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In this Sunday Edition, a discussion of the federal Making Home Affordable Program. The program is designed to keep families in their homes through loan modification if they meet certain criteria, but it has created nightmares for some homeowners. 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.It's a fair bet that in your neighborhood, maybe on your street, there is an empty house that has gone through foreclosure, or maybe it has been through a short sale. Those transactions directly affect the value of your home.
The meltdown of the housing market has been brutal to Utahns. More than 17,000 Utah families have lost their homes to foreclosure in the last 18 months.
The federal government came up with a loan modification program to try to limit those losses, but often the results have not turned out as planned.
Cody and Davi Livingston built their own home and sought a loan modification when Davi's hours were cut at work. Their experience turned into a nightmare, and they lost their home.
The bank told them to stop making payments, and the Livingston's feel they could have kept their house if they had continued to make payments.
They applied for a loan modification because money was getting tight. They also took precautions to avoid financial disaster.
"I sold everything that I have. I sold my truck, all my workout equipment; anything that I could put a price tag to I sold," Cody says. "I sold my guns that I've had for years -- any way I could get money to help us pay off debt, pay off medical bills, I did it."
They kept in constant contact with the bank, calling many times each week for the nine months before they lost their home. The various customer service representatives told them they would be approved, and then one day they found a foreclosure notice on their door.
The day before foreclosure, the Livingston's were told they needed to pay $28,000 immediately. They had the money because of help from family, but it was too late because the banks were already closed.
They offer this recommendation to anyone considering a loan modification:
"Don't do it yourself. If that's your last option, don't do it yourself," Davi says. "Find someone who can help you, hire someone, do something. Hire someone to represent you, because the banks won't talk to the customer. It has to be a lawyer or someone representing you who knows their language, who knows what it is they want."
Bruce Lindsay discusses the Livingston's nightmare and the Making Home Affordable Program with Julia Borst, president of the Utah Mortgage Lenders Association, and Marco Fields, an advocate for homeowners.
The federal program lowers a homeowners' monthly mortgage payment to 31 percent of their pre-tax income to make their payments more affordable. To qualify, a homeowner must:
- Own a home that is their primary residence
- Have received their mortgage on or before January 1, 2009
- Have a mortgage payment that is more than 31 percent of their gross monthly income
- Owe an amount that is less than or equal to $729,750 on their first mortgage
Some homeowners have been opportunistic and taken advantage of the program, but most truly need help.
"I would probably say two out of 10 are in fact taking advantage of the system. The other eight should qualify, but you have to understand those guidelines to qualify. That 31 percent ratio and the way the banks calculate it is a very, very small box that most of the families just don't fit within," Fields explains. "It doesn't mean that they do not need or should not have a system that gives them help."
Adding to the problem, the banks were not prepared for the changes in the banking industry in the last several years.
"No one could have anticipated where we are," says Borst. "It takes your breath away where we've come the last three or four years, and banks were not in a position to deal with it. They just weren't."
There is hope for homeowners. The State of Utah received $1.8 million of federal stimulus money for a two-year Foreclosure Prevention Grant. The grant provides free counseling to anyone with questions concerning their mortgage.
You can get connected with a counselor by calling 211, statewide. Housing counselor Cheryl Stevenson, from the Salt Lake Community Action Program, is part the state program.
Stevenson agrees with Davi Livingston's suggestion to get help and not try to go through the process alone.
"If you are not familiar with the mortgage system, you have no idea what's really going on," she says. "When you come into a housing counseling agency, we first of all ask everyone to attend a home retention class where we go through, from A to Z, everything you need to know to deal with it and explain options. So by the time you come in to a one-on-one counseling session with a counselor, you have an idea of what's best for your family, which way you need to go, and what options you have."
David Burnham:It is a shame that so many people do not fully understand the full consequences of both foreclosure and "short sales!" There are implications (very adverse to owners) that actually are very detrimental to the distressed property owner, and the banks have little to no incentive to care, and sales agents stand to profit in spite of the "hit" owners are subjected to. In my opinion, in FAR too many instances some real estate agents and banks are serving their own interests over those of the distressed property owners. An important consideration is the long-term consequences of the credit rating "hit" these actions cause, and the real chance of regaining a lot of "lost equity" when the market and job situation rebound. There are important tax considerations that could dramatically improve their immediate net-income situations too, by going the professional property management alternative. Something not emphasized enough is the option of turning to professional, licensed property management companies to rent and manage the property for the owners, and the valuable, free help a property manager can provide in negotiating with the mortgage holders, and other creditors.
Kirk Hansen:We are going through this exact thing for over a year now. Wells Fargo is telling us we are very, very close to getting approved for a loan modification. Yet we keep getting other letters from Wells Fargo telling us that we are going to be in an accelerated foreclosure if we don't pay the $13,780 we are behind by Nov. 30. I called several times this week after receiving the letter. They said, "Don't worry, it's computer generated, ignore it. You're in the modification program and can't be foreclosed on." I said it sure looks like that department doesn't know we are in the modification program. They said, "Don't worry you are very close to getting approved. We have all your paperwork needed." I have faxed all our paperwork over and over for a year now. Then I follow every time with a call to make sure they got it. Then I resend it if they can't find it. Then send it again every 30 days like they say to do. They are calling six days a week now every single morning. I have a long, long phone call every morning going over all the mandatory spill they have to say on every call. Then they usually say, "We don't [know] why the computer called you everything looks to be in order." Then the next day another one calls from Wells Fargo and says we need these papers. Even though the papers they are asking for were sent recently and checked that they received them they need them again. They have asked for our 2009 tax return over and over. It never changes yet they keep having us write that day's date and sign it and resend it 38 pages. Really makes me keep thinking, how are they making money? If so many are not paying their house payments and all in this program. How are they (Wells Fargo) paying their mortgage payments? How can anyone afford to run any business so inefficiently? Are they getting paid from the government somehow? Why else would they not get this done? Why are they not caring about getting paid for 9 months now?
Brien Christoffersen:Bruce, thank you so much for looking into this very troubling problem that is affecting literally thousands of Utahns and millions of Americans around the country. It was especially poignant for us, because we are in the middle of this process and our mortgage companies are Bank of America and Citimortgage. I too have been through the mind-boggling process of trying to communicate with these folks over the phone. I was shaking my head and yelling out loud as I heard both of these families share their frustrations with dealing with these incompetent entities. I would rather deal with the IRS than B of A! It is the most frustrating thing I've ever had to endure. The real underlying problem here is you have the incompetent banks, being compensated by an incompetent federal government agency, and there is absolutely no incentive for B of A or Citimortgage to help the homeowners! They took the TARP funds, collected the interest, and then paid back the loans without using anything but a pittance to actually address this crisis. Another thing that wasn't addressed was the fact that most of us troubled homeowners are "under water." I paid $535,000 for our home in January of 2007, it's now worth between $250,000 to $280,000. So rather than make an honest effort to modify my home loan based on today's value, they will boot my family out and then sell our home to a stranger for $250,000 and then they will sue me for the difference (which will force me into bankruptcy) and then write the rest off on their taxes! They have nothing to lose, they have no incentive to deal in a fair and honest way with their struggling customers. This is scandalous! I have offered to take half the hit for the reduced value of the house, if they would reduce my owed amount by the other half and then enter into the MHA modification process (which I qualify for). They told me they do not negotiate, take it or leave is their attitude and motto. As I said previously, they have no incentive to deal in a fair and objective manner! They are ruthless, verbally abusive, rude, and relentless. I will never do business with either of these companies again. I have been struggling through this process for 24 months now! I am nearing retirement age (I'm 59) and now face the looming thoughts of foreclosure, eviction, and starting over. My triple-A credit rating is in shambles and I will most likely be forced to take out bankruptcy. My wife doesn't sleep well and is suffering from depression. The uncertainty of this process is debilitating. But I keep humming the Lee Greenwood song, "If tomorrow all things were gone I'd worked for all my life, and I had to start again with just my children and my wife. I'd thank my lucky stars to still be living here today... (America) cause the flag still stands for freedom and they can't take that away." Bruce, thanks for the program this morning, I can't tell you what it means to families like mine, and thanks for listening!