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Gilroy homeowners struggle with loan modifications and foreclosures

CA: Gilroy homeowners struggle with loan modifications and foreclosures

Gilroy resident Rose Barry has spent hours on the phone, even contacting people in other countries, all in the quest of obtaining a home loan modification.

Barry’s husband lost his job earlier this year, and if they cannot get their loan modified, they will have to consider renting their home and moving to a smaller place or risking foreclosure.

“It has been a very curious process,” Barry said.

Barry’s story is not unique. Real estate industry representatives said it has been particularly challenging to obtain a home loan in 2009, while foreclosures are still going through the roof.

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Project Sentinel, which aims to prevent foreclosures in San Mateo, Santa Clara and Stanislaus counties, handled 1,203 cases this year, up from 342 cases in 2008, said Martin Eichner, director of the agency’s HUD housing counseling. In 2007, the group only handled 84 cases, Eichner said.

Second wave of foreclosures

People who are losing their homes in 2009 are experiencing the second wave of housing foreclosures, he said.

The first wave, which struck a couple of years ago, wiped out those who had subprime loans, with terms that Eichner described as unconscionable.

More recent victims often find themselves already underwater and then a job loss pushes them into foreclosure, Eichner said. Gilroy has suffered during both periods, he said, noting that most foreclosures in Santa Clara County have occurred within proximity of Highway 101, where the county’s cheapest housing stands.

Gilroy has had a disproportionate number of foreclosures for its size

Gilroy has had a disproportionate number of foreclosures for its size, Eichner said. The city had 141 foreclosures in November while Santa Clara County’s total was 2,276. The county had 1,725 foreclosures in November 2008, according to foreclosure listing service RealtyTrac.

Gilroy unemployment rate high

Gilroy’s unemployment rate peaked at 17.8 percent in July before dropping to 17.2 percent in December. That rate remains the highest in Santa Clara County, according to the state Employment Development Department. By contrast, Morgan Hill’s unemployment rate is 14.9 percent, and the rate in Los Altos and Saratoga is only 6 percent.

Homeowners struggle with banks for help

Customers who face foreclosures have varying stories, but many of them have similar tales about the banks.

One northwest Gilroy resident, who would not give his name, noted that he bought his house in the mid-$200,000 range about 11 years ago, but then he refinanced with a subprime loan about 3-1/2 years ago.

He struggled to get a loan modification when it appeared that his payments were going to balloon from about $3,760 to $4,200 per month.

His mortgage had been sold multiple times, ultimately landing in the hands of City Mortgage. He successfully negotiated lowering his monthly payment to $3,100, but now even that has become too much to bear, as he lost his job earlier this year.

While he maintains hope that he will hold onto his house, he noted that others in his area have not been so fortunate.

“In our community, if I went for a five or six block walk, I bet there would be at least one to two homes on every street that either someone walked away from or someone lost their house,” he said.

Bank of America

Barry also has held onto her home, although she has been unsuccessful in getting her loan modified through Bank of America since June.

After she and her husband spent one to two hours each week for several weeks trying to get in touch with the right person, she said the bank sent her husband a letter denying approval because the bank had unsuccessfully tried to reach them by phone. Barry does not recall receiving a single call from the bank.

“They’re unbelievable,” she said. “I don’t know how they can sleep at night.”

Sheila White, a real estate agent with Starritt Realtors, has worked with Barry to help obtain a loan modification, and she said they have put in more than 20 calls to Bank of America.

Did you know – bank bailout money being used to hire employees overseas?

On one occasion, Barry said she even talked to someone from Costa Rica. She expressed shock that federal bailout money that was given to lending institutions was being spent on hiring employees overseas.

“The need is enormous, and the generosity of the banks with our money is nil,” she said.

Rich Simon, a spokesman for Bank of America, noted that the bank had done 160,000 trial home loan modifications as of November and was expected to do 200,000 by the year’s end.

“It’s impractical for us to assign someone to every one of these customers,” he said.

The Costa Rica call center generally deals with Spanish-speaking customers, he said, although calls can be transferred to various offices if one particular call center is busy.

In order to qualify for a modification, customers must have financial problems that will likely cause them to lose their home but who still make enough money that they will be able to make payments after the loan is approved, Simon said.

“It’s not something where the government is easily convinced,” he said.

Wachovia | Wells Fargo

Meanwhile, White said Wachovia is the only lender she has dealt with that seems to have processes in place to work with clients effectively.

Terri Schrettenbrunner, a spokeswoman for Wells Fargo, which runs Wachovia, said that bank officials knew that there was public concern when it acquired Wachovia in December 2008 because Wells Fargo had no experience with negative amortization loans.

As a result,the bank created a group to manage those loans. Wells Fargo and Wachovia now have 15,000 people who are focused on home retention, and all of them are based in the United States rather than overseas, Schrettenbrunner said.

She noted that banks face plenty of challenges, including keeping up with the volume of customers who need assistance and changes in federal guidelines. Consumer experiences are also changing, Schrettenbrunner said, as there are now more people who are unemployed or underemployed.

Still, she said 92 percent of Wells Fargo and Wachovia customers are up to date on paying their mortgages, and it appears that mortgage relief programs are working.

Getting a purchase loan extremely difficult

Others within the industry say that it is extremely difficult to qualify for loan programs these days.

David Hart, owner of Hometown Realty and Gilroy Mortgage Co., said things have gotten so bad that he has given up on home loan modifications.

“It’s a nightmare,” he said.

Banks generally seem to look for reasons not to approve loans, and they often do not believe appraisers, Hart said.

Many homeowners who owe twice as much as their homes are worth are tempted to walk away from the property. Meanwhile, the homes that sell are often bought by people who already have cash in hand.

“Investors are the ones who are keeping the market alive,” Hart said.

Susan Jacobsen, another real estate agent at Starritt Realtors, said she has never seen a market that is this bad.

“We’ve seen cycles like this before, but nothing like this,” she said.

On the other hand, it is potentially a good time for first-time home buyers, Jacobsen said, noting that products such as FHA loans can be helpful. Several members of the real estate industry also mentioned that new home buyers can get an $8,000 tax credit as a benefit.

Jacobsen urged new home buyers to be wary of purchasing foreclosed homes, as they can come with tax liens and property damage among other problems.

Patty Filice of Intero Real Estate Services said there are great deals to be found if buyers are willing to wait through the short sale process.

Looking ahead, what happens with the market next year all depends on interest rates and unemployment trends, Schrettenbrunner said. And ultimately that’s anybody’s guess.

In the meantime, homeowners and the real estate industry face many challenges.

In the words of Hart: “It’s just going to take a little time to heal.”

Before completing and sending in a loan modification package, you may want to obtain some coaching to combat the stall tactics banks/servicers are using to cut to the front of the line of other applications and get approved faster

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