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The plight of two Bend families illustrates what many say is the government’s failure to stem the housing crisis, as the Knights and the Costas wonder ...
Having designed and built their home with the help of relatives and raised their two kids there for years, A’Leah and Randall Knight, of Bend, are in no hurry to leave it.
Nor are Glen and Jennifer Costa, also of Bend, who built an indoor horse arena at the back of their home because they’d planned to stay.
Instead, like many in Oregon and across the U.S., both couples spent the holidays contemplating the loss of their family homes.
Their plights punctuate what most consider the failure of federal and state government to staunch the national crisis. And it’s unclear what help, if any, is on the horizon.
In Washington, D.C., where Congressonal hearings were recently held on the subject, few reforms have been approved. And in Salem, where the state Legislature plans to meet in February, it’s not clear if any legislation is planned, though rumors abound.
State lawmakers say their ability to do anything about the situation is frustrated by a combination of lack of authority over much of the industry, as well as by political gridlock.
Sen. Suzanne Bonamici, D-Wash- ington County/Portland, spearheaded Senate Bill 628 last session. It was intended to force company representatives to sit down with homeowners before foreclosure and make a good-faith effort to do a deal.
Instead, it was watered down by fierce lobbying on the part of the financial industry.
“I would have liked to do something much more than we did, but the political reality is this is what we could get passed, and we’re hoping that it’s helping,” Bonamici said.
Told of the effort to require a sit-down with her mortgage company, A’Leah Knight said, “I understand that, and I think it’s a great idea; but you know what? It’s not happening ... I would have paid $100 to sit and talk to them.”
Randall and A’Leah built their 1,700-square-foot home practically themselves five years ago. An appraiser valued it at $350,000 just two years ago.
The market was booming and investing in a second home made sense.
“We bought a rental house, and then the market just crashed,” Knight said.
Even worse, her husband recently had a severe pay cut, and their renter stopped paying rent.
They sold the rental house. Now, trying to short-sell their home to help pay off their $300,000 debt, they have it on the market for $136,900.
For the Knights, selling their home was a last resort. Helped by a friend who is a financial consultant, they worked for months trying to get a remodification from American Home Servicing Inc. They even tried to access the Home Affordable Modification Program, or HAMP, set up by President Barack Obama earlier in the year.
The company told them there was little it could do to lower their roughly $1,400 monthly mortgage payment. Their consultant friend told them the company was lying.
The couple had to fax over their modification application repeatedly, and had almost daily conversations with customer service representatives — strangers who spoke to them from various places overseas, and who had no authority to help them.
Knight says she came to the conclusion that the firm could help — it just didn’t want to.
“We’ve got our own blood, sweat and tears into this place,” she said. “It really is disheart- ening.”
Jennifer and Glen Costa bought their house in 2004 for $318,000. Jennifer wanted to start a program to help disabled youths by teaching them to ride, and they refinanced their home to pay for an indoor arena in their backyard.
Now, they owe $666,000 on the 5-acre property.
Between a costly failed business investment and the stock market collapse, the couple suddenly found themselves dipping into their retirement money to pay their mortgage.
They’ve made several attempts to negotiate a loan modification, wading through the same maze of lost applications and telephone runaround that the Knights did. And they’ve had several proposals.
But Jennifer Costa said she did her homework, and found that the proposals would have offered only temporary relief — and still left the couple financially doomed. The modifications being offered “could be considered predatory,” she said. “If I would not have had an attorney review my documents, we would have been screwed three times.”
Her story, she said, “seems more like a Stephen King novel that goes on and on and wakes you in the night, because there are so many turns and twists that are unbelievable.”
The Costas, who even set up a blog, called Can GMAC Execs Help?, at http://alldebtmods.com/, have been invited to submit another application for a loan modification, but they think foreclosure is inevitable.
Asked about the Costas’ case, Jeannine Bruin, a spokeswoman for their loan servicer, GMAC Financial Services, said she could not comment on confidential client information.
However, she defended her firm’s record, saying loan servicers have limited authority in what help they can offer; rather, it is the investors who have purchased the who dictate whether debt can be forgiven.
“I understand that this borrower is not happy, and we’re willing to look into this case again,” she said. “But I think overall we’re one of the better servicers.”
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As with the Knights, the Costas’ lack of success was not for lack of trying. Besides bargaining with their mortgage company, they wrote letters to company executives and lawmakers, like state Rep. Judy Stiegler, D-Bend.
“She’s been very proactive and very active,” Stiegler said. “I think it shows how difficult the process is ... I think it says that we may need to do some looking at our consumer protection rules and our laws to make it an easier and more accessible process. It’s been a very difficult road for them.”
It’s unclear if any legislation will be taken up in a special session planned for February. Rep Paul Holvey, D-Eugene, who is chairman of the House Consumer Protection Committee, said he’s heard someone in the Senate may be pursuing a bill, but Bonamici said she’s heard something may be taken up in the state House of Representatives.
Bonamici and Holvey say there are limits to what they can do, because a lot of loan holders and servicers are regulated by the federal government, not the state.
Bonamici plans to hold a hearing on Jan. 12 to get an update on how her bill, SB 628, is working, as well as how federal reform efforts are going. But she said lenders and loan servicers so far are refusing to attend.
“It’s been like pulling teeth” to get information on the subject, she said.
Holvey encouraged families facing foreclosure to keep sending lawmakers their stories.
“It’s disturbing to hear that couples are out there (trying to modify loans) and not being given a reasonable chance,” he said.
Through a spokesman, U.S. Sen. Jeff Merkley, D-Ore., who sits on the Senate Banking Committee, said he is pressuring lenders and loan servicers to do more.
“I have been very disappointed with the slow pace of modifications done under HAMP and have been pushing the Treasury Department to improve the program,” Merkley said. “This program will better assist troubled homeowners if we simplify the loan modification process and ensure that (federal) funding allocated for loan modifications is serving that purpose.
“The improvements I’m pushing for include requiring loan servicers to provide a single point of contact for homeowners, increasing transparency be- tween loan servicers and borrowers and enabling home- owners to submit documents electronically.”
Workshop March 27
Jon Bartholomew, a consumer advocate for OSPIRG, worked on SB 628 but thinks more is needed. He said families facing foreclosure should attend a Home Ownership Preservation Event workshop on March 27 at Central Oregon Community College, or go to www.foreclosurehelp.oregon.gov.
Nick Budnick can be reached at 503-566-2839 or at email@example.com.
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