The latest foreclosure numbers are in and they're not good. A record number of homes were foreclosed upon in the first few months of this year. This is despite billions of taxpayer dollars and promises by the mortgage industry to aid struggling homeowners.
A KING 5 investigation finds part of the problem lies with some of the people who are supposed to help you out. They profit if you fail.
The story of Washington National Guard Sgt. Tyler Hood may be an example of that.
He was dodging roadside bombs in Balaad, Iraq last summer unaware that a financial time bomb had starting ticking back at home.
Like many soldiers Sgt. Hood kept a large bank balance as a safety net for his young family in case the worst happened in the war zone.
It wasn't until after he got home that Hood and his wife Melissa, also a National Guard Sgt., learned their new online banking service wasn't paying their monthly mortgage.
"We missed payments. That's our fault," says Tyler Hood. “I just want to get back on track. We can afford our house. But the problem started when we started trying to make that up."
The Hoods sent a check, they made calls, and they spent nearly three months trying to confirm they had pulled their mortgage out of default.
"They just assured me that everything was fine,” says Tyler Hood. “Then, a week a later we get our ten copies of foreclosure documents in the mail. It feels like they're trying to steamroll you out of your house."
It almost seemed as if the people that were supposed to help them wanted the Hoods to fall into foreclosure.
It may sound confusing, but it all adds up to Melissa Huelsman. The Seattle attorney and mortgage expert reviewed the Hood’s documents at the request of the KING 5 Investigators.
She tallied thousands of dollars in fees that were charged while the Hood’s home loan was in default.
“Mortgage loan servicers have a financial incentive to push to foreclosure because they make more money in the foreclosure process," says Huelsman.
The loan servicer is the company that handles your payments and paperwork. It’s the middle-man between you and your lender.
Loan servicers now have a new and vital role processing homeowner's requests for loan modifications and other tax-payer assisted help.
One of the largest is CitiMortgage, the Hood's loan servicer.
In public relations campaigns, these companies claim they are working hard to help struggling homeowners.
A new government report tells a different story; that loan servicers are undermining modifications which take a lot of work and earn the servicer little profit.
The case of the Hoods, who had the money to pay their debts, may reveal the loan servicer's perverse incentive to foreclose.
“Because they get paid to foreclose," says Huelsman.
And they get paid in big numbers. The KING 5 Investigators sifted through CitiMortgage’s publicly available financial records. We found that CitiMortage made 90 million dollars in mortgage servicing late fees in 2007.
The following year, when more mortgages were melting down, that number grew to 123 million in late fees a nearly 40% increase.
Deborah Bortner of the Washington State Department of Financial Institutions the agency received enough complaints that it pushed for a new law that now requires loan servicers to be licensed and regulated.
"Many of the loan servicers are serving just 10% or 20% of the people who call in and giving them a fair shake," says Bortner.
But the new law only covers state-registered loan servicers. Big banks like Bank of America, Wells Fargo and US Bank all have loan servicing divisions. They generally service the loans of outside investors or lenders; in other words, loans where they don’t stand to lose if the mortgage goes into foreclosure.
The big banks, which own 70 percent of the loan servicing market, are federally regulated so they are beyond the reach of the State’s new loan servicing law.
That includes CitiMortgage, which earlier this year sent the Hoods paperwork showing that their home was sold at a foreclosure auction.
How much did Citi make off of fees in the Hood’s case?
“So the total charges by the time they were getting their notice of foreclosure was $3553.14," says Huelsman.
"You start feeling hopeless, especially when everybody you talk to tells you it's too late," says Hood.
But is it too late?
After calls from the KING 5 Investigators and Huelsman, Citi now says it will try to keep the Hoods in their home.
Negotiations on just how to do that are under way.
A spokesperson for CitiMortgage, owned by parent company CitiGroup, did not reply to questions posed by the KING 5 Investigators. Mark Rodgers, director of Citi Public Affairs, did release the following statement:
"We cannot provide details about a specific customer's account due to privacy restrictions. However, the sale of this property has been reversed, and it has been restored to its owners. We comply with the Servicemembers Civil Relief Act, which provides certain financial and related protections to servicemembers on active duty. It is, however, incumbent upon borrowers to inform us and document their deployment for active duty, so we can avoid misunderstandings resulting from missed or short payments. We continue to work with the borrowers on this matter."
The company did point to government reports showing that Citi is offering more temporary modifications than most other big banks.
For help and more information, contact the Washington Homeownership Center foreclosure hotline at 877-894-4663 or CLICK HERE to go to their website.