The trouble for the Stromseth family of St. Louis Park began about five years ago. That's when Kathy Stromseth, 53, suddenly lost the job she'd had in the financial industry for three decades.
"All I got was my retirement, my 401K. And that just tanked a few months later," she said.
She quickly found a new job. But four months of unemployment and living on just her husband Dale's salary was enough to derail their finances.
Like so many families hit by the recession, Kathy and Dale, 55, quickly fell behind on their mortgage.
They applied for a loan modification through the federal Home Affordable Modification Program (HAMP). And after successfully completing a three-month trial modification in 2010, they signed a permanent loan modification agreement with their servicer, Bank of America. It lowered their monthly bill by a few hundred dollars.
Minnesota saw a 17-percent drop in foreclosures last year, but many homeowners like the Stromseths are still struggling to keep their homes.
“I have worked hard, we got married and I have never struggled as much as I have the last two years.”Homeowner Kathy Stromseth
A recent landmark settlement with the nation's top mortgage banks is the latest and largest effort to help homeowners on the verge of foreclosure. But the agreement comes too late for homeowners whose loans were mishandled, or who don't qualify for help.
Late last summer, after a year of on-time payments, Kathy Stromseth noticed a mortgage check was returned. She called Bank of America to find out why.
"When I called to say, 'Why did you return my check,?' she goes, 'Oh well, your modification wasn't approved.'" I said, 'I have the letter right here from July saying you approved it.' She goes, 'Well, in November we declined it,' and I said, 'And did I get a letter?' 'No, we didn't send you a letter,' " she recalled.
Stromseth said she was told her loan was delinquent, and her modification was never processed.
Bank of America said its researchers are still trying to determine what happened with the family's mortgage. A spokesperson said in an email that it's likely no letter was sent.
"I have no information in the original research provided to indicate what communications took place with the Stromseth's at the time the determination was made that the loan was not eligible for a permanent modification," the email read. "The case was escalated for further consideration within a week of that decision, so it is very likely that no final action letter was sent because the file was kept open and the modification was then completed."
Bank of America finally processed the modification last fall. But for reasons the Stromseths don't understand — and Bank of America hasn't explained — their loan principal and monthly payments are higher than they were when they first applied for a modification.
The spokesman stresses that Bank of America has fully participated in government programs like HAMP and has completed more than 1 million modifications since the start of the economic crisis. And the bank has beefed up staffing, instituted new procedures and taken other steps to help struggling homeowners.
"LIFE'S BEEN HELL"
The Stromseths aren't satisfied. They are asking Bank of America to recalculate their loan and recognize the original modification they agreed to back in 2010 to make their payments more affordable.
Kathy Stromseth gets emotional as she recalls the toll the experience has taken on her and her husband and their family.
"Oh, life's been hell," she said. "It's just been the worst experience of my life. I wouldn't wish this on my worst enemy, the part that I've gone through. I have worked hard, we got married and I have never struggled as much as I have the last two years."
The Stromseths want to keep their house. They are working with attorney Jane Holzer from the non-profit Housing Preservation Project.
"I think this is a story of homeowners who applied for HAMP, who were eligible for HAMP, and actually got the permanent modification," said Holzer. "But Bank of America completely failed to implement it and Bank of America sent out their own documentation and couldn't even recognize or put that documentation into motion."
Holzer said the Stromseth's situation is typical of what's happened to many people across the country who sought help through the Home Affordable Modification Program.
That's because HAMP lays out guidelines for lenders and servicers but allows them to use their own formulas to decide who qualifies for permanent modifications. Housing experts say as a result, many qualified homeowners were wrongly rejected from the program.
Law professor and former Assistant Attorney General Prentiss Cox said problems like these were a driving force behind the $25 billion settlement between state and federal officials and the nation's five biggest banks, including Bank of America.
"There is a difference between different mortgage servicing companies and some have gotten much better and their record is much better," Cox said. "Others have continued to show these kinds of really egregious problems where they just don't have basic fair and efficient business procedures in place."
The Stromseths wouldn't qualify for help under the settlement, because their original mortgage was an FHA loan. FHA, Fannie Mae and Freddie Mac are not participating in the settlement.
Yet Cox says the settlement's requirement that banks process applications quickly and communicate clearly with homeowners will have a positive effect. That's something that didn't happen with the Stromseths.
But Cox said the deal lacks strong enforcement. He's doubtful the settlement alone will be enough to force banks to change their practices.