Lessons From the Last Recession: How I Saved My Home from Foreclosure

Thirteen years ago, Thomas Nitzsche was working night shifts in the customer service department of a global financial services company — tasked, mainly, with helping clients wire cash from credit cards to casino ATMs in the wee hours of the morning.

Nitzsche lost that job when the 2008 recession rolled around, and as a brand new homeowner, he had to fight tooth and nail to keep from losing a lot more.

“I was still paying on student loans, I had a new car payment, plus a mortgage, utilities, and all the normal housing and living expenses,” he says. “I had to get creative to make the math work.”

Today, Nitzsche is head of media relations at Money Management International (MMI), a nonprofit that helps dig people out of financial ruts through mortgage, credit, and loan counseling, and a 24/7 national hotline that’s pretty much the diametric opposite of the one he used to man the phones for.

Nitzsche joined MMI's Clearpoint division as a counselor at the tail end of 2008, taking a hefty pay cut from his previous job, he says. Still, he was able to stay current on all of his mortgage payments, and eventually get back on track with his savings and retirement goals, using many of the resources he referred new clients to.

Housing security is a huge issue for Americans right now: More than 4 million are past due on their home payments, according to the mortgage data company Black Knight. Renters are in even worse shape: According to The Aspen Institute, as many as 20% of Americans who rent their homes are at risk of eviction by the end of September.

In his own words, here are the money moves that kept Nitzsche afloat during the last recession, and his best advice for weathering the next one.

How I made it through the 2008 financial crisis

I bought my house in 2007, and a year later I got laid off. I didn’t have an extravagant lifestyle. I wasn’t like a clothes person or a vacations person ... but there were areas that I was able to cut. I got rid of a new car and bought an older one I was able to pay cash for. At one point, I was doing odd jobs for cash.

I was absolutely hell-bent on making sure I stayed on track with my mortgage. I had a four-bedroom house and ultimately ended up subletting the other three bedrooms to help pay for the bills. Fortunately, the people that moved in with me were somewhat in the same situation — one had just gone through a breakup and couldn’t afford to live alone, another was a student.

It probably helped that I didn’t have a family. I had a partner, but I didn’t have kids to take care of.

Where I looked for help

I was one of the first Americans approved for a federal Making Home Affordable mortgage modification [an Obama-era U.S. Treasury program that helped homeowners avoid foreclosure], which I successfully completed. That brought my mortgage rate down to 2.1% for a few years, and then it started graduating up and capped out at 5.1%. I still had taxes, and monthly payments. But when your mortgage is new, most of your money is going towards interest, and adjusting it down that low definitely helped.

I needed repairs on the house at one point, so I also did an individual development account through a match savings program the United Way does.

If you’re in a similar boat today, here’s where to start

You’ve got to become an expert on the options that are out there, learn how to self-advocate, and not make snap decisions based on panic or other emotions.

There is not (yet) any federally incentivized program like [the one I used], but there are certainly forbearance programs in place to help homeowners by temporarily pausing payments. MMI operates the housing counseling programs for Fannie Mae, known as their “Disaster Response Network” and “Know Your Options” programs.

Why financial counseling could be the lifeline you need

The counseling at MMI is about understanding people’s financial situations, and helping them try to manage the downturns.

We find resources to help with basic needs—medical, food, or whatever—through a local referral system based on zip code. We also give them advice on how to speak with creditors, and how to get a deferment. If there’s an issue with their mortgage, we walk them through different forbearance scenarios—what that means, what to expect, how to fill out paperwork—and sometimes conference in with their lender. We received grant funding from [the U.S. Department of Housing and Urban Development (HUD)], so our housing counseling is free. Other programs have nominal fees.

We pride ourselves in being empathetic, and not being judgmental. Most of our counselors have personally been in these situations before. The average counselor tenure here is like 14 years — so most were working here before the Great Recession or came to us during it.

What I would do differently

One of my biggest regrets after I got laid off was taking a 401(k) withdrawal. I had a small 401(k), nothing to really write home about, but it was very much a panicked move. In hindsight, I wouldn’t have done that, because I probably would have been substantially further along in my retirement goals.

I could have made it work. I did odd jobs, but I never took a SECOND job. I had some credit debt, and in the long term, I may have been better off at least temporarily defaulting on that, or doing some kind of hardship plan.

There’s no reason I needed to be so concerned about my credit. The most important thing was keeping a house over my head. I had already downsized my car … I didn’t make another purchase for years.

My advice for weathering a financial storm right now

There’s a lot of angst when it comes to money. A lot of stigma and apprehension, and just general fear.

I was brought up very, “pull yourself up by your bootstraps,” and “don’t rely on anyone.” But it’s really liberating when you can have these conversations, and come out, so to speak, with financial issues.

People are hesitant to talk about these things. That’s why I think counseling is so important. It gives you an objective voice.

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