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Mortgage companies calls the shots in home loan modifications

Kelly Sherman poses for a portrait outside her Sykesville home Friday.
Kelly Sherman poses for a portrait outside her Sykesville home Friday. (DAVE MUNCH/STAFF PHOTO , Carroll County Times)

SYKESVILLE - From 2007 to 2008, there was an 81 percent jump in the number of homes which had foreclosure filings, according to RealtyTrac. Kelly Sherman was among the additional 3.1 million who were forced to file a foreclosure in 2008.

The Sykesville resident had four children, and her husband was out of the picture.

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What she did have, and still has, is the family home her father built and that she grew up in.

"The house is everything," Sherman said last June.

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Two years prior, her husband signed a fixed loan for $140,367.15 with monthly payments of $709.26, using Sherman's credit score and name. Unbeknownst to her, payments on the loan fell behind, Sherman said.

By November 2008, Sherman was going through the foreclosure process. That's when she met Pam Graham, an Air Force veteran, from her church.

Graham didn't know Sherman, or know anything about her, she said. Graham said she was volunteering at the church they both attend when she found out about Sherman's troubles.

Graham had an auction for Sherman and sold some of Sherman's family heirlooms to stop the foreclosure sale from occurring. Then they applied for a loan modification, also known as the Home Affordable Modification Program, or HAMP.

HAMP was created by the Obama administration in order to help failing homes get out of foreclosure. Under HAMP, mortgage lenders are able to enter into contracts with the government to modify a mortgage loan to bring the debt ratio of mortgage borrowers down to 31 percent of their income. The lowest a bank will go for a modification is 2 percent interest over 40 years, said Matt Gregory, a housing counselor with Consumer Credit Counseling Services.

In order to qualify for HAMP, homeowners must have received their mortgage before Jan. 1, 2009, owe up to $729,750 on their primary residence, be able to prove financial hardship, have sufficient income to support a modified payment and have not been convicted of any felony larceny, theft, fraud, forgery, money laundering or tax evasion.

Recent data from the credit reporting company TransUnion shows many borrowers who received mortgage modifications fell behind on their payments again 18 months later. Nearly six in 10 homeowners who received mortgage modifications went delinquent following the modification date, according to TransUnion.

Gregory said today, anyone who has mortgage problems, and has tried to get that mortgage modified multiple times, can get denied for any number of reasons.

"The mortgage company calls the shots," Gregory said.

This wasn't exactly the case for Sherman, who did not fall behind during her trial period. Sherman received her first mortgage modification Nov. 1, 2009. She was granted a trial modification to pay $498.77 every month for three months, which Sherman and Graham were able to afford. By January 2010, the bank sent a letter stating Sherman was still missing additional documents, including her pay stub, employment verification and tax returns.

Sherman faxed the information to the bank, explaining the financial hardship she was suffering. She began working in 2009, and worked until 2011, until she began suffering from severe anxiety and depression.

"It's not just money," Sherman said. "My father shed his blood [on this land]. He did it all for his family."

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Sherman's father spent his weekends building the house for 32 years before the family could live in it. Out of Sherman's four other siblings, Sherman, the youngest, was the only child who lived in the home.

Sherman continued to make her $500 payments, assuming her three-month trial period was made permanent, until July 28, 2010, when the bank denied her for HAMP. The bank said the request was incomplete, but did not cite which documents were still missing, according to a copy of the file obtained by the Times.

For the past four years, Sherman and her bank have been playing the same back and forth game. She sends in as much information as possible to enroll in HAMP, and the bank temporarily approves her for the program. All the while, Sherman has continued to make $500 payments each month, she said. Last October, the bank sent her check back and said she was facing foreclosure again.

When re-enrolling in HAMP in December 2010, Sherman's payments doubled to $1,072.82, without any change in her employment situation. The number is even higher than what her initial payments were.

This could have happened for a few reasons, Gregory said.

"Back in 2009, which was the start of the program, a couple years into it, they were giving everybody trial modifications," Gregory said. "Today, because the mortgage companies are [granting modifications], they are collecting all the documents first."

There could be many reasons why anyone has payments double without an employment situation changing, Gregory said. The severity of the delinquency, investor guidelines may have changed, the mortgage company could have failed to calculate the correct use of the client's income, or there could be an escrow shortage the bank is trying to make up, he said.

As of Oct. 28, 2011, when her house again entered foreclosure, Sherman needed $40,029.28 to reinstate her home. Her escrow shortage is $14,316.83.

"I'm scared of losing my home," Sherman said. "I'm petrified of it."

In order to avoid foreclosure, Sherman and Graham have simply been making the payments, and reapplying for HAMP over and over again. The bank sends a deadline, she applies, is temporarily approved, which helps save her home for a few more months, and then is eventually approved for a cost she can't afford, or is denied.

"[The bank] has every leniency ability and this is the part that devastates me the most - it's the house her father built by hand. The only thing she has in her life is her four children," Graham said.

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