Frustration with banks reaching boiling point

<p>Keith and Julie Hanover felt like someone was trying to steal their home.</p><p>Bank of America had started foreclosure proceedings on their house in Kenwood. Yet the Hanovers had never missed a mortgage payment. In fact, Bank of America wasn't even their lender.</p><p>The nation's largest bank appears to have mistakenly determined it owned their loan due to a clerical error resulting when another mortgage company collapsed and was taken over by the federal government, according to court records.</p><p>The Hanovers spent seven months hounding and pleading Bank of America to fix the mistake. But none of the numerous bank representatives they contacted was able to solve the problem.</p><p>"It's like their foreclosure process is on auto pilot," Keith Hanover said. "It starts and there is nothing anyone can do to stop it."</p><p>Finally, distraught and exhausted, the couple hired a Santa Rosa attorney who got a court injunction to stop the auction of their home set for 11:30 a.m. April 30 on the Sonoma County courthouse steps.</p><p>"You're just losing your mind," Keith Hanover said. "We had never even missed a mortgage payment."</p><p>The Hanovers' tale is one of a growing number of alarming complaints from homeowners, housing advocates and real estate professionals who say some of the nation's largest banks are ill equipped to handle the spike in mortgage issues driven by the real estate collapse.</p><p>The bureaucratic tangle could cost taxpayers billions of dollars as the government covers losses resulting from foreclosures that could have been avoided if banks had provided better assistance and helped families receive more home loan modifications, according to housing advocates.</p><p>Bank executives have countered that overly complex and shifting guidelines for the federal Home Affordable Modification Program, have made it difficult to establish procedures and train staff for handling the massive number of applications submitted by homeowners.</p><p>In Sonoma County, lenders have sent out 1,960 letters this year notifying residents that their homes are scheduled to be sold at a foreclosure auction. That is slightly more than at this time last year, and dwarfs the</p><p>376 notices that were sent out in all of 2006.</p><p>Figures for the number of county homeowners with troubled mortgages who are seeking a loan modification are not known, but real estate experts said the number could be in the hundreds.</p><h3>Only recourse is to call</h3> <p>When a homeowner gets a notice of a trustee sale, or a notice of default, or any of the numerous documents that flood their mailbox when they stop paying their mortgage, they are often given only one option for talking with the bank. That is to call a toll-free number.</p><p>Some national banks have poorly trained staff who are unable to provide meaningful assistance to homeowners, said Linda Hedstrom, who manages the loan modification assistance program at the nonprofit California Human Development Corporation in Santa Rosa.</p><p>"Every time you call a lender you talk to someone different. It is often a brand-new person off the street with no experience at all," she said. "We are totally fed up with their whole system."</p><p>Hedstrom and real estate professionals who work with families to modify their home loans cite a litany of problems:</p><p>Banks have foreclosed on people who deserve loan modifications, even forcing out homeowners who have found new jobs and can resume making their mortgage payments.</p><p>Some distraught homeowners are told to make payments in order to receive a modification, only to discover the bank is proceeding with the foreclosure and the homeowner is out thousands of dollars they could have used for moving expenses or a rental deposit on an apartment.</p><p>Another frequent complaint is that banks repeatedly lose documents, and then blame the homeowner for not submitting the information.</p><p>Some people's homes were foreclosured on despite bank assurances they were being considered for a federal loan modification, according to several sources and one family who provided detailed documentation of their case.</p><h3>Taxpayer losses</h3> <p>The federal government often bears the loss when a bank forecloses.</p><p>The government has already spent $145.9 billion bailing out Fannie Mae and Freddie Mac, which are the largest mortgage owners in the country and were seized by the government in 2008 due to mounting foreclosure losses.</p><p>National banks often service Fannie Mae and Freddie Mac loans. That means customer service representatives at Bank of America and other financial institutions are managing the critical steps necessary to help a homeowner receive a loan modification and prevent taxpayers from taking another loss on a foreclosed Fannie Mae or Freddie Mac loan.</p><p>On average, less than 60 percent of the outstanding loan amount is recouped through a foreclosure sale, according to Fannie Mae and Freddie Mac. The Congressional Budget Office predicts that the final cost to taxpayers could reach $389 billion.</p><p>An example is the experience of John and Traci Figueroa, who lost their Santa Rosa home two weeks ago after Bank of America declined their request to modify their Fannie Mae loan. The couple had submitted an application for the federal Home Affordable Modification Program in May, which should have stopped Bank of America from foreclosing, according to federal rules.</p><p>"We could pay the mortgage again. I had gotten a new job," said John Figueroa, who is helping supervise the oil cleanup in the Gulf of Mexico. "We just needed time to pay back the payments we missed."</p><p>Their home was sold July 2 to real estate investor Michael Cantarutti, who bought it at the foreclosure auction for $257,722, paying the amount on the spot. Fannie Mae took a loss of about $130,000, which will largely be born by the taxpayers.</p><h3>Banks fumble</h3> <p>At a congressional hearing last month, bank executives told lawmakers that a greater number of families were not receiving loan modifications primarily because they had failed to submit crucial documents or make payments once they received a trial modification.</p><p>But housing advocates and homeowners dealing with troubled loans in Sonoma County say the process can be overwhelming.</p><p>"It is common for us to have to fax the same thing in three times," Hedstrom said. "Then they still say we didn't send it in."</p><p>Since the California Human Development Corporation started its program about two years ago, counselors have worked with 65 Sonoma County families trying to save their homes. It is one of two programs in the county certified by the U.S. Department of Housing and Urban Development. Many more people try to get a modification on their own.</p><p>Of the 65 families, only three have received permanent modifications, according to the nonprofit's records.</p><p>Four families seeking a modification lost their homes to foreclosure. Seven families dropped out.</p><p>About 50 families are still waiting to hear a definitive answer from banks; some have been waiting for more than a year.</p><p>"When it gets closer to finalization, it seems the banks lose even more documents," said Bertha Medina, a counselor at the California Human Development Corporation. "And that is very frustrating, because these are families' lives they have in their hands."</p><p>Bank of America is one of the financial institutions most difficult to deal with, according to Medina and several others in the industry.</p><p>"Their customer service is a mess," she said.</p><p>A spokeswoman for the Charlotte, N.C.-based bank did not return calls over several days seeking comment.</p><p>The bank says it has provided more than 630,000 loan modifications to financially distressed homeowners since January 2008. However, information on the bank's website does not identify how many of those modifications are permanent, and how many were trial modification that eventually resulted in foreclosure.</p><p>A bank spokeswoman earlier this month said Bank of America seized the Figueroas' home because the couple did not submit an application for federal assistance until less than 10 days before the trustee sale, and the couple had neglected to include required information.</p><p>However the Figueroas provided The Press Democrat with several documents that refuted the bank's public statement. The bank has not returned repeated calls and e-mails made during the past 10 days asking for clarification on its statement.</p><h3>Emotional cost</h3> <p>People fighting to retain their homes have grown weary and frustrated from receiving ever-changing responses from banks. Even after being rejected, they worry it is because the bank representatives did not process their information correctly.</p><p>"It's been really hard," said Karla Samples-Eastham, an event coordinator for the Sebastopol Chamber of Commerce.</p><p>She and her husband have applied and been rejected three times for a home loan modification. The lender, Wachovia Bank, which is now owned by Wells Fargo, has never provided a clear answer why, Samples-Eastham said.</p><p>Julie Campbell, the Wells Fargo spokeswoman for Northern California, said Friday the company's home mortgage group in Des Moines, Iowa, would need to look into the loan circumstances.</p><p>The couple fell behind on payments after Matt Eastham was laid off in March 2009 and was out of work for a year. He got a new job in March and the couple say they can pay their mortgage again.</p><p>"I just wish they would let us make our payments and put what we owe at the end," Samples-Eastham said. "I'm desperate at this point."</p><p>The couple received word from Wachovia that their house would be sold at auction Aug. 4. She and her husband built the house in 1990 with help from family and friends. Tears stream down her face and she barely contains the sobs when she thinks about losing it.</p><p>"The pets are buried here," she said. "It's so hard to tell my kids that mommy blew it and lost our house."</p><h3>Bank didn't admit error</h3> <p>Bank of America has still not admitted it made a mistake in the Hanover case.</p><p>The couple filed a lawsuit in Sonoma County Superior Court to stop the bank from seizing their home.</p><p>"When they came and were literally going to pull our house from underneath us, we knew we had to sue," Keith Hanover said.</p><p>But the couple had tried other means first. They agreed last November to refinance their loan with Bank of America to get a lower interest rate and fix the problem. They thought the bank would have to acknowledge the mistake once it ran a title history and required title insurance.</p><p>But instead of fixing the problem, the Hanovers started getting two mortgage bills every month from Bank of America. One bill showed they were current on their $630,000 mortgage. The other monthly statement continued to report they were months behind.</p><p>"They kept saying the paperwork would catch up. That everything would be OK," Keith Hanover said. "Then they started to foreclose."</p><p>A bank spokeswoman said in an e-mail Thursday that Bank of American is in "discussions about the possible resolution of the case."</p><p>For the Hanovers, anxiety over the situation is still a daily presence.</p><p>"You can't help but wonder what is going to happen. It just wears you down," Keith Hanover said. "The whole lending industry is such a mess. And it is affecting everyone in the country."</p><p>News researcher Teresa Meikle contributed to this article. You can reach Staff Writer Nathan Halverson at (707) 703-1577 or nathan.halverson@pressdemocrat.com.</p>