Housing rebound late for those in foreclosure

(CBS News) NELSONVILLE, Ohio - There was a sign Thursday that a key sector of the economy may be improving: Home construction. In July, the number of building permits was up by more than 29 percent from a year before. But the housing rebound may be too late for those facing foreclosure.

In Appalachia, 72-year-old Charlie Ward had no savings and lived on Social Security. But because of a special USDA program for low income families, he could buy his own home. Ward called it a day of pride for him.

A truck driver for more than 40 years, Ward and his wife Wilma expected to live out their lives in Nelsonville, Ohio. But last year, with Wilma dying of cancer, medical bills took a toll.

Ward said his family finances "disappeared fast" because of what happened to his wife.

Ward fell behind on his payments. He says he was trying to work out a payment deferment plan when the USDA seized his $2,900 tax refund, and began taking $135 from his $900 monthly social security check. Ward said it really hurt because "I have to survive, and I can't."

Unlike private lenders, the USDA plays by a different set of rules. The government doesn't need court permission to begin collecting on unpaid debts even before a home is in foreclosure.

Although there are USDA programs to help borrowers when they first fall behind, it's not always easy to get that help.

"One of the things you have to understand is that you're talking about borrowers who are not that financially sophisticated," said legal aid attorney Carlie Boos.

Boos is working to save Ward's home, now in foreclosure. She says once a home is in foreclosure, federal statutes leave no options.

"They're not allowed to do anything after a foreclosure has started other than say, 'give me everything that is owed,'" Boos said. "You are literally talking about squeezing blood from a turnip."

Tammye Trevino, head of the USDA mortgage program, called that accusation "pretty harsh."

The USDA mortgage program over its six-decade lifetime has helped more than 9 million people own a home.

"We've been told by the Office of the Inspector General that we need to do this. And so we've continued to follow the law and do what we are asked to do," Trevino said. "I think as, with anything else, we'd like to be able to take it on a case-by-case basis."

Ward lost Wilma two months ago. His hope now is that he won't also lose their part of the American dream.