This article first appeared in the St. Louis Beacon, Sept. 10, 2012 - The story of how Rick and Karen Hoffman of St. Peters saved their two-story American dream from foreclosure began during the nation’s financial crisis and stretched into this summer — a period roughly bookended by the 2008 presidential election and the coming one in November.
Their story speaks to the never-say-never attitude of a middle-income couple in middle America who fought to hold on to their house while riding out a brutal rough-and-tumble stretch of U.S. economic history.
On the one hand, the Hoffmans did eventually secure a modification to their mortgage that enabled them to stay in their Victorian-style home with its sunny yellow walls, spacious kitchen and hardwood floors that Karen Hoffman proudly recalls helping her husband install.
But it took them three years and three months to do it. The battle embedded itself in their daily lives, darkening three holiday seasons and every family gathering and milestone in between. Though extreme, their case offers a window into the modification programs intended as lifelines to help struggling U.S. homeowners downsize their monthly mortgage payments to match their downsized post-recession incomes.
Looking back, the Hoffmans say, it is difficult to comprehend how complicated, frustrating and all-consuming the process was. They slogged through a bog of legal and financial paperwork, followed by more paperwork, followed by more paperwork. Twice they were assured that they would be approved for a modification — even completing a trial modification period — only to be told later that they were not approved. There were days when they would receive simultaneous notifications announcing good news (their mortgage “solution” was in the works) and bad news (a foreclosure sale date had been set for their property).
“It’s been hell,” said Rick Hoffman, 60. “I wouldn’t want nobody to go through what we went through.”
Nearly 4 million foreclosures have been completed in the U.S. since 2008, and if forecasters are correct, the next three to five years will bring several million more. Those numbers are why the Hoffmans agreed to talk about their experience; they hope their story will help other families save their homes.
“You’ve got to keep trying,” Rick Hoffman advises homeowners still working with their lenders to modify mortgages. “One door closes; another one opens. You’ve got to try and keep a positive attitude no matter how many people are not doing their jobs or don’t know their jobs.”
The Hoffmans dig in
The Hoffmans stood their ground on a wooded suburban street in St. Charles County where in 2001 they had built the three-bedroom house of Karen Hoffman’s dreams.
It is about 1,000 miles from their welcoming front porch with its cheerful gingerbread trim to the corporate boardrooms of Wall Street. But the decisions made by those far-off executives would send unstoppable economic ripples their way. Along with the rest of America, the Hoffmans could only watch as the crisis unfolded in the fall of 2008, and the nation’s financial, political and government leaders scrambled to deal with the fallout of failed subprime mortgages and “toxic” assets — the mortgage-backed securities and other creative investment instruments that had helped fuel the U.S. housing bubble of the mid-2000s.
Like many financially stressed homeowners who are seeking loan modifications these many years later, the Hoffmans had a 30-year, fixed-rate mortgage. They did not have a subprime mortgage — the risky lending tool blamed for the initial waves of foreclosures — but were caught up in the financial mayhem that followed.
Economists say that U.S. corporations and businesses jettisoned 8 million jobs during the Great Recession, which began in December 2007, and was in high gear by September and October 2008, when two of the nation’s highest-profile investment institutions — Merrill Lynch and Lehman Brothers — were toppled or teetered on the edge of survival. Down on Main Street, nervous consumers tightened their belts and stopped buying $5 lattes and new SUVs.
As America reeled in spending that fall, the Hoffmans, who are both self-employed, watched their monthly income evaporating. He owns a home improvement and handyman business; she is a business consultant. The mortgage they’d had no trouble paying since they built their home had become a financial burden eroding their savings.
In April 2009 the Hoffmans did what American homeowners were told to do when they found themselves in a growing struggle to meet their monthly mortgage payments: They called their loan servicer — CitiMortgage — to ask about a modification. The newly minted administration of President Barack Obama had just launched Making Home Affordable, a government effort that included the Home Affordable Modification Program (HAMP) that Obama estimated could assist 3 million to 4 million homeowners.
The application process took several months, delayed by issues over their home’s value, which Karen Hoffman estimates at between $300,000 and $350,000, to concerns that their income was either too low or too high. She said they were often reassured that they met the profile of homeowners that HAMP was intended to assist.
In a “hardship” letter her lender requested in 2010, Karen Hoffman detailed some challenges of the process: “From April 2009 through August 2009 I was told all different types of reasons why there was a hold up in processing. One area was an ongoing story about an appraisal being ordered but not in, then another person would say, the appraisal IS in … Then our home appraised for too much … to our home was not valued high enough, to we made too little and we made too much.”
Finally, in October 2009, the Hoffmans signed an agreement for a three-month trial modification that cut their mortgage payment about in half. On Dec. 19, they received a phone call and a letter saying that they had been approved for a permanent modification. Rick Hoffman was so relieved he kept a recording of the voice mail saying they had been approved.
Their daughter Jaime Salas, who assisted her parents with the requests for paperwork associated with the modification process, also noted the good news in her personal blog: “My parents were ready to lose their house. It’s been very stressful. My dad hasn’t been sleeping. They’ve been trying since May to get refinancing. This morning a courier arrived with a letter from their bank saying they’ve been approved. My dad called me crying. Then I was crying. What a wonderful Christmas gift.”
But in a letter dated Jan. 21, 2010, the Hoffmans received disturbing news: They might not be eligible for a HAMP modification, after all, because their housing expense “is less than or equal to 31 percent of their gross monthly income,” a guideline of the program.
“How can you approve us and do all the formal approval one day and then three weeks later tell us, ’Oh, no, we made a mistake,’ ” Karen Hoffman said. “That was crazy. We were in heaven. We were so happy.”
She didn’t realize at the time that their “rollercoaster ride,“ as she calls it, would continue for two more years.
A lifeline under fire
The Hoffmans were not alone in their frustration that winter of 2010. Housing advocates were taking HAMP to task and questioning its effectiveness. That February, the Treasury Department reported that of the 900,000 borrowers who had gotten HAMP trial modifications in 2009, just 66,465 had been made permanent.
While their case was under review, the Hoffmans continued to make their modified mortgage payments. After months of submitting and resubmitting paperwork, the Hoffmans received assurance in late fall 2010 from a representative with CitiMortgage’s Executive Response Office that they would be offered another modification. But an alternative “workable solution“ presented by Citi included a monthly payment that was 60 percent higher than the trial HAMP payment; it was not workable for the Hoffmans. In January 2011, the Hoffmans were told that underwriters had again refused to approve them for a HAMP modification.
The Hoffmans were devastated but determined, and throughout 2011 they continued to push for the modification promised in 2009. Karen Hoffman said that at one point they were told to stop making their modified house payments, then allowed to make the payments again in another trial period, then told to stop again.
She said there were times when she felt that she was jumping through hoops that kept getting higher, and even now doesn’t understand what was really going on. She recalls the names of several Citi representatives who seemed genuinely interested in helping them.
“I have this basic fiber in me that says people don’t want to harm other people,” she said.
But they were also overwhelmed by repeated requests for different versions of the same financial information and by phone messages and emails that kept coming from various Citi departments, often contradicting what they had been previously told. The threat of foreclosure was always there. Karen Hoffman said it was like waiting for the other shoe to drop.
In December 2011 — shortly before Christmas — a Citi representative delivered a harsh ultimatum: Their time was up; they would not be considered for another trial modification. They would have to choose from several options: foreclosure, short sale or one last chance to “cure” their default, which meant paying in full the balance of their mortgage, plus arrears. On Dec. 23, 2011, they received a “demand letter” reminding them that they had not yet made up the default and that the next step would be for the lender to contact a local attorney to begin foreclosure.
Karen Hoffman says their holiday decorations remained in their boxes last Christmas; what little spirit they could muster was for the sake of their grandchildren.
Foreclosure now seemed imminent, but to the Hoffmans, the timing made no sense. Their financial situation had brightened considerably since 2009. They had no credit card debt; no car loans. Business was better, and they had also taken on a second job together: cleaning a sports complex in the pre-dawn hours before heading off to their separate jobs. The additional income covered their mortgage.
Karen Hoffman, who survived stage 3 ovarian cancer in the late 1990s, says that fighting cancer was easier than fighting to save her home.
“When I was diagnosed with cancer I really felt like I had a chance to win,” she said. “With the fight against cancer, people really want you to win. In trying to stay in our home, it just hasn’t felt like that. You get foreclosure notices while you’re submitting paperwork. It just doesn’t feel like they want you to win.”
Asked for comment, Mark Rodgers, a public affairs spokesman for CitiMortgage, provided the following statement: “Modifications must conform to established guidelines, and we continue to work with customers over time to find potential solutions. Often, qualifiers such as the borrowers’ income change over time, so what might not be compliant at one point in time, may allow the borrower to become eligible for a program as those numbers change. We are pleased to have resolved this situation and understand that the customers are satisfied with the results.“
Not a house but a home
It was Karen Hoffman’s ordeal with ovarian cancer that motivated the Hoffmans to build their new home in the Victorian style that she’d always wanted. To cut down on costs, they designed the house and did much of the work themselves. Most of their furnishings are garage sale and flea market finds.
The home is not extravagant, Salas said, but because her parents considered every detail it is “spectacular” for them. She and her family live next door, and Rick Hoffman laid a flagstone path between their two houses. The Hoffmans say their house is more than a pretty structure. It is a special family gathering place.
“What we built here we built with our imagination and our love,” Karen Hoffman said.
Even with their recent foreclosure troubles, the Hoffmans believe they have lived the American dream and talk about how lucky they are. They’ve been married for 40 years; she raves about how hard he works; he gives her all the credit for figuring things out.
They came from similar backgrounds: Both grew up in north St. Louis County; their parents had factory jobs. Neither went to college, but they’ve taught themselves what they needed to know. They climbed the ladder to the middle class the old-fashioned way, one step at a time.
“This is America. Hard work pays off. That’s the way it is,” said Rick Hoffman.
At 19, he was hired at Lever Brothers, later known as Unilever, and worked at the plant as a plumber and welder for 30 years, taking as many overtime hours as he was offered, until it was shuttered in 2001. The company provided a good severance package, and he used some of the money to buy equipment for his business. The package also included retiree medical insurance for the couple, which he says, has proven invaluable.
Early in their marriage, the Hoffmans bought houses, lived in them while rehabbing them and then sold them at a profit. But in the mid-‘70s they bought seven acres in St. Charles County and built the home where they would rear their four children. When they sold the property and bought their current property, the developer planned to tear their old house down, so their daughter and son-in-law bought it and moved it next door to the Hoffmans.
Karen Hoffman, 59, who works as a consultant, describes herself as a “connector” of people. She is known in the St. Louis small business community as the Idea Coach. She founded City of Experts, a marketing portal for speakers, consultants, authors and coaches. She hosts a weekly talk show on iWatchRadio.com and co-authored a book on bartering.
Hoffman, who believes in the power of positive thinking and urges her clients to think creatively, said she kept her foreclosure worries to herself as she went about her work. But in January, when she thought the battle was lost, she told some friends and acquaintances. Some of them confided to her that they, too, were facing foreclosure.
She said that living with the threat of foreclosure has been hard on her family, but she is thankful that their children are grown and not living at home.
“One of my friends just went through foreclosure, and their kids left all their outdoor toys behind. Or there are the pets. Animals that have to be given up because people lost their homes. It’s hard to watch another family go through it,” said Karen Hoffman who, despite everything, always ends her emails with the word “Positively.”
The Hoffmans say that dealing with the modification process drained hours from their workdays — at a time when they could least afford it.
“There is no security when you’re self-employed,” said Karen Hoffman. “When you’re working on the loan you’re not working to make money. You’re working to try and get the loan modified.”
For this story, the Hoffmans allowed a reporter to review their documents and correspondence and were open to discussing what most people would consider very personal information. They asked only that their loan and monthly payment amounts not be disclosed.
“This has been a shameful secret for me, and even more so for my husband who is this really hard-working breadwinner. But I do think people learn from other people,” said Karen Hoffman, echoing her husband’s comments that she hopes their story might help others.
Rick Hoffman said the experience has been an eye-opener.
“Before this happened to me, I thought people who wasn’t making it, maybe they wasn’t trying,” he said. “But I found out that you can try, and things can go bad and you can keep getting knocked down.”
He said he doesn’t understand why it took so long to finalize a deal when they had proven that they could afford the modified mortgage.
“We weren’t upside down on our mortgage. Maybe they wanted our house to help offset all the people who were upside down and that they were losing money on,” he said. “I will never know what the real reason was — incompetence or purposely done. I know they were overwhelmed, but I was overwhelmed, too.”
