A mortgage modification mess
TEXT OF INTERVIEW
Tess Vigeland: Here’s a candidate for “duh” headline of the week: “Inspector general says mortgage modification program a ‘failure.'” Neil Barofsky said the government’s efforts have been “nothing short of abysmal,” in part because regulators aren’t doing anything to penalize the banks.
Karin Andreen of La Mesa, Calif., wrote to us a few weeks ago with a mortgage modification horror story. We’ve seen plenty of them over the last couple of years. But we were struck by her plea for help and by the fact that these homeowners seem to have done everything right. Yet they’re climbing the financial paperwork equivalent of Escher’s never-ending staircase.
KARIN ANDREEN: These are all the notice of intent to accelerate for foreclosures, as you can see… We contacted our representative, so this is from his office, thanking us for contacting him… This is the fax that I mailed in that they said they didn’t get… I saved a couple letters that I wrote to the president of the United States, hoping that someone in the White House might just listen.
VIGELAND: Their story begins in April of 2007. Karen is 29 and was teaching 2nd grade. Her husband Kevin teaches 7th grade. They have two kids — one is 3, one is 8 months. They bought this condo conversion for $320,000. They had a 20 percent down payment and a 30-year fixed mortgage. The condo is less than 1,000 square feet. Two years ago Karen lost her job, so they thought it would be wise to refinance the house.
ANDREEN: So I contacted the bank, wondering what type of options we had. We knew that interest rates had dropped, so we thought maybe we could borrow some money and possibly refinance and the bank informed us that was not an option because our property value had dropped so much.
VIGELAND: How much?
ANDREEN: At the time, I think it had dropped by about $40,000 or $50,000. I know right now it’s dropped by 50 percent.
VIGELAND: So what did you do?
ANDREEN: Well, so the bank had first told us to apply for a loan modification, so we filled out the paperwork. And we never heard back and I was calling and calling. And then a couple of months later we received a letter of denial. And I called to inquire and then they said that we had been put in the wrong loan modification. So then we reapplied. And that was October of… Well, it’s been a little over a year I guess. I can’t quite remember.
VIGELAND: So ’09 then?
ANDREEN: Yeah.
VIGELAND: And who’s your bank?
ANDREEN: Bank of America. And so then we were put in the new loan modification. We were accepted into the program and they gave us our three trial payments, and they said at the end of the three months we would be able to get our loan modified.
VIGELAND: Had you missed any payments at that point?
ANDREEN: No. We have really good credit history. We’ve never been late on any type of payment ever. And we’ve been making the trial payments now for over a year.
VIGELAND: And what is the trial payment? What is that based on? Did they bring down your interest rate?
ANDREEN: Well they haven’t told us how they’ve assessed our trial payments.
VIGELAND: They just gave you a number and said pay this.
ANDREEN: Right. No documents were signed. All we have is a sheet of paper basically saying this is your trial payment. So every month we’re paying $400 less and so every month then we’re assessed late fees. And they’ve sent people to knock on our doors, so then we’re assessed for the people knocking on our door. They claim that they’re starting to foreclose on us, so we have a couple of thousand of dollars in late fees.
VIGELAND: And that’s because you had a trial modification?
ANDREEN: Correct.
VIGELAND: Did anyone explain that to you?
ANDREEN: No. I’ve called and I’ve asked about it and they said that if we do get accepted to the loan modification program that all those late fees will be rolled into our current mortgage and that the probability is high that our rate will actually go up instead of decrease.
VIGELAND: So you could be in worse trouble because of the loan modification than you were before?
ANDREEN: Yes. That is kind of what I’ve been led to believe when I’ve talked to them.
VIGELAND: But they didn’t tell you that before you got the modification?
ANDREEN: No, they did not.
VIGELAND: And for the intervening 14 months, Karen has been in a special kind of hell. Bounced from one B of A department to another, phone tree after phone tree. So many re-directed calls, in fact, that she keeps a daily log of transfers and misinformation.
ANDREEN: September 17th called 7:45 talked to Anne Marie, said office of the president is working on the account; gave me the new phone number. Transferred to the office of the president, executive of customer relations, talked to Elizabeth, placed on hold while she reviews the account — appeal still valid, received paperwork, still in review, assigned to advocate in office of the president, Renee. Left a message with Renee, talked to Renee…
VIGELAND: Her call logs also detail how long she’s been on the phone.
ANDREEN: Starting last spring, I started to keep track of how long I was on hold for only because my phone battery started to die. It was an old phone and it would only last about two hours. I used our land line cause I used our cell phone one month and racked up a huge bill, so I used our land line and my battery kept dying. So I actually had to get a new phone to make these hone calls.
VIGELAND: She’s been on the phone with the federal Department of Housing and Urban Development, which helped direct her to the bank’s advocacy department. But couldn’t do much else. She called the federal Hope for Homeowners program, which redirected her to the federal Making Home Affordable program — to little avail. Lawyers have suggested the Andreens simply walk away, but after putting 20 percent down four years ago, they’re not ready to do that. So they continued their appeals. They also continued making the modified payments and racking up fees because here’s the alternative.
ANDREEN: If we make the actual payment, then we are removed from the program because then we have the money to pay.
VIGELAND: What are you told your options are right at this moment?
ANDREEN: The only options that we know of are to foreclose or stay here and ride it out.
VIGELAND: That’s because so many units in their condo complex are empty. Banks will not provide financing to potential buyers. So selling their home — even in a short-sale — is next to impossible. And if they try to ride it out?
ANDREEN: I have no idea. I know every single month we get something saying if we don’t make our full payment, plus all the late fees, that they will start foreclosure proceedings. Every month we get that and every month we say we have until about the 21st of the next month to become current or they’ll foreclose.
VIGELAND: So you just never know when somebody might come walking up…
ANDREEN: Right. But every month the bank accepts the payments, our trial payments. And supposedly they cannot foreclose if they accept a payment from you.
VIGELAND: So you’re watching for them to not accept the payment?
ANDREEN: Yes. On the first of every month I pay and on the third I usually will go back to make sure that they accepted it.
VIGELAND: Cause if they don’t?
ANDREEN: Then we know to start packing our stuff.
VIGELAND: So at any moment you just expect someone to knock on the door and say you got to get out?
ANDREEN: Yeah because that happened to our neighbor last week. So, pretty much.
VIGELAND: How do you live like that?
ANDREEN: Well, I went through and I repacked all of our baby’s clothes, so that if we have 72 hours to vacate all that stuff is already packed and ready to go.
VIGELAND: In boxes?
ANDREEN: In boxes. We keep an eye on what’s for rent and how much. That way we’ll kind of get an idea on where to go. However, they’ve dinged our credit because we’re technically late $400 every month. So if you look at my credit rating, I used to be in the high 700s and now it’s in the low 600s — all because of our trial payments. I know a lot of people didn’t put down any money and I know for my husband and I, when we made our down payment, we thought that we had put down enough. And we live in our means. If we don’t have cash, we don’t buy something. We’ve never had any debt ever. We try to live very conservatively.
VIGELAND: We called Bank of America to get their side of the Andreens’ story. Shortly thereafter, the family was told their case would get a so-called “second look.” B of A didn’t make anyone available for an interview with us. But they offered this statement from spokeswoman Jumana Bauwens.
BANK OF AMERICA STATEMENT: Back in March of 2010, we offered the Andreens a trial modification through Treasury’s Home Modification program. After that, we began the review process for the modification and noticed that some of the required documents were missing. So we reached out to them via mail and phone to inquire about those documents. Eventually, we had to decline them for the program due to those missing documents. In late July, the Andreens appealed the decision and we determined that we could have done a better job in trying to contact them during that process. After that time, we began the review process of modification once again. Unfortunately, the Andreens did not meet the guideline requirements set out by the Treasury Department. We will continue to work with them to identify other modification solutions.
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