Some Idaho homeowners say foreclosure threats often follow empty promises of help
Carey and Tracie Kinghorn were content with their adjustable-rate mortgage, but they were pleased when the Texas-based servicer that had bought their loan offered them a modification to lower their monthly payment by about $500. The change cost them $11,000 in fees and charges, but the Kinghorns signed a contract in April 2009.
The company cashed the check but never recorded the modification, the Kinghorns said. In February, they said, they learned that the home would be sold at a foreclosure auction because they hadn’t been paying the original full monthly payment. They tried to stop the sale, but it went forward in March.
The Kinghorns blame the mortgage servicer for taking their money and selling their home. The company says it handled the Kinghorns’ mortgage properly and tried to reach the couple by phone and mail in the past year to no avail. The couple contends they were not contacted.
An Idaho Statesman story April 7 about a family whose owners said their home was sold after a botched loan modification prompted dozens of responses from Treasure Valley residents complaining about loan servicers, lost paperwork, miscommunication and prolonged modification trial periods. Many said their loan representatives told them the only way the family could get help was to stop paying their mortgage for several months. Several said they had lost their homes through foreclosures that shouldn’t have happened.
LOSSES CLIMB
The economic recovery may have begun, but Valley foreclosures are still accelerating:
• The number of Idaho homes repossessed by banks reached 1,234 during the first quarter of 2010, more than six times as many as in the same quarter of 2009, according to RealtyTrac, an online foreclosure database.
• Canyon County had Idaho’s highest county foreclosure rate in February, with one in every 119 housing units receiving a foreclosure filing of some type — 3.5 times the national average, RealtyTrac said.
• And one in every 29 Valley mortgages were actually in some stage of foreclosure in February, compared with one in 50 a year earlier, according to First American CoreLogic, a real estate tracking service.
Mortgage modifications are supposed to help people avoid foreclosure. But complaints about modifications topped the Idaho attorney general’s complaint list for the first time in 2009, with 353 complaints, as foreclosures rose 89 percent from the previous year, the AG’s office reported.
Servicers and counselors say the sheer volume of borrowers seeking modifications has overloaded them, and many homeowners fail to turn in requested documents. They also say they’ve been challenged by frequent changes in the Obama administration’s Home Affordable Modification Program, called HAMP.
Across the country, borrowers, bankers and big government have one thing in common: They’re frustrated.
“The problem is bigger than any one lender,” said Faith Schwartz, executive director of Hope Now, a nationwide alliance of counselors, servicers, investors and lenders that assists troubled homeowners through several outreach events and a national hotline.
For homeowners, “it’s a growing problem, and it’s going to get worse,” said Brian Webb, the Kinghorns’ attorney in Boise. “We need help from somewhere else. People don’t have the resources and time to spend in litigation.”
HELP NOW?
The federal program was supposed to help homeowners stay in their homes by offering incentives for lenders to lower monthly payments with lower interest rates, longer repayment periods and, in some cases, forgiveness of principal. Federal guidelines say homeowners who are behind in their mortgage payments may be eligible as well as those who are current but are at risk of falling behind because of changes in their finances. But a federal audit said the program’s results have been inadequate. Through March, only 230,801 homeowners nationwide had received permanent modifications since the program was launched in the Treasury Department in February 2009, the audit said — a small fraction of up to 4 million it was supposed to help.
“Treasury has blamed servicers for this disappointing result; servicers have blamed Treasury’s implementation; and both have blamed homeowners for failing to comply with documentation requirements,” said the audit by the special inspector general for the Troubled Asset Relief Program, better known as TARP.
The sheer volume of modifications is still slowing lenders, too.
Tom Birch, a Neighborhood Housing Services counselor in Boise, has 35 years of mortgage banking experience and is president of the Idaho Mortgage Lenders Association. He has been through several refinancing movements but never anything like the tsunami of modifications hitting now.
“This is like a gigantic, two or three times bigger, refinance boom,” he said.
KINGHORNS’ PLIGHT
Carey and Tracie Kinghorn took out their original adjustable-rate mortgage for about $76,000 in 1998 for when they bought their home in unincorporated Ada County, south of Boise. They were living on his salary, then $37,000.
By April 2009, the couple owed about $101,000 on the mortgage. They said the terms of the 2009 modification offered by American Home Mortgage Services Inc. — a rate of 5 percent rising over six years until it became fixed at 7.125 percent — were less expensive than what they had. So was their monthly payment: about $850 after the modification, down from $1,400.
The couple said they made payments via Western Union as required by the modification until February, when they learned their account had been closed. They said they called American Home Mortgage Services and learned that the loan modification had never been entered into the company’s computer. Several phone conversations followed, involving different company representatives. The Kinghorns say they faxed documents and receipts multiple times to several employees. The company first promised to stop the sale, then to reverse it, but didn’t do either, the Kinghorns said.
An hour before the home was sold in March, the company asked for $12,000 to make their loan current, Carey Kinghorn said.
“Then they called asking for our March payment after they sold the house,” Tracie Kinghorn said.
Spokeswoman Christine Sullivan said the company does not disclose customers’ details because of confidentiality. “However, our records show the (Kinghorn) file was handled appropriately,” she said.
The Kinghorns have hired Webb to help them navigate the legal system.
HOW FORECLOSURES WORK
Some Valley residents complain of getting little or no notice of foreclosure. Some say they can’t understand how a bank or servicer can negotiate a modification while it files for foreclosure on the home at the same time.
Schwartz, the Hope Now director, said companies legally do both together to save time and money in case a borrower is unable to regain sufficient income to pay the mortgage.
“It’s a nine– to 12-month process in some states, a costly process,” Schwartz said.
She believes an updated federal directive will help.
“If they (the borrowers) verify their income, then the servicer will stop the foreclosure,” she said.
In Idaho, the trustee, usually a title company, files the foreclosure for the lender in the county where a home is located. The trustee also mails a preforeclosure notice and a default notice to the homeowner, and it serves the homeowner with the default notice or posts it at the property.
If a sale is postponed, the postponement will be announced at the original time, day and place set for the sale, said Ron Jantzen, trustee manager of Pioneer Title’s lender trustee services. If the lender decides to continue with the sale, no further notification to the homeowner is needed, he said.
Jantzen said many modifications happen near the end of the foreclosure process, and a lender’s processes may not stop a sale from going forward.
Homeowners can attend the sale on the original date, call the trustee at the phone number listed on the notice, or call any title company’s customer service number to request a record check. Residents also can look up notices filed in the county courthouse, and homeowners in Ada and Canyon counties can check the Idaho Statesman’s searchable database at Idahostatesman.com. (Click on “Special Content” atop the home page, then click on “legal notices.”)
“It’s the borrower’s responsibility to find out” if a proposed foreclosure has been postponed or canceled, Jantzen said.
MISCOMMUNICATION AND LOST PAPER
Miscommunication and lost paperwork within the loan-servicing company, between the servicer and lender, or between the borrower and the bank or servicer are major complaints of residents who called the Statesman.
“I think they’re playing games with people, and I’m sick of it,” said Cara Werlinger, a Nampa homeowner who received a permanent modification offer Wednesday from Chase.
She sent in six copies of tax returns covering two years and copies of bank statements for the past year, she said.
“One week, we talked to one person and they said they had all the papers we need,” Werlinger said. “The next week, we talked to another guy. Every month we’re sending them stuff and they’re saying they don’t know where it is. Nobody is together. Nobody knows what’s going on.”
Werlinger’s family started struggling when her husband, Chris Werlinger, was injured on his construction job, disabled and diagnosed with multiple sclerosis and epilepsy four years ago.
The family took out an adjustable-rate mortgage in 2006, initially paying $1,200 on a $126,000 loan until he could get back to work driving heavy equipment. They found out a month later that Chris Werlinger would never work again.
His salary of up to $40,000 a year was replaced for about a year with workers’ compensation of about $14,400, but that’s now gone. The family lives on about $22,000 a year from an in-home business and disability pay.
Cara Werlinger said at the height of her frustration, she called the Idaho attorney general and Hope Now, but was merely told to call her lender, which she said she had already done.
“Hope Now was just useless,” she said.
She then called U.S. Sen. Jim Risch and Rep. Walt Minnick. Minnick’s staff advised her to send all her paperwork via certified mail, even if copies were faxed. Risch’s staff told her to write down what was said in each phone contact with the bank and the names and employee identification numbers of all bank representatives she spoke with. Risch’s staff also referred her to the Office of the Comptroller of the Currency, which oversees national banks. She filed a complaint there. She believes this helped move her modification along.
For the Werlingers, the story eventually ended with a new loan on favorable terms. They applied for a loan modification through HAMP early in 2009 and began the required trial period in October with a monthly payment of $746.
Chris Werlinger said that hurt their credit score, because their payments were counted as partial payments instead of full payments. Until the permanent offer came, he also was concerned about owing the balance of the loan payments — about $10,000. Now that amount will be tacked onto the end of their mortgage, which has an initial rate of about 3 percent rising over several years to a maximum of 5.1 percent for the life of their 30-year loan.
Carla Werlinger advises other Valley residents struggling with loan modifications to keep up the fight.
“If not for my family and my husband, I would just have given up because of the stress,” Carla Werlinger said.
“But I got my home. It’s my home now.”
Sandra Forester: 377‑6464
Unemployment benefits do not count as income under the government mortgage modification program.
