Tough Workouts

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Richard and Pati Kays - Stuart Fla.

"We are two married people," said Pati Kays. "He's 83 and I'm 73, with separate assets, stuck in the mortgage mess. We're not quite in foreclosure but in distress over the inability to sell or refinance."

Pati married husband Richard seven years ago. He's a retired high-steel construction man. She's a retired attorney who owns five cottages she rents out in Stuart Florida, north of Palm Beach.

Richard was supplementing his pension and social security with the rent from a mortgaged duplex he owns in El Granada, Calif. Not any more. His adjustable rate mortgage reset, and his payment on the $430,000 mortgage went from $1,750 a month to $2,750. The rent he now receives is only $1,800 a month.Trying to head off payment problems, Richard called his lender and asked for a mortgage workout. "The bank told him he doesn't meet the parameters for distressed mortgage," said Kays, "since he was not in default."And also, the property is still worth a lot, perhaps $800,000, much more than he owes. But it's very difficult to sell anything in the San Francisco Bay area these days; normal sellers have to compete with a flood of foreclosures.

And refinancing the loan is also out of the question, according to Kays. "He's tried that with several lenders, but because he doesn't have any income, they won't do it," she said. "It doesn't seem fair that it got so bollixed up."

To raise cash now, he's trying to sell the Florida home the couple is living in that he owns. But the market there is dead. Richard listed the house for a year starting at $550,000, and it did not attract an offer. It's now for sale for $350,000.

Ron Nash - Carlsbad Calif.

Ron Nash is not someone who's shy about pushing to get what he wants; he's a motivational speaker, headhunter and author of "How to Find Your Dream Job; Even in a Recession."

But when it came to obtaining a mortgage workout, he wasn't getting anywhere -- even after months of trying. He finally wrote a letter to the president of his lender to try to resolve the issue. The results were very gratifying -- at first.

"I was contacted by the office of the president and apologized to profusely," he said, "and told that they would try to work things out."

After that, however, and after he was asked to send in all his paperwork for the fifth time, he didn't hear from them again for six months. Then, recently, he finally got a call back with a loan workout offer.

The lender offered an extremely low rate, 2.8%, which sounded great. The problem was the value of his property has dropped from $840,000 to about $620,000 and the lender would do nothing to reduce the mortgage balance. Nash believed he would be upside-down on his mortgage, owing more than the house was worth, for years.

Meanwhile, the slowing economy, with little hiring going on, has taken a toll on his income.

He looked around town and decided he could walk away from his house and rent another comparable place for half of what he would be paying his bank just for the mortgage payment.

He loves his house but he's choosing to give it up rather than shackle himself to a bad investment for years.

"The house is just a thing," he says.

Ken Mobley - Tampa Fla.

Many Americans have lost their jobs in recent months, while others have seen their incomes drop. Ken Mobley is one of those. He had some of his best earnings years ever in the mid-2000s, as an advertising sales representative for a media company. But with newspaper ad revenues in decline, he was "reorganized" by his company and now sells ads to mom-and-pop businesses.

"With all of these changes my commissions have fallen substantially," he said, "and for the past 18 months I've been supplementing my monthly shortfalls by withdrawing money from an IRA."

He called his lender last fall hoping for a hardship consideration and asking for a two-month postponement of his mortgage payments. He wanted to have them added to the end of his mortgage. Mobley says his credit rating was excellent, and he was merely trying to free up some cash for the holidays. The effort failed."I was told that until I was late, there was little they could do as I wasn't experiencing any obvious hardship from their perspective," he explains.

His Catch 22 is that, although he could foresee a big problem on the horizon, until the problem finally hits home, his requests to deal with it fell on deaf ears. A major factor is that Mobley bought the house 22 months ago, before Tampa prices started to drop precipitously. He has no equity so he can't refinance. Otherwise, he might be able to take advantage of low interest rates now to whittle his mortgage payment down to a more affordable level.

"Everywhere I turn, I seem to end up on a dead end street," he said. "Since I haven't been late on any payments, haven't defaulted on any loans and currently have managed to maintain an excellent credit rating, all attempts to change my situation have failed."

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