Banks Fail To Modify Mortgages - Homeowners tell how firms failed to redo home loans

By Kevin G. Hall
McClatchy Newspapers

Nearly three years into the deepest U.S. housing slump in generations, lenders are modifying only a small number of problem mortgages, and rising foreclosures are retraining the economy’s recovery.

The Obama administration has stepped up pressure on lenders and their mortgage servicers, who act as bill collectors on behalf of investors who own mortgage bonds. The administration on Aug. 4 unveiled the first of what will be monthly “name and shame” exercises, publishing data on the loan-modification efforts of about three dozen companies. McClatchy received calls and e-mails from borrowers across the nation in response to a recent story about the “name and shame” effort.

In subsequent interviews with them, a common theme emerged: Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. Then the modifications never came. These borrowers burned through retirement savings, destroyed their credit reactions and suffered mental and financial hardship.

Here are two of their stories:
Phil Stubblefield, 61, arrived in loan modification hell quite by accident. His ex-wife died of heart failure April 20, and her Sacramento home and Countrywide mortgage passed to their daughters, one of whom was in college and the other starting medical school. As students, each had limited income.

Stubblefield reached out in May to Bank of America, which had bought Countrywide in January 2008, as it faced a bankruptcy filing because of problems with its loan portfolio. Stubblefield sought to modify the loan on the property in order to stay current amid unusual circumstances.

“Virtue was met with no help at all. The only recommendation was, ‘We can help you when the loan goes into default,’ “said Stubblefield, an Amtrak train conductor in California’s capital.

After the mortgage payment became two months late in June, the girls started receiving what Stubblefield dubs “nasty-grams.” After becoming authorized to speak for his daughters, he tried to negotiate a lower interest rate to reduce payments enough for him to help, or to have some portion of the loan forgiven.

“I was waiting for them to turn around and say, ‘What can you do for us?’ There was no coming together, no negotiation,” he said. “It was ‘Sell the house,’ and that’s when I came back and said, ‘Don’t you read the newspapers? There are 40,000 foreclosures in Sacramento and a 19-month turnaround on [real estate] listings.”’

A work-from-home psychotherapist and real-estate agent, Helen Rudinsky, 53, bought property in the nation’s capital in June 2004. At the height of the housing boom, she took out an interest-only loan, offered for pricier homes and marketed as virtually risk-free because of climbing home values.

A few years later, she gave birth to a boy who was diagnosed with autism. She temporarily moved to Bend, Oregon, seeking easier access to expensive testing and therapy for her child. Rudinsky contacted Wells Fargo last October about mortgage options because her payment of $2,500 a month was set to leap by $1,000 this month. She said that a Wells Fargo employee advised her that only loans that fell behind on payments were reviewed for modification. Rudinsky has never missed a payment, had a credit score of 770 (anything higher than 600 is considered good) and put down $130,000 when she bought her home - clear evidence that she was a reliable customer. She took the employee’s response as a suggestion to miss payments, and as a solution to her problem. “I got behind, and then it spiraled out of control,” she said.

Assigned a loan negotiator, Rudinsky called many times a week but got nowhere. She followed a checklist to ensure that all necessary documents were with the lender, but it was never enough, she said.

In May, she was told that she was approved for a program with interest payments potentially as low as 2 percent. After more documents and more back-and-fourth, Rudinsky was finally assured that things were on track and that the foreclosure process was on hold. Later, to her shock - nearly 10 months after her initial call to Wells Fargo for help, her home suddenly headed for auction.

The sale was scheduled for 10:15AM, August 4th. Rudinsky raided her retirement funds to pay $30,795 in a last-ditch move that saved her home minutes before the auction. Days later, when Wells Fargo called again, demanding that she make good on her loan or lose her home, she said, “I don’t know what to do anymore. I feel like Alice in Wonderland, because whatever you do, it isn’t enough.”

Wells Fargo had modified only 6 percent of its eligible loans through June.

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Source: National Loan Auditors, Inc.
http://www.NLAudit.com