By Ellen Yan
RISMEDIA, Oct. 16, 2008-(MCT)-After she was laid off two years ago, Rosemarie Cino tried talking to her mortgage lender when she fell $8,000 behind on her mortgage despite her jobs walking dogs, cleaning swimming pools and driving for Federal Express.
“They didn’t even want to talk to me,” said the Islip resident, who has two dogs. “They were like, ‘Pay or we’re taking your house.’ They asked about what I spend on food. When I said I had to buy dog food, they suggested I get rid of my dogs.”
A year after the subprime mortgage collapse, millions of homes have fallen into foreclosure as the economy has soured and struggling homeowners buckle under the weight of higher payments on escalating adjustable rates and mortgage balances far in excess of their home’s value.
Lenders have mostly resisted calls from housing advocates, legislators and government legislation urging them to help stem the foreclosure tide by remodifying loans to include lower interest rates and monthly payments. And borrowers have fared no better, with many delinquent homeowners on Long Island unable on their own to break through to communicate with lenders and loan-servicing companies. Some lenders and servicers are so swamped with calls from distressed homeowners that it can take weeks to return calls.
Inching closer to foreclosure, desperate homeowners are seeking out nonprofits and a growing number of for-hire negotiators. Housing advocates and loan modification or loss mitigation firms advise clients on required paperwork and steps that show how they can get back on the payment track — all before negotiating with the lenders or servicers.
But after the explosion in the number of mortgages for people who didn’t qualify, nonprofits and other industry veterans call for caution over this latest wave of sales pitches to needy homeowners, which also includes those who are behind on payments but don’t have subprime loans.
The job of the loan modifier and housing advocate is to persuade the lender or servicer to rework terms into payments that the homeowners can afford. They try to lower rates, reduce monthly payments by extending the mortgage term, get cuts in the principal owed, switch adjustable rates to fixed, and make other changes.
Some firms and advocates succeed by emphasizing hardships, such as layoffs or accidents that led to hospitalization. Some pore over clients’ mortgage papers for law violations as bargaining chips. Those who once worked in the mortgage world say they use their connections to lenders.
“There really wasn’t a need for this until about a year ago, if that, because you could get a mortgage in a heartbeat,” said Michael Attina, a former mortgage bank manager who founded Manhattan Mitigation in April and last month opened a South Huntington office. “That’s what we’re cleaning up right now.”
Lately, with Wall Street giants dying and asking for a government rescue, the increasingly unstable economy has led to more lenders and servicers being amenable to loan “workouts,” some nonprofits and loan modification companies said.
Homeowners usually get loan modification services from nonprofits for free, but businesses commonly charge 1% or 1.5% of the loan amount. Some companies said they work for free in major hardship cases. However, some companies have turned out to be disreputable, so homeowners are warned to read fine print to avoid possible scams.
“They prey on that frightened person, and they tell them exactly what they want to hear,” said Joanie LaFemina, a homeowner services coordinator at the Community Development Corp. of Long Island in Centereach.
Since Sept. 1 in New York, “distressed property consultants” can no longer charge for services up front, unless they’re attorneys, nonprofits or a few other groups. In response to foreclosure rescue scams, state officials this year approved a law allowing loan workout companies to get fees only after the work is done.
But the law might be too late for Monique Gordon and her partner, Leroy, of Riverhead. The couple has been bombarded by mailings from loan modification firms.
They gave a $1,000 check last fall to one Long Island outfit whose representative visited their home, but the pair stopped the check when they couldn’t find the company online or anywhere else.
A short time later they contacted an agency whose mailing read, “There are 48 ways to stop a foreclosure.” After the company owner dropped by their home at 8 p.m. and talked until 1 a.m., the couple shelled out $1,000 upfront and agreed to have $2,259 debited automatically from their bank account over six months.
But over those months, all the company did was demand updated budgets, the two said, and the last time they talked was April or May, when the last debit was made.
“At that point,” Gordon said, “we hung our heads with our tails between our legs and said ‘We were defeated again.'” She worries that her home could be auctioned off soon.
David Litterick, the owner of the firm in question, Dalgia Services in East Setauket, said reworking a mortgage requires a “partnership” between the loan modifier and the homeowners, but the Riverhead couple refused to send documents required by the lender.
Copyright © 2008, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.