Bank's repeated errors almost caused couple to lose home to foreclosure
Tom and Lola Kern with their 2-year-old daughter Maya in front of their Ypsilanti home that they almost lost through foreclosure because of a series of bank errors. The Kerns have lived at their home on Forest Street for 10 years.
Lon Horwedel | AnnArbor.com
When Tom and Lola Kern applied for a mortgage modification last November, it seemed they were being given a lifeline that would allow them to keep their house.
Eight months later that lifeline was turning into a noose. Because despite doing everything the bank asked, the Kerns still ended up being threatened with foreclosure.
The Kerns’ situation had many of the familiar hallmarks of the nationwide mortgage crisis: decreased household income, a home that has lost substantial value, and a hair-pulling loan modification process with no end in sight.
But the Kerns' story also shows that, if you’re struggling to pay your mortgage and not getting anywhere with your servicer, don’t give up. Escalate.
The Kerns bought their house in Ypsilanti in 2000. Both are self-employed: he’s a house painter, she’s a professional violinist. For several years they made their $1,400-a-month mortgage payments.
But after the economy tanked in 2007, painting jobs were harder to come by and gigs became more infrequent.
Tom and Lola tried branching out into office jobs — balancing work with staying home with their 2-year-old daughter so they could avoid day care costs. Although they drained their retirement fund, they managed to keep making their house payments until the fall of 2009.
At that point they applied with JPMorgan Chase, their loan servicer, for a modification under the federal Home Affordable Modification Program. They were accepted and given a three-month trial period from January through March, 2010, with payments of $1,200 a month. They were told a permanent modification would bring their payments under $1,000.
The Kerns successfully completed the trial period. In April, Chase requested additional documents, which the Kerns say they promptly returned. A Chase employee told them to keep making the trial payments until a decision was made on permanent modification, Lola said.
Then the process unraveled. Every month from May to August, they received the same letter from Chase requesting the same documents. Each time, the Kerns re-sent their inch-thick packet to Chase, saving the postal receipts. Tom said he called Chase each time to see if the documents had been received, and was assured each time they had.
The next month the entire process would be repeated.
On Aug. 10 Lola arrived home from work to discover a door tag with the message “Please call Chase.” Tom called and was told they had been declined for final modification in June, but they could be reinstated if they submitted all of their documents again. They did.
On Aug. 16, they were served a foreclosure notice. Tom said when he called Chase, he was told the foreclosure was triggered because they were more than three payments behind schedule — a direct result of their reduced trial period payments.
The Kerns contacted the Mortgage Foreclosure Intervention Program at Michigan State University Extension. Program coordinator Katherine Grant secured a 90-day stay on foreclosure proceedings, and set up a mediation meeting with Chase lawyers for November. In the meantime, Lola said, they were told to cut all unnecessary spending and record every dime they earned and spent.
Lola also called AnnArbor.com. I met with the couple in mid-September, and they told me their story and showed me the voluminous paperwork.
“If it comes to pass that we lose our home, there are worse things,” Lola said, tearing up. “But we have a lot of happy memories here. We’ve done a lot of growing in this home. My mom and dad gifted us the down payment, and I would hate to see it lost to Chase bank.”
After our meeting, I called Chase and asked spokesperson Mary Kay Bean to look into the Kerns’ situation. Once she had researched it, I asked her why the Kerns had to repeatedly send the same documents. Are things really that disorganized at Chase?
“It appears there was some confusion,” Bean replied. “I’m not going to go any further than that.”
I also asked Bean why Chase initiated foreclosure proceedings while the Kerns were still in the modification process. Bean replied that the foreclosure was filed “appropriately after the trial modification period and before the current modification review.”
In other words, it was filed during the time that the Kerns were mistakenly dropped from the program due to Chase's “confusion” over documents.
Bean told me the documents were under review, and it could take up to 60 days.
But it seemed wrong that the Kerns were even facing foreclosure and having to go through the mediation process. So I called the U.S. Treasury Department, which oversees HAMP. Spokesperson Andrea Risotto told me that under HAMP guidelines for servicers, Chase was supposed to have notified the Kerns in writing when they were dropped from the program and offered other foreclosure prevention alternatives.
“Our guidelines are clear that [homeowners] get 30 days to appeal or apply for an alternative modification,” Risotto said.
Risotto referred the case to their help line — a step that any homeowner can do by calling 888-995-HOPE and asking for "MHA Help.”
Then I contacted Fannie Mae, which owns the Kerns’ loan, to see if there was anything they could do. Spokesperson Janis Smith immediately put a team of people on the Kerns’ case. Four business days later, she called me with the news that permanent modification papers were on their way to the Kerns. The interest was modified from 7 percent to 2 percent, bringing the payment below $1,000.
Help for homeowners
Homeowners who find themselves in loan-modification limbo can take the following actions:
- Know your rights. Familiarize yourself with the HAMP guidelines for loan servicers.
- Keep detailed records. Make copies of all documents you send. Save postal receipts. Keep a log of conversations with your servicer and note whom you talked to. Save all documents sent to you.
- Escalate. If you feel you’re not getting anywhere with your loan servicer, ask who owns your loan and contact that company’s help line.
- Escalate further. If you don’t get anywhere with the loan investor, or you’re unable to find out who owns the loan, contact the Treasury Department’s Hope Now hotline: 888-995-HOPE or www.hopenow.com.
“It really is just about getting people to slow down and call people back and forth and look over documents, put all the pieces together, and figure out whether anything is missing, and if it is, get it,” Smith said. “What's going on in this environment is that servicers are processing so many cases, things get bottlenecked.”
When I shared the news with Lola, she was shocked for a moment, and then the relief came pouring out.
“I can't believe it — I can't thank you enough,” she said, her voice trembling. “I'm speechless. We get to keep our house.”
And what was Chase’s response? Bean said they were “pleased” with the outcome. I asked her if Chase was taking steps to make sure other homeowners weren’t being dropped from the program without notification and referred for foreclosure.
Bean replied: “I have to decline to comment on whether Chase made any mistakes.”
I asked Risotto of the Treasury Department whether Chase would face any consequences for apparently violating HAMP guidelines in the Kerns’ case. Risotto she couldn’t comment on individual cases, but stated that Chase is included in the department’s monthly compliance reviews of mortgage files of homeowners who are not offered or denied a HAMP modification, to ensure that servicers' actions are appropriate.
“I would just reiterate that in any instance where a homeowner believes they are not being treated fairly, call the hotline,” Risotto said.
Likewise, Smith of Fannie Mae said she couldn’t comment on consequences for Chase, but said that any servicer's failure to comply with requirements may constitute a breach of their contractual agreements.
“Errors may cause a servicer direct reputational risk, and for any situations where servicers are out of compliance with Fannie Mae guidelines, they must provide appropriate remedies to the borrowers,” Smith said.
That seems to be exactly what happened here.
Jen Eyer is on the Community Team at AnnArbor.com, and she writes a citizen advocacy column. Do you have a problem you’d like to share? Contact Jen at jeneyer@annarbor.com or 623-2577, or fill out the form at www.annarbor.com/citizen-advocate.
Comments
Angil Tarach-Ritchey RN, GCM
Mon, Oct 11, 2010 : 6:59 p.m.
This is similiar to what I and many others experienced with Washington Mutual/Chase. I had a modification in August of 2008. I recieved, signed, and sent all notorized paperwork in, with a check they said needed to be submitted with the paperwork. I received my monthly statement reflecting the new terms and payment. I paid my mortgage payments every month without delay before and after the modification. In January I paid my mortgage payment without looking at my statement, and at the end of January I received a letter from Chase saying I missed 3 or more payments. I then looked at my statement to shockingly find the interest rate and payment was reverted to the terms before the modification! This modification was prior to the changes put in place by the government and was not a temporary modification. My paperwork reflected the modification was for the life of the loan. I assumed it was an easily resolved error, and called to have it cleared up. To make a long story short, they didn't credit 10 months of my payments to my account, and I was receiving foreclosure notices by registered mail. I spent countless hours on the phone, gathering and sending out proof of my payments, and I still couldn't get the issue resolved. I would hear, "we see there is a mistake, but we don't know what happened. We'll get back with you." No return calls or any contact from them other than more foreclosure notices. I could never get the same person on the phone. The people I did speak with were rude, accusitory, and I was even hung up on. I called Chase offices and administrative staff all over the nation, trying to get someone to clear the mistake. It wasn't until I notified the Better Business Bureau, the Federal Trade Commission, and sent packets of documentation of this whole situation to every major news station, I finally got the payments credited to my mortgage. I barely received an apology, and was given some excuse about someone not entering the modification information into my account. They claimed payments were held from my account because they don't accept partial payments, yet most employees I reached by phone said I hadn't made any payments until I insisted they look further. They had no excuse for why someone didn't enter the information when it was brought to their attention and I was sending proof of my modification, and payments. They even had the audacity to tell me they wouldn't charge me late fees, as if they were doing me a favor. In the midst of this whole mess I found situation after situation reported by homeowners all over the web, having the same type of problems with Washington Mutual/Chase. Chase' incompetence and poor company communication causes extreme amounts of stress in their victims! They should be held accountable and forced to provide some type of compensation for the unnecessary hell they put homeowners through! They have no idea the stress and frustration they caused me for 8 months! Not only was it devastating and embarrassing to get several registered foreclosure letters, but when you know you have never missed or been late on a mortgage payment in over 12 years, and no one will listen or correct the error, you experience an incredible amount of anger. Unless homeowners speak out on what Chase has put them through, more homeowners will suffer and spend countless hours battling to keep their homes. I wouldn't wish what I went through on anyone! They don't hesitate to rip the homes out from under families struggling to keep them, but they have no urgency when they are the ones at fault. I would warn everyone to steer clear of Chase when considering a mortgage loan.
Mick52
Wed, Oct 6, 2010 : 4:27 p.m.
Under the assumption that bailing out people in trouble helps us all, would it not be beneficial all the way around to let everyone get their mortgage down to 2%? That way we all save and pump money back into the economy. I am so glad things worked out for these folks, but it kind of sticks in my craw that if you work hard, makes ends meet and keep up you do not get any assistance. I think everyone should be eligible that would prevent further problems. The best example - not pertinent here - is he cash for clunkers. My wife was driving a rusted out beat up 15 year old Honda that was getting over 30 MPG. Did not qualify. So you got a bailout for buying a bad car, but no reward for doing the right thing.
Speechless
Mon, Oct 4, 2010 : 10:40 p.m.
An addendum: The New York Times published an informative piece late last week that was headlined "Foreclosures Slow as Document Flaws Emerge." http://www.nytimes.com/2010/10/01/business/01mortgage.html?_r=1&th=&emc=th&pagewanted=all The initial comments I read were pretty interesting as well: http://community.nytimes.com/comments/www.nytimes.com/2010/10/01/business/01mortgage.html?sort=recommended It looks like the larger housing industry context for HAMP is a mixture of overwhelming mortgage/foreclosure paperwork (which the big lenders may exacerbate by not hiring enough help to handle the work), lender expedience, and fraud that victimizes mortgage payers. There's debate as to which screw-ups are "missteps" and which ones amount to land grabs.
Cendra Lynn
Mon, Oct 4, 2010 : 1:02 p.m.
This is MY story. Since December 2008. Only with CitiMortgage and we aren't at the happy ending yet. You must keep re-sending updated versions of your information every 3-6 weeks. The bank admits it made a mistake in December of 09. But has no way of going back in time and saying: if it was OK then, it's OK now so let's just finish it up. They say, "Let's start over." So you do, again and again and again. Think about it: you're a bank. Even if you're a good bank, how do you suddenly handle tens to hundreds of thousands of mortgage renegotiations. Where do you find enough people trained in this process to hire? How do you set up a computer system to link to everyone who answers the phone? OK, you outsource. Mortgage Outreach Services is similarly swamped. So most of us are in this together, banks, people, kids, homes, lives. Who has the magic wand to make it all come right? Who can handle each separate case and see it through to the end? In Washtenaw County, the blessed Catherine McClary has created a department to oversee foreclosures. They are very, very good. But they are swamped. Some days I think that we'll have this settled the month my last house payment is due in 30 years.
Milton Shift
Mon, Oct 4, 2010 : 10:37 a.m.
We're supposed to believe we live in a free and democratic society? Those who control capital - the banks, the big shareholders - they dictate almost every aspect of our lives and our world, and they are not elected. There is no division of power and virtually no checks on it....Almost cost this unfortunate couple their home. Sounds like many may have already. Thank you Jen for drawing attention to this.
Speechless
Sun, Oct 3, 2010 : 9:57 p.m.
Since it appears from the story and the comments that the Kerns' experience is hardly unique, one has to wonder if this kind of institutional process amounts to a coordinated land grab by big banks. The assumption would be that those straining to pay off their mortgage will typically have less knowledge of how the system works and also not be able to afford the caliber of legal help they need to fight back. In times past I've heard a tale or two of mortgage bankers moving in like vultures when a small business began to struggle with cash flow — and also its storefront or office mortgage. Quoted from above:  "I find it really puzzling why we can bail out the banks to avoid their ruin, but when it comes to bailing out families, to promote community stability, suddenly they are demonized as irresponsible. They didn't cause the financial meltdown. They are mere pawns in a system that was greedy beyond measure." That, in a nutshell, summarizes the current politics of the economy inside the DC Beltway. It's all about nodding quietly and handing over tax revenues to the mega-banks when Wall Street bellows that it's too big to be allowed to fail. When reasonable, concerned people question this and point to the waves of foreclosures and the growing numbers of homeless, the political far right will step forward to vigorously blame and demonize the less fortunate who struggle just to get by. In the context of media, those who play this blame game are a modern equivalent of black-shirt street enforcers whose bullying plays right into the hands of large banking interests.
YpsiLivin
Sun, Oct 3, 2010 : 9:05 p.m.
Jen, Nearly half of all "economically active" persons in the United States participate in a credit union, but only twenty-six credit unions participate in HAMP. A homeowner isn't eligible for relief under HAMP unless his/her loan is guaranteed by Fannie Mae or Freddie Mac. Other servicers participate on a strictly voluntary basis. According to the Web site you provided, just over one hundred servicers (out of thousands) that aren't REQUIRED to participate in the program do. That's a pretty nominal voluntary participation rate. So, from a practical standpoint, the program isn't available to people whose loans aren't guaranteed by Fannie Mae or Freddie Mac. HAMP is yet another handout to the banks; it has very little to do with helping homeowners.
Kathleen
Sun, Oct 3, 2010 : 5:20 p.m.
This story sounds remarkably familiar. Different bank, same kinds of crazy slothfulness--family had 3 months to "prove" they could make the new payment, followed instructions to a tee, kept paying, heard from the bank that they had failed to follow some (unwritten/unnotified) requirement and were therefore ineligible. Family went to MSU Coop extension where they learned that it would not be "worth it" to continue to honor their commitment to the now-inflated mortgage of their house, given the current value of their home, and decide to give up. Net gain--the bank gets all payments to date on their home, including down payment, the bank gets bailed out of possible failure, the bank gets the house, complete with all improvements made by the family, gratis. The family gets to squat until they are formally notified of foreclosure. Net loss--the house sits vacant, deteriorating in value as the grounds are no longer maintained, the neighborhood loses a committed and responsible family as a neighbor, the family's credit rating is ruined, and the family has to leave the area to find an affordable rental unit which will not benefit from an investment in improvements because the family doesn't own it. I find it really puzzling why we can bail out the banks to avoid their ruin, but when it comes to bailing out families, to promote community stability, suddenly they are demonized as irresponsible. They didn't cause the financial meltdown. They are mere pawns in a system that was greedy beyond measure. I don't buy the idea that the benefit should only extend to banks. With the drop in housing value, some of this needs to trickle down to the home-buyers.
Marcia Mai
Sun, Oct 3, 2010 : 4:48 p.m.
It's good to see a local story about the horrific 'bait and switch' practices that the big banks have been practicing for the past year. They offer customers who are struggling but not delinquent on their loans- HAMP loan modifications. Hopeful homeowners fill out the 40 + pages of forms, personal and financial documentation, and if they meet the stringent guidelines, the banks approve them for the HAMP and a lower trial period mortgage payment. Even while paying the trial amount on time, the banks report them as delinquent to the credit agencies, ruining their credit. Over the months, the banks require resubmission of documents, often numerous times. Finally, they deny the loan modification- without notifying the home owner- and start foreclosing on their homes. This is clearly illegal (MLL 600 3205 in MI) but banks are doing it with impunity. I know too much about this as I have been living my own version of this nightmare for the past year. I'm happy that the Kern family contacted the local press and got help. I only hope that I and the other local people whom I know are facing this same corporate fraud-- can achieve happy endings. The local legal services attorney whom I was referred to by the local foreclosure prevention counselor has yet to advise me of how to proceed- other than telling me to call and meet with CitiMortgage's attorney. I wish that I had contacted Jen, the can-do gal, myself!
jondhall
Sun, Oct 3, 2010 : 4:21 p.m.
@ Eyeheart: Think like some thought, buy the house refinance in 2006 when homes were at the peak, spend the cash on vacations and electronics, now let the tax payers bail them out! There are tens of thousands that did just that. Now we the tax payers bail them out. This all relates back to the "Clinton" era, whereas they wanted all warm bodies in homes. Something does not smell here as good as it could, I'm sure of that. Also let us not forget this house appears to be located in the "City of Ypsilanti" where taxes are higher than anywhere else. (they have great services there I hear tell).
YpsiLivin
Sun, Oct 3, 2010 : 1:26 p.m.
Jen Eyer, It's worth pointing out that HAMP was NOT designed to help every homeowner. Only those homeowners whose mortgages are guaranteed by agencies like Fannie Mae or Freddie Mac qualify. Right off the bat, that eliminates people whose mortgages come from credit unions that keep their mortgages rather than sell/securitize them. Second, the best way to protect the consumer is to re-regulate the financial industry and put it on a very short leash. Under deregulation, the financial industry has come up with incomprehensible "monetization" and "investment" schemes that are designed solely for the benefit of their designers, most of whom are now rich beyond the dreams of avarice. When even financial experts, much less federal regulators and legislators don't understand these "products," how can the consumer possibly HOPE to figure these things out? The controls on banking, insurance and securities have been systematically dismantled for the past 30 years, leaving the almighty taxpayers - the ones least equipped to even understand what happened - to pick up the tab.
mike from saline
Sun, Oct 3, 2010 : 12:49 p.m.
anytime the Government tells you they're going to take your money and re-distibute it for your own good, I suggest you hide your wallet, and make sure your guns are loaded, and in working order!
jondhall
Sun, Oct 3, 2010 : 11:39 a.m.
@ annie: they wash upon the beach becasue they know the Government will take care of them, improper planning, they made a mistake, there are numerous reasons. However this is not my problem as a taxpayer. If you chose to give them some money that is fine, and very noble of you, but the government has selected a few people to help. My grand daughters should not have to pay for this, and we are not on a "pay as you go tax system". So be noble with your money not my granddaughters money she is only six years old. @ Elizabeth Nelson: When you personally attack me and call me simple minded, maybe you should check your mirror. For I'm not a sheep following blindly what someone else states.I guess you blindly believed that Iraq has nuclear weapons, because someone told you so. As for property values I can tell you this it does not take ten houses on one street to lower proerty values. One house sold at reduced amount is all it takes. The bank when and if they loan any of that 0.00 -.25% money (what the bank pays the Federal Rreserve) does an appraisal. That one sale at reduced amount will be there in that appraisal. If you really want to help someone how about a 1.5% loan for all? I guess if you are rich and make over $200,000.00 you deserve nothing.
CountyKate
Sun, Oct 3, 2010 : 11:28 a.m.
Are there any local agencies that give advice on what to do if one thinks one is going to become delinquent? It seems to me a lot of people could use that kind of guidance before the process gets very far down the road.
Annie Zirkel
Sun, Oct 3, 2010 : 10:48 a.m.
So there's a story about a person walking down the beach and noticing thousands of starfish that have washed up on shore. They pick one up and throw it back into the water so that it doesn't die. Then they pick up another one and do the same. A passerby stops and, sensing the futility of the action says, "Why bother? What you're doing won't make any difference." To which the first person replies while throwing in yet another starfish, "Well it makes a difference to this one." Hopefully someone takes on the job of figuring out why the starfish are washing on shore. And for this story, obviously there are big questions about how to address our country's financial challenges, but I would love to see comments that stay with actual story that was written instead of immediately turning the conversation into a debate on fiscal/government policy. Jen's and annarbor.com's actions helped this family. (And maybe others who now have an idea of what they can do if they are in the same situation.) So I'll just say - thanks Jen for helping create a happier ending for the Kerns. I am sure they appreciate it.
Elizabeth Nelson
Sun, Oct 3, 2010 : 10:46 a.m.
I'm impressed at how simple-minded some people are. Like Jen explained clearly and concisely: there is a direct and indirect benefit to millions of homes not going into foreclosure. Folks who like to scream warnings about socialism and communism are also not 'getting' that there is a direct and indirect benefit to having a safety net in place for people. No matter how comfortable and secure my own family is, it is not a good situation for ME if too many of my neighbors are desperate and in need (this is true whether they live next door, across town, or across the county). This is the reasoning behind government safety nets, it's not JUST for the people who take advantage of them. And in this case, it's obviously better for our WHOLE community when every third house isn't in foreclosure...
jondhall
Sun, Oct 3, 2010 : 9:39 a.m.
Back in December 2008 a full page ad was run in the USA Today Newspaper. The following is that ad : http://remortgageamerica.blogspot.com/. This Ph.D In Economics Dennis F Paulaha proposes giving every US Citizen a 1.5% loan up to $500,000.00. Now what could you do with that in Savings? The Federal Reserve loans banks money at less that that currently 0.00 to.25%. That would require no stimulus $$ spend, the economy would right itself overnight. Property values would increase as rate decreases would "enable" more citizens to purchase homes. Please note : This program was proposed only for US Citizens. There are other answers rather than Government spending my granddaughters future. Think outside the "box", now what do you think the lobbyists for "the Banks" thought of this proposal? Think of how you can do it! Not how you can quit! If we bring America back to the people we will survive, if we stand by and let government take over, we will not continue as a a civilization. Socialism does not work just like Communism will fail.
The Watchman
Sun, Oct 3, 2010 : 8:59 a.m.
OK, so I have kept up with my payments through sacrifice and working a second job. I still pay 6.125% interested. So am I now subsidizing others that defaulted on loans through my taxes? Wouldn't I be better to default to get AnnArbor.com to make calls for me? @A2comsux(love the name by the way), if you weren't tongue in cheek on your comment: "I'm glad A2.com was able to take the time to call 3 different places and figure out why this mess happened. Most people that are working all day and raising kids after work don't have the time to deal with all the endless phone calls and staying on hold for 45 min etc.", if you want the house bad enough you make the calls. I am not suggesting the Kerns' did not do what was required through Chase and I am glad for them. I WANT A 2% LOAN also.
jondhall
Sun, Oct 3, 2010 : 8:49 a.m.
While I'm glad for the Kern's that they get to keep their house. I do not agree with the reduction in rate from 7% to 2 %. On a $100,000.00 loan that amounts to $5,000.00 per year or $417.00 per month savings. Who is taking the "hit" here is the Bank ( Chase) or is it the taxpayers? If it is Chase that is fine as they are currently borrowing their money for 0.00 to.25 % from the Federal Reserve. (They just print more or borrow from China) Those are some great margins for Chase to have a "spread" like that. No wonder they have a "bank" on every corner these days. Then when they "fail" the good old government bails them out! I say "horse hunky" let them fail. I hope Chase took the "hit" as my six year old grand daughter does not need that to pay off this loan. Is there Liberty still or is there Justice?
Scotsman
Sun, Oct 3, 2010 : 8:04 a.m.
2% interest? How does that work? Are they on another ARM? I am not aware of any fixed rate mortgages with a rate that low.
dading dont delete me bro
Sun, Oct 3, 2010 : 7:26 a.m.
$1400/month seems awfully steep for a mortgage on that house. i know i don't know the specifics, i suspect they have an extremely short mortgage term (