Reach out to lender if home is at risk

Janet Rogers thought she was doing everything right.

When her income as a real-estate agent plummeted last year and she fell behind on mortgage payments, she contacted her lender, EverHome Mortgage of Florida, to try to avert foreclosure of the Kent home she'd lived in for 15 years.

In mid-January, she said, the lender told her it had canceled the foreclosure and worked out a loan modification.

Then in February, a stranger knocked at her door and said he had just bought her house at a bank auction.

"Before last year, I'd never missed a payment," Rogers said. Now she and her daughter have moved into her sister's two-bedroom condominium. "It's humiliating."

With the number of home foreclosures in the Puget Sound region skyrocketing during the past two years, officials from the Obama administration on down to local banks are advising distressed homeowners to work with lenders.

Banks may agree to temporary payment plans or lower interest rates, or approve a home sale for less than the amount owed — what's known as a short sale.

But housing advocates and real-estate agents say not all lenders have been responsive to homeowner requests for relief.

Many lenders including Bank of America, JPMorgan Chase and Countrywide have agreed to participate in Obama's Making Home Affordable program, which will allow qualified homeowners to get loan modifications or refinancing.

Other banks, though, are just gearing up for the federal program. And the volume of requests seems to have overwhelmed some lenders.

Lenders inconsistent

"There's no consistency whatsoever with the banks," said Donna Dziak, manager of the housing-counseling programs for Solid Ground in Seattle, which advises homeowners facing foreclosure. "Some banks who were difficult to work with last year are really coming around, while some who last year were responsive have totally flipped."

Solid Ground saw the number of people asking for help climb 30 percent each quarter last year. In the past four months, its caseload jumped 85 percent over the same period last year, said Mike Buchman, Solid Ground's communication manager.

For their part, banks say they have added staff and are modifying loans at an unprecedented rate.

Last year at Countrywide, for example, one house was repossessed by the bank for every two in which owners were able to remain under new terms.

This year, it's one foreclosure for every five home retentions, said Rick Simon, spokesman for Bank of America, which acquired Countrywide in 2008.

Distressed homeowners say their calls to lenders sometimes start at call centers in Mumbai, India. And when they reach the loan-modification department, there's no assurance those specialists are talking to the department that handles foreclosures.

"It feels like a lack of communication," said Tim McEwen, an agent for Re/Max in Covington, who has worked with distressed homeowners on short sales. "The loan-modification folks and the foreclosure folks seem to be working against each other."

Even when a homeowner reaches the person authorized to negotiate a new loan, that person may have hundreds of active files.

"The sheer volume of loans is making it hard to get any modifications," said Anton Stetner, a real-estate agent with Keller Williams Realty in Marysville.

Proof of hardship

Stetner said banks don't want to repossess homes in default, but they need proof of financial hardship.

He recommends homeowners assemble a financial package that includes two months of pay stubs and bank statements, two years of tax returns, a detailed yearly income and expense report and a personal hardship letter.

"If you're asking the bank to take a loss, you have to prove your case," Stetner said. "If you got into drugs and got a divorce, tell them. Make yourself a real and actual person."

Loan modifications and short sales are complicated by the practice over the past few years of banks bundling loans and reselling them to investors.

Investors have voice

These investors must approve any change in the terms of the loan or a sale for less than the amount owed.

"This is not a 10- to 15-minute conversation," said Jason Menke, spokesman for Wells Fargo Home Mortgage.

He said banks need to understand the homeowner's financial hardship well enough to present the case to investors.

Negotiating new loan terms or winning approval of a short sale is complicated by falling home values.

In some Puget Sound areas, prices have fallen as much as 25 percent from their 2007 peak, according to Redfin, an online real-estate broker.

In the past, with rising values, homeowners who got into financial trouble could sell at a profit or refinance with better terms. Short sales were rare.

Gamble

Now, agents say banks often turn down short-sale offers as too low, only to accept an even lower offer months later, when prices have fallen further.

Janice Poole, a Re/Max agent in Covington, represented a builder who listed a four-bedroom custom home for $634,000 in 2007 and dropped the price repeatedly last year before getting an offer of $450,000.

The lender, HomeStreet Bank, "wouldn't talk to us," she said. "I told them if it went to foreclosure, they'd get less."

The house was foreclosed upon and eventually sold for $389,000.

Home Street, a small lender that does business in Washington, Oregon and Hawaii, said it tries to stay abreast of local market trends.

The bank, which did not make subprime loans, has foreclosed on just 10 houses since January, compared with 99 on which it has worked out loan modifications or agreed to short sales.

"We do the best we can based on the facts at the time," said Rich Bennion, HomeStreet executive vice president. "Six months later do we kick ourselves? Sometimes."

Lynn Thompson: 206-464-8305 or lthompson@seattletimes.com