Tough Workouts

Lenders all say they want to help mortgage borrowers stay in their homes. But when homeowners contact lenders in search of mortgage modifications, they often find getting help very difficult. Here are some stories from readers who struggled to find solutions.

Sue Wright - Las Vegas Nev.

A few weeks after the July takeover of the insolvent IndyMac Bank by the FDIC, the agency announced a mortgage modification plan to help the bank's at-risk borrowers keep their homes.

One of the earliest homeowners to apply was real estate agent Sue Wright of Las Vegas Nev., which is one of the nation's hardest hit areas in terms of foreclosures and home-price declines. But because she was current on her mortgage payments, the bank said it couldn't help her and advised her to stop making payments for two months. She did that and called back right after her second payment was overdue.

She was given a plan with a reduced interest rate and told to make the new payments for three months and the modification would become permanent. But after doing that, she received a letter from the bank telling her the modification was off; the investors wouldn't approve it.

"It was the first time I heard the word `investors,' or that the modification needed any further approval," say says.

No specific reason was given for the reversal; it could have been any of 10 or 15 reasons listed on the rejection letter. The crazy part of the story is that the bank should be anxious to work out the mortgage for Wright and her husband, John.

They want to stay in the house; they've lived there for 15 years and, well, it's home. They're way underwater, owing about $510,000 on a property not worth much more than $350,000 right now. All they wanted was an interest rate reduction for five years. They didn't ask the bank to "cram down" their loan to the $350,000. Meanwhile the market in town is just horrid.

"Nothing is selling in Las Vegas," said Wright. "Nobody even goes to foreclosure sales anymore."

If the bank does follow through and repossesses the house, it stands to lose $200,000 or more.

"It's so unnecessary for people who are trying to work this out," said Wright.

A.G. Chancey - Longwood Fla.

A.G. Chancey has been trying to arrange a mortgage workout since August 2008, when she was only two months behind on payments. Today, after dozens of phone calls to her lender, she's made progress. But she's now five months behind.

She has been in the home for 23 years, but family health problems, divorce and economic factors have conspired against her and she's never been able to substantially pay down the loan.

She had a fixed rate loan, but a couple of year ago she refinanced into an adjustable rate mortgage (ARM) with Countrywide, now a part of Bank of America. Her payment, on a loan of $157,000 was originally $1,150, then it reset to $1,340 and in December it jumped again to $1,460.

Meanwhile, the economy and high gas prices have reduced the family's income. Her husband assembles office furniture all around the area and is not reimbursed for his auto expenses. During the summer, when gas prices were so high, he was sometimes spending $30 in gas to get to a job that paid $60. That added to the strain on the household finances.

"I've been trying to apply for a mortgage workout," A.G. said. "The first time, I submitted my application over the phone and faxed all the documents they requested. After hearing nothing for a few weeks, I called back and was told they were behind and I should call back in two weeks. I called back and they told me the same thing, again and again."

She was told her application had been turned over to a team but they had no record of it. No one seemed to ever know her status. Finally, in November, she was told to try a new application to the "National Homeownership Retention Program," a mortgage workout program the bank initiated as part of a legal settlement with state attorneys general.

"They said it would defer what I owed and they would be dropping interest rates to give us a fresh start," said Chancey. She would hear back in early December, but the second week in December came and went and she heard nothing, so she called. She was told that there'd be no modification; she'd only be allowed to make up missed payments. In other words, they'd permit her to pay more for a number of months until the missed payments were reimbursed.

"I've been trying diligently for the past five months to apply for a loan modification to no avail," said Chancey. "It's as if Countrywide is purposely trying to avoid me and has no true intention of helping us."

She may get some good news yet. A spokesman for Countrywide told CNNMoney.com "This loan is in the queue for the National Homeownership Retention Program."

"A home retention specialist will be contacting Ms. Chancey to bring her up to date on the status of her modification request and move forward with the review."

Raul Medina - Moorestown N.J.

No good deed goes unpunished, they say, and Amber and Joe Tardiff might be forced to agree. When Joe's good friend and partner in a landscaping business, Raul Medina, was left a parapalgegic by an auto accident, the Tardiffs and took on the Good Samaritan task of dealing with Medina's mortgage issues.

Medina, who's also a minister, owns two properties, his residence and one he bought for a Moorestown, N.J., church to provide shelter for the homeless.

"My husband made the bank aware of the situation," says Amber, "and asked if there were options to modify the loan. Everybody he talked to gave him a different story. By the time he was able to get through to the people who might be able to help, nine months had passed."

"It was extremely frustrating," adds Joe, "getting bounced around from department to department and get the wrong person again and again."

The lender of Medina's residential property delayed for six months in responding to an offer of a short sale - one in which the sale price is less than the borrowers owe and the bank agrees to forgive the difference. The price was $335,000, the original mortgage balance, but the lender wanted all their fees - $62,000 - paid as well.

"They finally agreed to a short sale but that was after calling and faxing their office daily and begging them to work with us so [Medina] didn't have a foreclosure on his hands," said Amber. "They're getting exactly the same amount of money they would have had they agreed to refinance two years ago."

That was bad strategy for the bank. Prices fell through that half year of dithering and missed payments, and expenses added to the lender's losses.

Medina owes about $280,000 on the other house he owns, in Medford N.J., and it needs a $75,000 overhaul to make it habitable for him. His insurance company offered to kick in $120,000 to make the property suitable for the wheelchair-bound Medina, according to the Tardiffs, if the lender would work out a modification. It wouldn't.

"After seven months of roadblocks, wrong numbers, voice mails to people who `no longer work for the company' I was told that the lender does not offer any loan modifications," said Amber.

Medina's options boil down to keeping the house but pay all the outstanding bills within 18 months or arranging another short sale. Since he gets just $1,000 a month from Social Security and $1,100 a month rent from an apartment in the house and a small housing allowance from the church, he can only afford the original mortgage payment; he couldn't afford to add the missed payments to that and pay it back in a year and a half.

"Based on our experience with two different mortgage companies trying to help a paraplegic minister, the lenders are less than willing to help people struggling to get by," said Amber Tardiff.

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