Is this reporter reading the RRECI?????
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Lenders offer little help in foreclosures
Companies ill-equipped to handle surge of distressed homeowners
By Kimberly Blanton, Globe Staff | May 12, 2008
Three times, Thomas and Tracy Barboza found a path out of foreclosure. Three times, their lender failed to help them.
Unable to afford their mortgage, the Barbozas are trying to sell their home. They have received three offers since last summer. But because the offers - between $220,000 and $225,000 - are less than their $320,000 mortgage, their loan company, Countrywide Home Loans, would have to sign off on the deal and accept a loss. Countrywide has either rejected or ignored the offers and foreclosure seems imminent.
"It's like they want things to go sour," Tracy Barboza said, sitting at the kitchen table of their home, stripped bare of other furniture after they moved into an apartment in anticipation of a sale.
The Barbozas are among the hundreds of thousands of homeowners seeking help from mortgage companies to withdraw from loans they cannot afford. Some want lower loan rates to reduce their monthly payments. Others simply want to cut their losses and sell.
But the loan companies are proving ill-equipped to handle record foreclosures, particularly requests involving sales that would require lenders to accept losses on the loans, so-called short sales. The mortgage companies turn down offers - even though it may be more costly to seize the house in foreclosure - or they take so long to respond that the buyers move on, or don't respond at all.
Homeowners, real estate brokers, and others who have tried to crack the system describe it as akin to a black hole. Automated phone systems are impossible to penetrate, and people describe waiting on hold for an hour or more. Messages go unanswered. Paperwork is lost or gathers dust in piles. Those inside the loan companies with authority to make decisions are not consulted.
Andrew Kaplan, whose firm Agencybid.com auctions distressed properties, has devised tactics to get a loan company employee on the phone. "I say, 'Look, these people are in trouble. They need help.' They just say, 'I can't do anything about it,' " he said.
The companies say they are trying. The American Securitization Forum, whose members include mortgage holders and loan-servicing companies, said in a statement they "are working diligently to address all these requests but each loan needs to be evaluated on a case-by-case basis."
Vicki Vidal, senior director of government affairs for the Mortgage Bankers Association, said some lenders have set up online applications so borrowers can work out their problems. She said short sales are particularly difficult. If Countrywide approved the Barbozas' sale, it would mean forgiving the amount the couple owes in excess of the sale price, about $100,000. Also, many short sales involve a primary and a second mortgage, further complicating matters.
Rejecting an offer for a short sale is "a valid, acceptable response," Vidal said.
After being contacted by the Globe, Countrywide agreed to try to expedite a short sale, Tracy Barboza said, though the couple currently doesn't have an offer. Countrywide also issued a statement apologizing for how it handled their situation.
Delays also affect the broader housing market. The longer troubled properties languish, the more they undermine other homeowners trying to sell into a market of mushrooming inventories.
"It's killing the market," said the Barbozas' agent, Tina Golant. Her firm, Action Real Estate, has called and faxed Countrywide repeatedly about the various offers.
Prospective buyers of these homes react in disbelief when their offers for properties elicit no response or even an acknowledgment from lenders.
Six months ago, Don Lin put in a $390,000 offer on a four-bedroom Colonial with an in-ground pool in Tyngsborough. The owners had a $471,750 mortgage and received a foreclosure notice in January. The house's current list price, $399,900, is down from $575,000 last year.
The lender, Option One Mortgage did not respond to the offer, said the seller's agent, Sean Valiton of Redfin.com. Lin recently toured the house and discovered a foot of water in the basement, because the electricity had been shut off, rendering a sump pump inoperable. Lin is prepared to walk away if he finds another house.
Option One spokeswoman Christine Sullivan said short sales have numerous steps that make them difficult to approve. Also, loans today have a layer of complexity that didn't exist when banks used to make loans and put the paperwork in their vaults. Option One sold this mortgage in a bundle of loans to investors, who have final say about a sale.
Sullivan also blamed delays on the house's seller, saying that "despite ongoing outreach to the borrower and his attorney to request the missing document, we do not yet have a complete package of information."
"That's baloney," said the seller's agent, Jay Lynch, who said he has a paper trail of the documents sent to Option One. "I can't believe they have the nerve to say that."
The companies in the middle - between lenders and borrowers - are often loan servicers. Historically, they did not handle the types of problems borrowers face today in such large numbers, said Bruce Marks, chief executive of the Neighborhood Assistance Corporation of America, a Boston nonprofit that renegotiates subprime loans for borrowers.
Traditionally servicers' jobs were simple: collecting monthly payments and past-due bills or paying property taxes on behalf of homeowners. "Servicers have not been able to change that culture," he said.
During the era of easy money and rising property values, the Barbozas, like many, repeatedly refinanced their Attleborough home. Thomas Barboza said the last refinancing, with Countrywide in 2005, helped pay off some credit cards and buy equipment for his work as a carpenter. The couple said they didn't realize the risks associated with the Countrywide loan, which was an "option ARM," an adjustable-rate mortgage that gave them the option of paying less than the monthly principal and interest payment. They often did not make full payments, causing the loan balance to swell to $320,000 by last summer.
But the Barbozas tried to dig out of the hole. With their mortgage payments due to rise, the couple applied to Countrywide early last year to refinance into a different type of loan, but were rejected. They then borrowed $10,255 from family to catch up on their debt, with the expectation Countrywide would offer them a repayment plan. That plan, however, was $3,000 a month, beyond what they could afford.
"I tried to contact them, and nobody would return my call," Tracy Barboza said.
Last August, they put the home up for sale at $248,900.
Rose Spoltore, another agent at Action Real Estate, said Countrywide responded to just one of the three offers, for $225,000. Countrywide countered at $268,000. "No way," said Spoltore, who has been an agent for 30 years. The buyer walked.
She said Countrywide barely responds to her correspondence. From a 3-inch stack of paperwork, she fished out a January memo to Countrywide that details how she spent two hours, in vain, trying to fax the company 32 documents - "many of which you already had." She sent the documents overnight but got no reply. In exasperation, she wrote on one faxed letter, "NO ONE THERE KNOWS WHAT THEY ARE DOING!!!"
The market has declined, and Spoltore reduced the list price to $199,000. She estimated it would fetch about $125,000 in a foreclosure auction.
To move on with their lives, the Barbozas rented an apartment from a cousin. Yet they're latched to their property, maintaining and heating it for the second-floor tenant.
Thomas Barboza is incredulous about their circumstance. "I either get extremely angry, or I start laughing," he said.
Kimberly Blanton can be reached at blanton@globe.com.
© Copyright 2008 The New York Times Company
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