One in 4 million: After 3 years of disappointment, a St. Peters couple lands mortgage modification
This article first appeared in the St. Louis Beacon, Sept. 12, 2012 - For Rick and Karen Hoffman of St. Peters, foreclosure salvation came in an unlikely, roundabout way, beginning with yet another letter they didn’t understand from a government agency they had never heard of.
Karen Hoffman said they paid little attention to the notice from the Office of the Comptroller of the Currency that arrived in December 2011, advising them that they were eligible for an "independent foreclosure review." She didn’t know what it meant, and they were focused on the fact that they could be days from the foreclosure sale of their home.
The letter was part of a mass mailing trying to reach 4 million U.S. homeowners who dealt with foreclosure in 2009 and 2010. It was part of the OCC’s enforcement action against large national bank mortgage servicers who had engaged in unsound practices in foreclosure processing. If the reviews turn up errors, the homeowners could be eligible for financial compensation.
On Jan. 12, Karen Hoffman, who was running out of options, called an information number to ask about the foreclosure review and was referred to 888-995-HOPE, the national hotline run by the nonprofit Homeownership Preservation Foundation. Hoffman found herself talking to housing counselor Steve Mitchell who works in the Minneapolis office of Novadebt, a national nonprofit that helps staff the hotline with HUD-certified counselors. He told her he would escalate her case for review.
Mitchell said he was struck by how long the Hoffmans had been negotiating with CitiMortgage -- and the fact that they had received written notice in December 2009 that they had been approved for a modification, only to be told a few weeks later that it had been a mistake.
“And that shouldn’t happen,’’ Mitchell said. “I know lenders make mistakes and there is some human error involved and they’re doing thousands if not tens of thousands of these at the same time. But if they make an error we want to make sure they get it right the second time. We want to make sure the homeowner does not suffer.”
Mitchell, who helps five or six callers a day, said that most of his counseling sessions are completed in the span of about an hour. He realized the Hoffmans’ case would take longer than that, but it had struck a chord.
“They went through Christmases when they thought everything was great – 'We got approval.’ And then everything fell apart. I just imagined what it was like for her and her family,” Mitchell said.
Talking the talk
The Hoffmans credit Mitchell with helping them accomplish in a matter of weeks what they had been fighting for since 2009: a modified mortgage they can afford. Karen Hoffman said that having Mitchell on the line during phone conversations with her lender made all the difference because he knew the language and also the facts that mattered and didn’t matter.
She stressed the importance of having an advocate, such as nonprofit housing counselor, to help homebuyers negotiate and understand the foreclosure process.
"When you're buying a house you have somebody representing you. You have a mortgage officer or a Realtor. Somebody is helping you. When there is a question or problem there is a team of people to help you through it. In this, you're alone,'' she said.
Mitchell says most of the credit should go to the Hoffmans for their determination to keep fighting for what they felt was right, even though it meant another grueling round of paperwork.
“Karen was wonderful. She was very frustrated and to the breaking point when she called,” Mitchell said, adding that some homeowners would have long before given up.
“I said, 'Hey, Karen we’re going to have to start this process over. New paperwork. Sending it to someone different. Keep your fingers crossed.’ And she pushed through and continued,” he said. "They deserve the credit here. They were the ones who made this work after so many years. I can’t imagine as a homeowner that I would have continued to try this many years down the road.”
Unlike homeowners who are emotional about saving their homes, Mitchell offers a dispassionate view of the process. He fields hotline calls from across the nation and never meets the homeowners face to face or even sees pictures of their homes. And, he rarely hears from them afterward.
Mitchell points out that during the long process, CitiMortgage never took the final step to foreclose on the Hoffman property, and he credits Citi’s executive resolution team for eventually working out a solution that was similar to the modification the Hoffmans were offered in 2009.
He said that homeowners often don’t realize that modifications are complicated by guidelines set by lenders, the federal government and investors of the loans. The Hoffmans' loan is owned by Freddie Mac.
“It’s not like Citi is calling all the shots, but I wanted to make sure they were able to resolve something for Karen that made sense for her,” Mitchell said.
On Jan. 31, a Citi representative sent an email to the Hoffmans that included a bright blue box with these words: Your Request Has Been Approved. The Hoffmans were to begin a new three-month trial modification. On April 30, they received the paperwork to make it permanent.
There was one more dose of last-minute drama -- and panic -- for the Hoffmans: They were informed on May 24 that their mortgage papers weren’t properly notarized and had to be re-signed. The next day they got a letter from foreclosure attorneys telling them their house would be sold on June 26.
Karen Hoffman said she couldn’t help but be “freaked out” because of past experiences with having the rug pulled out at the last minute. “Breathe, Karen, I am saying to myself!” she wrote in an email.
CitiMortgage assured the Hoffmans that the foreclosure sale had been canceled and sent written notification to that effect in June.
'We are not alone'
After three years and three months, the Hoffmans' foreclosure struggle was over. Their modified mortgage replaced their original fixed interest rate of 7.25 percent with a graduating scale: 2 percent for the first five years; 3 percent in year six; 3.875 percent in years seven through 40. Their monthly mortgage payment was cut by about 40 percent, but will rise as their interest rate increases. Arrears, which piled up when Citi told them to stop making their monthly payments, were tacked onto the remaining principal of the loan, and the term of the mortgage has been extended. There was no principal reduction.
Karen Hoffman jokes that her husband will be more than 100 years old when they pay it off. Modifications are no free ride.
"We’re still going to pay,” she said. "Here’s what they gave us: They gave us an opportunity to stay in our home, and we will continue to pay for it. They will get everything that is owed to them.”
At this stage of their lives, the Hoffmans say they have never worked harder, but they are willing to do what they have to do. If and when they decide to leave their home it will be on their terms.
Their daughter Jaime Salas, who stepped in to help her parents with the unrelenting demand for paperwork, said that modifications are a good idea, but she described the implementation as "terrible, atrocious and devastating to families.”
"The bank executives should be ashamed of themselves for not helping the homeowners keep their homes,” she said. "There are some times when people have to let go and lose their homes. It’s sad and it’s true. It’s a fact. But the [modification] initiative was made to help families who are working. And it’s fair. Why wouldn’t you allow a family to do that?”
Salas said that from her perspective “the squeaky wheel will get the oil” and that homeowners should push hard to save their homes. Her parents gave their permission for her to participate in conversations with their lender on their behalf. On sleepless nights, she sent emails to dozens of Citi executives asking them to intercede on her parents' behalf.
”My story is not spectacular,” she wrote to one executive in an email sent at 1:54 a.m. on Sept. 30, 2010, the day after her parents were given an October foreclosure sale date. “My story is not out of the ordinary. Unfortunately, in today’s world we are not alone.”
The executive responded at 7:30 that morning that he would have his team look into the case, and he did, Salas said. But until Mitchell took up their case, success always eluded them.
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."
An imperfect world
Ironically, the Hoffmans say, they had called the national hotline once before -- in 2009. At that time, a counselor told them that nothing could be done.
The hotline was announced in October 2007 by an alliance of lenders, investors, servicers and nonprofits who provide housing counseling. The free service was intended to assist struggling borrowers deal with foreclosures and mortgage modifications. Hotline officials report that since 2008, counselors have fielded 4.7 million calls and completed 1.4 million counseling sessions with borrowers. Karen Hoffman was one of 4,118 Missouri residents who called between January and March 2012.
Mitchell said he is glad that Karen Hoffman reached him in January.
"As a counselor, the first thing you have to learn is that not every home can be saved,” Mitchell said. "That’s a really unfortunate thing. But even if I can’t help a person save this home, I’m still providing a service. I’m still giving information, giving resources. If the home isn’t savable, at least I put the homeowner in a better position. Or, provided rental resources. If the homeowner is unemployed and has no job on the horizon it is going to be difficult. You have to help them move forward.”
At the same time, Mitchell said, there are homeowners who were incorrectly turned down for a modification -- perhaps they didn't fill a form out correctly.
"There are a lot of problems with the process still,” he said. “As many people as it’s helped there are a lot more who could have been helped, most likely, in a perfect world.”