Mortgage write-downs: Are they fair?

Should your neighbors get a chunk of their mortgage permanently written off because their income has fallen, they can't afford their payments and their home's value has fallen?

Meanwhile, your house has also lost value. But you've been fortunate enough to keep your job. Or bought at a lower price. Or have a lot in savings. Or, for whatever reason, you can afford your payments. So you don't get a deal. You might get irked, start demanding a cut. Maybe you would fall behind on purpose, trying to get a reduction. (By the way, that probably won't work, and it will mess up your credit.)

Those are among the concerns as writing off mortgage principal gains traction as a tool to prevent foreclosures.

Critics of mortgage modifications in general say people who can't afford their homes should give them up and move. Normally, that's what happens, but we haven't seen normal in a long time.

Foreclosures are a noose around the housing market's neck, and that won't change for a long time.

President Obama's well-intended efforts to help distressed homeowners have fallen short. Some problems, like program complexity and inept service from lenders, were probably avoidable.

But entrenched unemployment makes it hard to keep people in their homes, and deflated values make people less interested in hanging on. That's why we've seen several programs trying to help the jobless. And that's why principal reduction is gaining interest.

So what do you think: Is writing off mortgage principal a good idea for foreclosure prevention? Click here to vote.

Check us out on NPR

Today, NPR interviewed me about foreclosures for its "Here and Now" show, broadcast nationally.

You can check out the segment at http://www.hereandnow.org/.

We talked about the ongoing increase in people losing homes and problems with the federal foreclosure prevention program, including shortfalls of recent changes intended to help the unemployed. (Go to the "more coverage" section of this blog to read my stories about the problem.)


We also talked about Bank of America's efforts to improve modification results, including its recent pledge of speedier responses to customers and its program to write off principal on certain especially troubled mortgages.

In testimony this week before Congress, the Charlotte bank's top mortgage executive said hundreds of thousands of its customers haven't paid their mortgage in more than a year. Wow. In another sign of the distressed volume, the bank says it gets more than 125,000 calls a day from customers who need help with their mortgages.

Continued job losses are really complicating efforts to save homes. Save Your Home will have more on that soon.

What do you think could be done to help prevent foreclosures as unemployment remains high?

Did you get a mortgage modification while receiving unemployment benefits? I'd like to hear from you. Email me at shopkins@charlotteobserver.com.

Homeowners sue BofA, Wells Fargo

More frustrated homeowners turned to federal court this week for help with their mortgages, saying Bank of America and Wells Fargo failed to provide promised payment modifications.

The two cases, filed Tuesday in Massachusetts, seek class action status.

Three specific families are identified, one with a loan serviced by Bank of America and two by Wells Fargo - the nation's two largest mortgage servicers. They were granted trial modifications, according to court documents, but haven't received long-term modifications despite having submitted all required documents and made timely payments for more than three months.

The claims are simple, the two filings say: "When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expect that promise to be kept."

The Home Affordable Modification Program (HAMP) is the main federal plan for reducing mortgage payments, part of a $75 billion plan to stem the national foreclosure crisis. HAMP calls for a three-month trial period, intended to give time for the homeowner to demonstrate an ability to keep up with the lower payments. However, there are growing reports of homeowners in trial plans ultimately being rejected for modifications despite making their trial payments or even being foreclosed on during the process.

The modification process has generated so many complaints that regulators and lawmakers are pressuring lenders to improve.

The Massachusetts cases, which are not open to borrowers in other states, say homeowners are "living in limbo" and spending scarce resources on payments that might ultimately not save their homes.

"Some are in fact continuing to receive foreclosure notices," said Stuart Rossman, a lawyer with the National Consumer Law Center in Boston, which brought the lawsuit along with a law firm and another advocacy group.

Bank of America didn't immediately respond to a request for comment this afternoon. The Charlotte bank may not yet have been served. The bank has said it is taking "extraordinary measures," including sending workers to borrowers' homes, to help customers fulfill requirements for long-term modifications

A Wells Fargo spokeswoman said the company "will respond to the lawsuit once we have a chance to review it."

The San Francisco bank, which bought Wachovia late in 2008, has been "diligently working to convert - from trial to completed modifications - customers who meet the HAMP guidelines," Debora Blume said in an e-mail. "Unfortunately, not all customers who enter a HAMP trial do ultimately qualify for the program. In these instances, we work to determine if another foreclosure prevention option is available to them. "

Earlier this month, 10 Ohio homeowners filed a civil case in federal court against Bank of America, also saying the bank broke promises to modify their payments.

The circumstances differ in that the Ohio homeowners say they were promised modifications during a federally sponsored event last year. As of the filing date, they hadn't received documents or had their payments reduced, meaning they are not as far along in the process as the Massachusetts families.

Are you struggling to get a loan modification? Please e-mail me, shopkins@charlotteobserver.com, or call direct, 704-358-5173.

Free foreclosure prevention help

Gains continue in North Carolina's foreclosure prevention effort, with the state saying that as of Monday, it has helped 3,132 families keep their homes, an increase of 17 percent since year end.

Of those, 360 were Mecklenburg County homeowners, according to the N.C. banking commission, which runs the program.

Please note: The program is FREE.

And a reminder: Since 2005, it's been against the law in North Carolina to charge an upfront fee for foreclosure prevention assistance. But with foreclosure filings at record levels, there are many people afraid of losing their homes and exasperated with the mortgage modification process. They keep shelling out their last dollars in the hope of getting help.

Last year, the N.C. Attorney General's office issued 166 cease and desist orders to firms pedaling mortgage modifications or other foreclosure assistance. That's more than four times the 40 orders in the previous year.

Don't do it. Call toll-free, 1-866-234-4857, for FREE assistance. You can also locate FREE foreclosure prevention counselors in your area at http://www.fightncforeclosure.org/.


In addition to those who have already worked out a plan, more than 8,000 additional homeowners have met with housing counselors to get free advice and assistance in dealing with their finances and mortgage problems. More than 1,000 of those were residents of Mecklenburg, which leads the state in foreclosure activity.


Report suspected foreclosure assistance scams to the Attorney General's office at 1-877-5-NO-SCAM or by filing a complaint at http://www.ncdoj.gov/.

I'd also like to hear from you if you've been approached by a firm charging a fee or are concerned you may have been the victim of a foreclosure assistance scam. Please e-mail me at shopkins@charlotteobserver.com or call direct, 704-358-5173.

Bank of America modified more mortgages

The nation's largest bank quadrupled the number of borrowers it has placed in long-term mortgage modifications.

Bank of America said today it has completed more than 12,700 so-called "permanent modifications" through January, up from 3,200 as of December. Another 13,700 are pending, which the bank says means documents have been sent for customers' signatures.

The Charlotte bank had been criticized following November results from the Department of Treasury showing it had only 98 permanent modifications under the Home Affordable Modification Program (HAMP). That's the centerpiece of federal foreclosure prevention efforts.

The bank released its most recent results today. Treasury's full HAMP update is due soon.

The bank's modifications represent a tiny portion of the more than 1 million borrowers Treasury estimated were eligible as of December. Bank of America has disputed the eligibility estimate, which is based on delinquencies without regard for whether they meet other HAMP guidelines.
In addition to the permanent modifications, Bank of America had about 200,000 borrowers in trial plans as of December. Combined, those results represented 19 percent of the estimated eligible homeowners, well below the level of such large competitors as Wells Fargo and Chase. The bank has said it modified hundreds of thousands of mortgages outside the HAMP program.

Overall, critics say lenders and mortgage servicers aren't doing enough to reduce mortgage payments and stem the nation's foreclosure crisis.

Bank of America is the nation's largest servicer, handling one in five mortgages nationwide, according to Guy Cecala, publisher of Inside Mortgage Finance. The bank ranked second in mortgages issued last year, accounting for 22 percent. Wells Fargo led with 24 percent, Cecala said.

Read the full Bank of America release: http://www.prnewswire.com/news-releases/bank-of-america-completes-12700-permanent-hamp-modifications-another-13700-approved-and-pending-homeowners-signatures-84467482.html

Homeowners sue Bank of America

Ten homeowners resorted to federal court for help with their mortgages this week, saying Bank of America broke promises to modify their payments.

The civil case, filed Wednesday in Ohio, says the 10 troubled borrowers attended a federally sponsored loan modification event last October in Cincinnati. Some had previously tried to get loan modifications, a process that can be so lengthy and frustrating that regulators and lawmakers are pressuring lenders to improve.

During the event, the homeowners met with Bank of American representatives who offered each borrower a loan modification and promised written agreements would arrive by mail "within weeks," according to court documents filed by lawyers from the Legal Aid Society of Southwest Ohio.

No one has received the documents or had their mortgage payments reduced, the filing says. They have called to follow up and received no help. One woman has received notice the bank has begun foreclosure proceedings on her home.

"Today, after months of agonizing worry and having experienced every manner of deception, confusion, avoidance, indifference and incompetence at the hands of BOA, Plaintiffs are no closer to receiving the promised loan modifications," the civil lawsuit says. "As a result, Plaintiffs are living with the daily trauma of imminent foreclosure and loss of their homes…"

A Bank of America spokeswoman said in an e-mail today that the bank can't comment on the lawsuit because it hasn't yet been served.

"Bank of America is committed to helping customers facing financially difficulties remain in their home," the statement said.

To see the lawsuit: http://media.charlotteobserver.com/static/images/pdf/BoAComplaint021010.pdf

Are you struggling to get a loan modification? I’d like to hear from you. Please e-mail me, shopkins@charlotteobserver.com or call direct, 704-358-5173.

Kindness of strangers

A Charlotte couple, who read the Jan. 31 story of a woman trying to save her home, sent $400 to help her. They sent the money to the Observer, for delivery to Jenna MacFarlane, a woman they don't know.

"We aren’t looking for any special recognition or even a thank you response," said the couple, who wishes to be anonymous. "We are only interested in trying to help another person who is in a difficult situation."

MacFarlane, a graphic designer, put 40 percent down when she bought a 1930s house near uptown in 2004. Her income dwindled with the economy, and she's been trying for months to get a loan modification to reduce her payments.

"That is so kind," she said today, upon learning of the gift. "Wow."

Her benefactors stand out among the many critical remarks, railing about the poor decisions and questionable judgment of families profiled by The Observer who are struggling amid a deep downturn to pay their mortgages and other bills.

The couple, who says they have made other direct payments to help people, are disenchanted with formal channels and "feel helpless in trying to have a true impact on change." But, "we can help to change or offset some less fortunate individual's hardship through charitable acts."

They are grateful for what they have, and giving makes them feel good.

MacFarlane can relate. In better times, she too gave, including establishing a scholarship that helps women complete their education at a northern California university.

"I’ve always been the one to help other people," she says. "I’ve known firsthand how good it feels."

She never thought she'd be the one struggling, to have to reshape her image of herself as the one who needs help.

"It’s a new way of thinking about your life," says MacFarlane, who is determined to rebuild her income and save her home. "Many people practice self denial, especially when they have been proud of themselves for supporting themselves all their lives. We’re all pretty close to the edge at this point."

Another Save Your Home reader echoed a similar thought.

"The real point of this is: walk a mile in someone's shoes before you become so arrogant about their life's problems," said alittlemoretolerant.

Readers, what upsets you about the nation's $75 billion foreclosure-prevention effort?

Rising foreclosures fuel scam surge

Another downside to swelling foreclosures: More scamsters, preying on people desperate to save their homes.

The N.C. Attorney General's Office handled 448 foreclosure-scam complaints last year, a jaw-dropping jump from 82 the previous year. In 2007, there were just seven.

Among the big offenders are firms charging upfront fees for so-called foreclosure-prevention help. That's been illegal in North Carolina since 2005, but people fearful of losing their homes and frustrated with the modification process continue plunking down their scarce cash in the hope of getting help.

Last year, the AG's Office issued 166 cease and desist orders to firms pedaling mortgage modifications or other foreclosure assistance. That's more than four times the 40 orders in the previous year.

Al Ripley, a lawyer with the N.C. Justice Center, sees too many sad cases of people who shelled out thousands for help and got nothing. Last fall, a Western N.C. man paid $1,000 to a firm saying it could get him a lower payment and prevent foreclosure. A few weeks later, the company asked for another $1,000. The man paid again and never heard anything, all too common an outcome, Ripley says. He ultimately lost his home, too.

"People are terrified," Ripley said. "They’re looking at potentially being made homeless and being financially devastated. They’re under a great deal of stress. They’re not sleeping. When approached, if there’s something they think they can do, they’re eager. It's a very vulnerable situation."

Working out a loan modification is time-consuming and frustrating. The main federal program is cumbersome. But there's a lot of free help. See www.fightncforeclosure.org to find a free foreclosure prevention counselor in your area. The site has contacts for other resources, too.

And remember: If you're facing foreclosure, we want to hear from you. We're looking this year at whether the $75 billion federal foreclosure-prevention program is really helping people. E-mail me at shopkins@charlotteobserver.com or call direct, 704-358-5173.

Coming Sunday in The Charlotte Observer's MoneyWise section: Read about an Iredell County couple, struggling to save their home, who almost shelled out big bucks to a firm pitching help with mortgage modifications.

Here are tips from the AG's Office to avoid foreclosure scams.

Beware of so-called foreclosure assistance or rescue companies that require upfront payment to help you. That's illegal in North Carolina.

Avoid companies that want you to make your mortgage payment to them or that tell you not to talk with your lender or an attorney.

Avoid companies or individuals who say they will pay off your mortgage if you sign your deed over to them.

Be alert for a scam if a company pressures you to sign paperwork, offers to fill out forms for you or refuses to put promises in writing.

To report a foreclosure scam, contact the Attorney General's consumer protection division at 877-5NO-SCAM (877-566-7226). Or file a complaint online at www.ncdoj.gov.

U.S. Sen. Kay Hagan helping save homes

Three Charlotte families, whose struggles to avoid foreclosure were shared Sunday in The Observer, are now getting help from Washington.




U.S. Sen. Kay Hagan's staff is looking into problems the three families have had trying to modify their mortgages and save their homes. Hagan told Save Your Home this afternoon that during her first year in office, her staff worked with more than 100 N.C. families facing foreclosure. About 75 percent are still in their homes, she said.



The foreclosure-prevention cases represent a small but complicated and important part of her constituent services effort.



"Foreclosures affect whole neighborhoods, whole communities, not just the individual," she said. "Due to the economic environment we're in...they're more than they've ever been."



Statewide, foreclosure filings jumped 17 percent last year while Mecklenburg County saw a 52 percent gain compared with a year earlier.

A year ago, the Obama Administration rolled out a $75 billion foreclosure-prevention program intended to slow the bruising pace of home losses. The program has been widely criticized, with much of the blame falling on lenders and mortgage servicers for being slow to respond. Banks and other firms have scrambled to improve, but homeowners, lawyers and foreclosure-prevention counselors continue complaining of confusing requirements, repeatedly lost paperwork and poor customer service that create lengthy delays.

"We can't force anyone to approve a modification, but we can certainly contact regulators," Hagan said. "A bank has to respond to a regulator, so it's a good way to get information to a constituent when they haven't been able to do it on their own.

"A lot of the time, the issue is lack of paperwork or not getting in touch with the right person. That's something we can help with."

Here are Hagan's answers to several other questions.

Question: What does it say about a big federal foreclosure-prevention program when it takes a U.S. Senator's staff to get people through the process intended to help them?

Hagan: It's probably due to the fact that we have so many people in this foreclosure situation. That's one reason I'm saying my office is open to help. We have a toll-free line: 877-852-9462.

Question: There's a debate about whether the government should be involved in widespread foreclosure prevention. What do you think?

Hagan: Home ownership is one of the basic building blocks of (personal) equity. I want to do everything possible to keep people in their homes. A government can help citizens in these very vulnerable times.

Question: One factor driving the foreclosure crisis has been exotic loans, often with spiraling interest rates, that borrowers didn't understand. The first bill you proposed in the U.S. Senate deals with financial literacy education. What would it do?

Hagan: This bill offers funding for states to put forward (financial literacy) curriculum in grades 6 through 12 that would actually teach our students about borrowing, credit cards, loans, accessing your credit score -- teaching young people the skill sets necessary in this world. This is critical.

Note: If you're struggling to save your home from foreclosure, I'd like to hear from you. Please e-mail shopkins@charlotteobserver.com or call direct at 704-358-5173.

See where the foreclosures are in Mecklenburg County with our interactive map, just updated with 2009 data. http://www.charlotteobserver.com/maps/story/712627.html

Penalty for saving home with 401(k)?

When you're struggling to pay the mortgage, the stash in a 401(k) retirement plan can look pretty enticing. So what became of the ’08 discussion about partially suspending the hefty penalty for early withdrawals of 401(k) money?

Fair question, given the rising wave of mortgage delinquencies and threat of foreclosure.

Short answer: Hasn’t happened.

Where it started: Late in 2008, then President-elect Obama included the penalty easing proposal in an early economic revitalization plan. People would be “facing unique economic hardship,” according to http://change.gov/agenda/economy_agenda/. The plan called for legislation that would waive the penalty on limited withdrawals "to help these families pay their bills and their mortgages and make it through these tough times."

PolitiFact.com, a Pulitzer winning site from the St. Petersburg Times, rated the issue a "Promise Broken" last year. http://www.politifact.com/truth-o-meter/promises/promise/508/allow-penalty-free-hardship-withdrawals-from-retir/

And it popped up again, just last week, when President Obama and Vice President Biden spoke at a town hall meeting in Tampa. A participant noted that tough economic times are forcing many people to make 401(k) withdrawals, and they can’t afford the penalty.

Obama responded that the penalty is in place “because you’re getting that money tax-free, the idea being that you’re going to actually use it for retirement. And then if you’re spending it early, before retirement, then you can imagine that a lot of people could potentially game the system by using these accounts to avoid taxes,” according to a transcript (http://www.whitehouse.gov/the-press-office/remarks-president-and-vice-president-town-hall-meeting-tampa-florida).

However, the President said the point is legitimate. “Blanket amnesties in all circumstances may not be possible,” he said. “But taking a look at certain narrow categories of emergencies in which these penalties could be waived is something that we have discussed and I think we could explore.”

Ed Ferrigno, who heads government relations for the Profit Sharing/401K Council of America, said most years someone in Congress calls for waiving the penalty for some reason. But the idea never gets much mainstream support. The only exception he recalls was for victims of the massively disastrous Hurricane Katrina.

The plans allow people to sock away money before taxes. In exchange for the tax break, you have to leave the money alone until you’re at least 59.5 years old. There are exceptions, including hardship withdrawals. See IRS site http://www.irs.gov/retirement/article/0,,id=162416,00.html for details.

But if you make a withdrawal, you pay regular income taxes and a penalty of 10 percent of the amount withdrawn.

The penalty is a way to “put discipline into the system,” says Ferrigno, whose group represents employers offering the retirement plans. At the same time, allowing withdrawals recognizes that sometimes “the best intentioned people have to re-evaluate their situation.”

Another option is to take a loan against your 401(k), which can be more restrictive but avoids the penalty, as long as it is repaid.

Obama added during the town hall that he has personally experienced the penalty’s pain. He said some years ago, when working in a law firm, the family had emergency needs. He made a retirement plan withdrawal and paid the penalty. “No fun,” he told town hall attendees. “But it was what we had to do.”

He and his wife were young enough to absorb the hit, he said, but acknowledged it would be a greater hardship for a lot of families.

What do you think Save Your Home readers? Should people facing foreclosure get a break on the hardship penalty?

And a request: If you’re struggling with foreclosure, please contact me directly. Call 704-358-5173 or e-mail me at shopkins@charlotteobserver.com. Thanks.

Caught up in the wave of foreclosures?

Last Monday, 14 of the 20 Mecklenburg homeowners scheduled for a foreclosure hearing before Cameron Scott actually showed up.

That was the highest rate of attendance the Mecklenburg County assistant clerk of court recalls having at the hearings - one of the last stops on the road to foreclosure. Used to be, no more than 15 percent of people came, said Scott, one of three attorneys who run the hearings.

More people are coming because they are more likely to know that, even at the last minute, they can stave off foreclosure. Some know because they read about it in The Observer. I know this because when I talk with people worried about losing their homes, they often show me one or more stories I’ve written about how to stop foreclosures.

But then I hear the process hasn’t worked for them. Or they didn’t call soon enough. Or they have more questions.

Here at the Observer, we began writing about the foreclosure problem long before it was recognized nationally, before it helped bring down the economy. That news coverage continues. With this blog, we’re reaching out in a new way.

Are you struggling to get a mortgage modification? We want to hear from you.

Were you able to get a modification? We want to hear your success story.

Are foreclosures hurting your community? Tell us about it.

Is it your job to help people save their homes? We want to hear your tips for what works.

We want to be a resource for linking people with the help they need. We also hope this blog becomes a place for sharing not only stories of struggling homeowners but also ideas about how to solve a problem that touches everyone. Sometimes, we’ll do all our talking in this space. Other times, your stories will also run in the newspaper.

Please join us.

Coming Sunday in The Observer: Read MoneyWise for the stories of three struggling homeowners and a discussion of whether foreclosure prevention programs are a good idea.