Stevone Saunders is a locker room manager who fell behind on condo payments when tips at his country club job declined. Foreclosure loomed.
"I couldn't even think. I couldn't function. I was always worried about when are they gonna be knocking at my door," he says.
But this fall, he got his mortgage modified so he was able to reduce the monthly payments by $200—enough to allow him to save his home and then some.
"It's a huge relief," he says, adding "it makes me want to just stay right." He's glad he didn't stretch to buy a larger home back in 2000. "I'm just glad I didn't bite off more than I could chew."
There are about 7 million homeowners around the country — including tens of thousands of people in Las Vegas — who would love to follow in Saunders' footsteps. But this sort of happy ending is pretty rare. Despite the many bank and government agency programs designed to help lenders and borrowers strike a deal, it's not happening quickly enough to stop the rapid erosion of home prices, particularly in Las Vegas.
In Search Of Loan Modifications
Las Vegas faces the highest rate of foreclosure in the country, and hundreds of homeowners are defaulting on their payments every month.
Many of those people won't qualify for a mortgage workout, or a loan modification that results in lowering a borrower's monthly payments on a home. This can mean reducing interest rates temporarily or permanently, extending the term of the loan or consolidating late payments into a new or separate loan. Sometimes lenders will take the late payments and make them due at the end of the loan.
But many homeowners simply cannot afford their homes, even with a lowered payment. Lenders are also skeptical of homeowners who may not be struggling but are simply trying to use the system to their advantage.
"There are people who are just opting not to make their payments on their houses," hoping to score a rate reduction even though they can afford to pay the old amount, says Jeremy Aguero, a Las Vegas-based economic analyst for Applied Analytics. Aguero says he believes modifying mortgages to save some homeowners is key for economic recovery, but he says it is tough to do so on a massive scale without creating an incentive for more people to default on loans in the hopes of lowering their payment.
But even those who say they aren't working the system say the process is confusing and frustrating.
Where, Oh Where Is My Loan?
Las Vegas residents Israel and Clantha Twillie say they haven't been able to make sense of the many documents they've collected in the process of trying to work out the mortgage on their home. They retired and put $80,000 down on their home two years ago, only to have the value of the home drop by about half. To pay some bills and medical expenses, they took out a second loan, then when interest rates reset at a higher rate, they fell behind and never caught up.
Countrywide, now part of Bank of America, manages the account on their first loan. Even with the help of a loan counselor, the Twillies say they don't know where they stand with their loans. They say they can't tell whether recent payments posted, or whether their payment is about to adjust. But one big problem is they don't know what lender currently holds their loan. They're hoping their lender — whether it's Countrywide or another company — will agree to reduce the interest rate on their payments and keep their payments low enough that they can stay in their home.
Otherwise, the Twillies say, they don't know where they'll go. Israel Twillie went back to work recently to increase their income. "Our home was supposed to be our nest egg," he says.
Citing privacy reasons, Bank of America declined to discuss the specifics of the Twillies' loan or their eligibility for a newly launched mortgage workout program.
In an e-mail, a Bank of America spokeswoman says, "With the recent launch of the national homeownership retention program on Dec. 1, we are in the process of assessing the Twillies' loan for eligibility. We are contacting them to ensure that they have a full understanding of their current loan status and future mortgage payments."
Navigating Workout Programs
Helping more people navigate these programs is urgent; otherwise, more families will lose their homes, says B.J. Wright, president and executive director of the Neighborhood Housing Services of Southern Nevada (NHSSN), a nonprofit group funded by grants and lenders.
"The need outside the door is overwhelming," Wright says.
Last month, NHSSN hosted at phone-a-thon, in partnership with Univision, asking troubled local homeowners to call in, Wright says. For six hours, the lines were busy and they were able to take only 650 applications. And with only two foreclosure counselors on staff, Wright's group is already beyond capacity.
Adriana Camejo is a loan counselor who is fighting her own foreclosure as well as helping others. Camejo and Irma Williams, another counselor, pore over thick folders that look like sick patients' medical charts. They say it takes weeks or months to resolve each case.
"It's exhausting, it's exhausting," Williams says, following a testy phone conversation with a lender. It's also often frustrating, she says, because lenders sometimes lose documents, never receive faxed applications, change plans or are simply unwilling to work with her clients. Only 11 percent of the agency's cases end up with modifications.
No Solutions From Washington, D.C.
Despite all the talk among policymakers, Wright says she doesn't see many answers coming from Washington. Lawmakers are too far removed from what's happening at the ground level, so they aren't aware of where the systems break down or where resources are needed, she says.
For example, bailing out banks without setting specific benchmarks for them to complete more loan workouts means much of that money will never help homeowners, she says. What communities like hers needs, she says, is more money to hire additional loan counselors to both help homeowners avoid foreclosure and help new homebuyers steer clear of bad loans.
Instead, what's happening now is that her group's funders are cutting back because of the poor economy, making her job even harder.
When Wright thinks about this, she pauses for a moment and begins to cry. "As an organization that's focused on helping those people, not being able to help them is overwhelming."
Part one of this series explored how Las Vegas has one of the highest rates of foreclosures in the nation.