Government mortgage program traps homeowners
Sandra Chapman/13 Investigates
Indianapolis - U.S. banks took $50 billion taxpayer dollars, promising to help homeowners reduce their monthly mortgage payments. But 13 Investigates discovered thousands of homeowners taking part in the program are falling into a financial trap - and they haven't done anything wrong.
Now, there is a consumer warning on why the banks' trial run could leave you worse off.
The invitations are everywhere: "Save hundreds of dollars on your mortgage." "Stay in your home for less."
That was the bank promise delivered to the Miller household.
It's the only home 10-year-old Jackson has ever really known. His mother, Amy, created a special world where he enjoys recess, goes to school and gets round the clock nursing through Medicare. And he's beating the odds against a rare genetic disease.
"There's really not anything in here that doesn't have to do with him," Jackson's mother said, showing 13 Investigates cabinets full of his medicines.
He doesn't know it, but within weeks, it could all go away. That same bank-run program that promised to reduce the Millers' mortgage, is now threatening to hijack their home.
"It's terrifying to think we're going to have to take him out of this home. I trusted them, I was naive, I had no idea this could possibly happen," Amy Miller said, shaking her head.
She's talking about HAMP, the government's Home Affordable Modification Program.
In 2009, Congress gave banks $75 billion to modify mortgage loans for eligible homeowners. $50 billion of that was bailout money paid for by taxpayers.
Wells Fargo suggested HAMP to the Millers. They had not missed any payments, but wanted to reduce monthly costs. Miller's husband's restaurant earnings and her rental property income had declined.
"I could see down the road this keeps getting harder every month," said Miller of the family's finances.
For three months, they provided financial statements, tax returns and other pertinent information. Based on those records, the bank cut their nearly $1,500 a month payment to $900.
"I was told that as long as I made all the payments on time, that we would be accepted," the mother explained.
But when the trial period ended, there was a surprise.
"We had been rejected," Miller told 13 Investigates.
They could either come up with $5,000 or face foreclosure. So the couple dipped into a 401K and sent the money.
Wells Fargo sent it back.
The bank wanted, instead, $100 payments until December and then a whopping $19,000, or else...the house.
"Besides being scared to death, I just thought that, that didn't make sense," said a frustrated Miller.
The Miller family's story is not unlike thousands of homeowners all across the country. In fact, a Chicago law firm with a growing reputation for consumer advocacy is now jumping into the fight.
"It was certainly in the intent of the government to keep people in their homes. That's the whole point! Rather than having their homes saved, they're one by one falling into deeper debt. And one by one, losing their homes," said attorney Rafey Balabanian.
His law firm, Edelson McGuire, is seeking a federal class action lawsuit against Wells Fargo.
"You do everything you're supposed to do. You're told at every turn that you've done everything right. And then you wake up one morning and get a letter that says you were denied for your modification and now your loan is in default and you have to pay off $15,000 by the end of the month or face foreclosure," said Balabanian, repeating a similar story he's heard from homeowners across the country.
Wells Fargo isn't the only bank accused of luring customers into a broken promise.
A government review of HAMP as of September showed 1.3 million trial modifications started by banks, of which more than 699,000 were canceled. The number of permanent modifications totaled just 466,000.
In Indiana, a mere one percent, or 4,600 are getting permanent help. Hundreds of others who were making their payments are now worse off than they started.
"It's hard to tell people that they should trust in the modification process at this point," said Balabanian.
"For me, there was no other option but to fight them," said Danielle Terry of Mooresville.
Terry and her husband went through a frustrating HAMP trial with Chase Bank. She, too, made all of her trial payments, only to haggle with random call center workers over lost documents.
She was denied.
The bank wanted fees plus what she didn't pay during the trial, or threatened to take her house.
"That was complete reality, that I could get a letter any day that said you have 30 days to get out," said the young mother.
Desperate, Terry turned to State Representative Ralph Foley, who directed her to the Indiana Supreme Court and a group of pro bono attorneys who set up a mediation with Chase.
Indiana's director of consumer protection says too many homeowners don't know they have a right to mediation or other modification deals.
"In many instances, you're not eligible for any of these programs unless you are still living in your home," explained Abigail Kuzma, whose office is a branch of the Indiana Attorney General's Office.
Danielle Terry stayed put. One day, with no warning something unexpected showed up.
"I laughed. I did laugh," said Terry, with chuckles of relief.
Chase had come up with a different modified deal. Bank officials would not speak on camera, but say Chase has changed it's process.
The bank will now "require complete and current documentation to review an application for a trial modification." That, they say, is likely to dramatically increase the percentage of trial modifications that become permanent.
For Amy Miller and her bank, time is running out. The stakes are high.
"Life and death, in my case," Miller summed up. "I, not in my wildest dreams, could have imagined that (the program) would be utilized, to give an advantage to the banks."
Despite repeated requests for information and a month-long review of the Millers' case, Wells Fargo refuses to answer 13 Investigates' questions.
Mortgage Modifications for JP Morgan Chase
As of 10-31-10, Key stats since January, 2009:
- Offered almost 1 million mortgage modifications
- Sent HAMP applications to 900,000 borrowers
- Offered 270,000 HAMP trial plans
- Have more than 60,000 borrowers in permanent modifications
FOR HELP CONTACT:
Indiana Foreclosure Prevention Network: 1-877-GET-HOPE
HOPE NOW - Homeowner's HOPE Hotline: 1-888-995-HOPE
HOPE NOW Mission Statement: Maximize the preservation of home ownership while minimizing foreclosures. Assist borrowers who have the willingness and wherewithal to remain in their homes, but need some help to do it.
Indiana Supreme Court
The Mortgage Foreclosure Trial Court Assistance Project (MFTCAP)
Elizabeth Daulton, Project Manager, at (317) 234-7155
MFTCAP was created to assist trial courts in scheduling and conducting mortgage foreclosure settlement conferences. This program utilizes court-appointed facilitators to reach out to foreclosed borrowers, ensure they are aware of their right to a settlement conference, and to bring both parties to the table to try to find a mutually-agreeable settlement, or "workout."