SALT LAKE CITY -- In March 2009, the federal government introduced the Making Home Affordable program. Its purpose is to help struggling homeowners stay in their homes by making their payments more affordable.

There are two ways the program can accomplish this -- through loan modification or refinancing -- but some homeowners found out too late they would have been much better off keeping their original loan.

The Sutoriuses' story

The recession shrunk Joey and Holly Sutorius' income, so they looked into a loan modification. They weren't in peril but wanted a better rate, a chance to get out of debt.

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Sunday Edition: Loan modification

In this Sunday Edition, a discussion of the federal Making Home Affordable Program. KSL's Bruce Lindsay discusses the program with a couple who lost their home, an advocate for homeowners, a mortgage lender and a housing counselor.

A Citibank representative the Sutoriuses over the phone they qualified, so they started reduced trial payments and waited 30 days for approval of their application. Several months later, they started to receive notices from Citibank that their loan payments were delinquent.

"I couldn't get in touch with anybody who knew anything about our loan, knew anything about what was going on," Joey Sutorius said. "It just basically showed that we weren't paying enough money each month, that we were delinquent."

For 13 months, they made the trial payments. They also made 315 phone calls to try clear up the delinquency issue. Citibank representatives told them not to worry about the delinquency notices, but they just kept coming.

In January, the Sutoriuses had to refile all their paperwork. In May, Citibank called to say they were delinquent and needed to make a payment of $14,500 in three weeks or foreclosure would start.

"I was on the phone five or six hours every day, speaking with Citi mortgage, trying to get things solved, getting transferred around, wasting my time, telling my story over and over again to different people who couldn't help me," Joey Sutorius said.

So, he and his wife contacted an attorney. Within a couple of weeks they were approved for a loan modification. They got a lower payment, but now they owe $17,000 more on the loan, and it's 10 years longer.

The Livingstons' story

Cody and Davi Livingston fared much worse. The Making Home Affordable program ended up costing them their home.

"When you talk to them, you feel like everything's fine. I don't know what a loan modification is. I just know it's help," explained Cody Livingston.

Last July, Cody lost hours and income at work. So, he and Davi called Bank of America and asked about a loan modification.

"In order to qualify, they told us, 'You need to miss a couple payments,'" Davi said.

As strange as that sounded, that's what the Livingstons did.

"Every time we called in, too, we asked, 'Should we make a payment?' [They said,] 'Oh no, no, no. We'll take care of that all when this is taken care of,'" Davi said.

That back-and-forth dragged on for months.

"You'd talk to 10 different people the same day, and they'd all tell you something different," Davi said.

Finally, they were told a permanent payment amount would be negotiated, but then later received a letter on their door that said their house was going into auction.

Financial experts weigh in

Attorney Michele Anderson-West has many clients caught up in the loan modification mess.

"With all the good intentions in the world, it doesn't have the underlying infrastructure to support its own programming," Anderson-West said.

She says lenders are mishandling files, departments are not communicating with each other, and banks are simply offering bad customer service.

"In the process, there's so much room for human error," Anderson-West said.

Julia Borst, president of the Utah Mortgage Lenders Association agrees.

"Banks were not prepared for this. Every one of them had their own process by which they figured out if you qualified, if you didn't," Borst said.

According to U.S. Department of the Treasury numbers through August, out of 1.33 million loan modification trials started for homeowners nationwide; only one in three are on permanent modifications today.

E-mail: cmadsen@ksl.com

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