosure in California, Florida, Illinois, and New Jersey. Nearly half of them identified medical issues as being at least part of the cause: illness or injury of self or spouse (32 percent), loss of work due to illness or injury (27 percent), medical bills (23 percent), and others in the family ill or injured (14 percent).

Similarly, a 2009 article, Health Status of People Undergoing Foreclosure in the Philadelphia Region funded by the Robert Wood Johnson Foundation, found that among the clients of one large Philadelphia housing counseling agency, medical problems contributed to more than 1 in 4 foreclosures; they were the primary cause for almost 1 in 10.

Based on those findings, if another 2 million homeowners enter foreclosure next year, between 400,000 and 980,000 of them are likely to also be struggling with a medical issue that is affecting their ability to pay their mortgage. But resources to help homeowners facing foreclosure have been slow to take this into account.

Qualifying for Resources

The Obama administration’s Home Affordable Modification Program (HAMP), launched in 2009, was designed to address what was effectively the first wave of the foreclosure crisis — homeowners facing steep mortgage payment increases from adjustable-rate mortgages or struggling with predatory loans. HAMP asked banks to take a variety of steps to lower borrower’s payments to 31 percent of income, but a bank was only required to offer a modification if the bank’s analysis showed that that was more profitable than letting the property go to foreclosure. It is easier to make such calculations work for someone who can still afford a sizable payment (just not the much higher payments that came when rates adjusted) than for someone who is suddenly struggling with little to no income, or with little income available for mortgage payments because of medical bills.

Eventually, HAMP was modified in 2010 to try to better address the needs of the unemployed by instituting a forbearance period for those borrowers of at least 3 months, which was later increased to 12 months. Now there are encouraging signs that policy makers are starting to recognize the effect of medical issues on foreclosure. In late January 2012, the Obama administration announced it would relax program regulations to make it easier for homeowners with significant medical-related debt to take advantage of HAMP through more flexible debt-to-income criteria and assistance to borrowers with more affordable mortgages but high levels of non-mortgage debt.

Two other federally supported efforts, the Hardest Hit Fund and the Emergency Homeowners’ Loan Program (EHLP), did include elements specifically designed to reach homeowners with severe, short-term financial issues such as unemployment or medical issues. The biggest limitation of these programs was their limited geographical scope, operational period, or both. Both programs were modeled, at least in part, after Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program (HEMAP).

HEMAP was operational in Pennsylvania from the early 1980s through July 2011. The Pennsylvania Housing Finance Agency (PHFA), which administered HEMAP, offered bridge loans targeted at homeowners facing foreclosure through no fault of their own who demonstrated a reasonable likelihood of being able to resume full payments in two to three years. Independent investigations have found HEMAP to be a strong, effective foreclosure prevention program.

The factors that might indicate that a person was facing foreclosure due to no fault of their own included unemployment, medical issues, or family issues (divorce/separation, domestic violence). Health-related issues were consistently a significant portion of the reasons homeowners sought HEMAP assistance. During the last three years of HEMAP (2009Ð2011), the percent of approved HEMAP loans where the homeowner identified their financial trouble as being related to medical issues ranged between 21 and 25 percent.

The Obama administration launched the Hardest Hit Fund in February 2010, initially targeting 5 states; it later expanded to 19. The selected states were identified based on either very high unemployment rates or decreases of 20 percent or more in home prices. Housing agencies in each state were able to design programs to address the needs in their state, and many of the states included a component specifically designed to address the needs of unemployed homeowners. It shouldn’t be a large leap from there to accommodating those facing medical issues as well. At a minimum, agency administrators should monitor the applicant pool and rejected applicants for trends, especially in the stated causes of financial difficulty. If the administrators see significant levels of medical-related causes or significant numbers of households with medical-related issues being denied assistance it should be a warning that the existing programs should be examined and modified to better serve homeowners with medical issues.

The Emergency Homeowners’ Loan Program (EHLP) was another federal effort to address the foreclosure problem. EHLP provided $1 billion to be used to fund programs in the states not selected to be part of the Hardest Hit Fund. EHLP was specifically designed to provide assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition. EHLP was the first major federal program created as a response to the foreclosure crisis to explicitly include consideration of health issues as a cause of foreclosure.

EHLP was implemented on a very short time frame. Funding was not available to the states until 2011, but all funds had to be committed by September 30, 2011. In Pennsylvania, PHFA administered the EHLP program. PHFA’s data shows that 18.4 percent of the applicants approved for EHLP cited medical issues as a cause of their foreclosure.

Foreclosure Counseling

Foreclosure counselors have been the lynchpin of foreclosure response efforts. In general, housing counselors were the ones working with homeowners to help them obtain a modification, access additional funding, or execute a graceful exit from the property. Despite the demonstrated incidence of medical issues that homeowners face, housing counselors have relatively little information on medical-related resources.

A 2011 survey of NeighborWorks-affiliated counselors found that while 68 percent of counselors felt it was their responsibility to refer clients to appropriate health resources, only 14 percent said their agencies provided training on the available local health resources. Many counselors appear to acquire the needed information from other channels and to make referrals, but 47 percent said they needed additional training from their agencies on how to connect clients to appropriate health resources, especially community health clinics, the Veterans’ Affairs medical system, prescription assistance programs, and affordable health insurance.

A 2011 report issued by Regional Housing Legal Services with the support of the William Penn Foundation, No Place Like Home: Philadelphia’s Approach to Foreclosure Prevention, found similar gaps in Philadelphia: “Hotline workers and counselors rarely inquired into whether a client had a health condition, and if the homeowner volunteered the information, they did not have the skills or knowledge to help the client to appeal a health insurer’s decision, to obtain public-health benefits for family members, or to refer them to an agency or a lawyer that could provide this assistance.”

Medical Consequences of Foreclosure

Medical issues can cause foreclosure. But medical issues can also be a result of foreclosure. Health researchers are finding evidence that the foreclosure experience itself worsens homeowner health — significantly.

When medical issues result from foreclosure, it further exacerbates an already difficult situation, taxing a homeowner’s physical, emotional, and financial resources.

A recent national survey of NeighborWorks mortgage counselors found that 68 percent of the respondents said that “many” or “almost all” of their clients from the last month reported feeling depressed or hopeless. During the same time period, 37 percent of respondents reported working with a client who had expressed suicidal thoughts.

A 2011 working paper published by the National Bureau of Economic Research, Is the Foreclosure Crisis Making Us Sick?, correlated a variety of ill health effects (mental and physical) with foreclosure. It found that for every 100 additional foreclosures among people aged 20 to 49 there is a:

  • 12 percent increase in anxiety-related hospital visits;
  • more than 38 percent increase in visits for suicide attempts;
  • 7 percent increase in emergency room visits and hospitalizations for hypertension; and
  • 8 percent increase in emergency room visits and hospitalizations for diabetes.
Recommendations

1. Housing professionals and policymakers must recognize medical issues as a cause of foreclosure and work with health professionals to provide resources for those homeowners.

A survey of American physicians released in December 2011 showed that four out of five physicians believe that “unmet social needs are directly leading to worse health”; about the same number are not confident of their ability to address social needs. Of urban physicians, 43 percent indicated they wish they could write prescriptions for housing assistance. Tapping into this interest, foreclosure advocates should reach out to medical professionals to ensure that hospitals and community mental health clinics stock brochures about foreclosure prevention programs and that the employees can provide basic referrals for homeowners facing foreclosure.

Similarly, housing counselors should have a basic understanding of the health resources available to their clients — including health clinics, free insurance programs, and legal assistance — and should make those referrals when appropriate. Health advocates should help housing professionals develop an understanding of the available resources.

2. Provide targeted legal and technical assistance for homeowners needing help to challenge health insurance determinations or access disability or other state-funded medical benefits.

Many foreclosures caused by medical issues are related to medical bills. Specialized legal or technical assistance to help uninsured and underinsured homeowners apply for health insurance, appeal health-insurance decisions regarding large medical bills, and increase prescription coverage could help reduce costs and increase income, which will make it easier for homeowners to take advantage of other foreclosure prevention programs.

3. Identify and document the interventions that provide cost-effective improvements to outcomes for homeowners with health and housing issues.

Housing counseling agencies should continue to track the causes of foreclosure, implement cost-effective measures designed to support homeowners with health issues, and track and report on the outcomes. In the current climate, without data to support the effectiveness of health-related interventions, even successful and cost-effective programs are unlikely to find adequate support.

4. Allocate funds to address medical-related foreclosure issues, potentially using settlement funds.

EHLP was short-lived in the handful of states where it operated. The Hardest Hit Fund programs continue, but in fewer than half the states. The upcoming modifications to HAMP that create more room for homeowners with significant medical bills are a good start. Supporting existing programs that do address this issue, like HEMAP (which is currently unfunded), is critical.

Without programs designed with an understanding of the needs of homeowners in foreclosure due to medical issues, it will be difficult to prevent foreclosures for these households.

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