By Al Heavens
Inquirer Real Estate Columnist
Martha Wright of Avalon was hoping to modify her mortgage after her salary was cut by half. But thus far, she says, the experience has been “a lot of talk and no help.”
Her experience is a little different from that of the people I deal with regularly. Although her salary was halved about 19 months ago, she freely acknowledges that this has made her cash-poor while she remains asset-rich.
What made me notice Wright’s e-mail among the dozens of pleas for help I receive each week was a conversation I’d had the day before with Patricia Hasson, president of the Consumer Credit Counseling Service of Delaware Valley.
Hasson had offered an observation about the mortgage-modification process that was right on the money:
“You know,” she said, “every loan is different, because everyone’s circumstances are different. So why should we use the same set of rules to fix them?”
Here is Wright’s situation:
“My retirement funds are over $300,000, and I have $19,000 in stocks which could be liquidated. Aside from that, there’s about $500 in my checking account until the next paycheck.”
Other than her mortgage, Wright says, she has no debt. She drives a long-paid-for used car with more than 100,000 miles on it, and she owns a second home outright. Her credit scores from the big three rating services range from 701 to 732.
Her primary home is assessed at $2 million for the land, $159,800 for the two-bedroom, one-bath house. She had a Washington Mutual (now Chase) pick-and-pay mortgage with a balance of $1,103,091; 21/2 years ago, she revised it to a fixed rate of 6 percent for five years.
“My mortgage payments are $6,800 a month, and I’ve managed to keep current by dipping into savings,” Wright says. “Those savings are now depleted.”
Twice, she’s tried to modify her loan, only to be told she has too much equity to qualify for the federal Making Homes Affordable program.
“Today, I was advised that until I have less than three months in cash reserves toward the mortgage payments, I will not qualify for a modification,” she says, adding that she knew in February where she would be in March 2010 and tried to get in front of the situation. Other banks couldn’t help, either, because her loan is too high, her salary too low.
“The irony is, on a loan of this size, a simple point or two adjustment in the interest rate would make all the difference,” Wright says. “Chase won’t share that free government money with me. They will talk to me only if I’m 31-plus days behind in my payments. Why would anyone want to get 31 days behind and damage their credit rating if they don’t have to?”
“I’ve invested 35-plus years in the workforce and paid a heck of a lot in taxes and interest, but can’t get the time of day on a loan-interest modification from one of the bailout banks,” she says.
Wright acknowledges that she is better off than many – which seems to be precisely the problem.
“I can’t get a break because I have, shockingly, ‘too much equity’ in my home. Isn’t that the American dream: Build equity with the goal of one day owning your home outright? I guess that’s not the bank’s dream. And how dare I have more than three months of mortgage payments left in my piggy bank.
“To sell a home (not something I want to do) in this price range takes six months in the best of times,” she says, “and these are approaching the worst of times.”
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Shortly after The Philadelphia Inquirer January 10, 2010 article by Alan J. Heavens in his “On the House” column appeared, I received a personal letter from the Law Offices of Bruce Shaw, LLC, 2735 Terwood Road, Willow Grove, PA 19090
After reading Mr. Heavens’ Philadelphia Inquirer article, Mr. Shaw wished to offer his services; he said if I was interested to please call him. I did; we had a lovely conversation and spoke about common interests, the mortgage and lending climate in general and my situation in particular. Mr. Shaw offered a complimentary review of my mortgage and I took him up on his offer.
We spoke again once he received my mortgage documents and he expressed concern over the nature of the mortgage, asking specifically what my goal had been when I modified the terms of the Washington Mutual loan back in February 2008. I told him about my distress over the negative amortization and the nature of the pick & pay loan in general, the fact that interest rates were increasing at that time and at the same time my credit scores were declining. I said I’d wanted to get out of the pick & pay loan, lock in an interest rate and both improve my credit scores and preserve my good credit rating.
With that information he wanted to think more about this troubling situation and when we spoke yet again, he concluded the situation was not at all encouraging. On February 9, 2010, Mr. Shaw sent me another letter, excerpted below:
“What is of concern about your original mortgage and the Modification – is that both are not favorable to you – especially the Modification wherein you would think that the mortgage company would be trying to help you get on “firm ground” with your mortgage payments. Here, all they did was “fatten their coffers” with interest payments and you are left with the same principal as before.
It is possible we could sue them for consumer fraud – I honestly do not know if we could persuade the Court to look at the “total picture” and see how you have been “taken advantage of”.
Unfortunately one thing is for sure- at the end of the sixty payments, you are going to be in a worse position as then starts the adjustable rate terms – exactly what you were looking to get away from. Hmmm – maybe there is a valid course of action here!
I would like you to think “hard and long” about what you are going to do. It is most imperative that you change your mortgage – and the sooner the better.”
Upon receipt of the letter I called Mr. Shaw and said that unfortunately I could not afford to engage legal counsel; I couldn’t even pay my mortgage, let alone take on more bills. I said I was going to soldier on in my efforts to obtain a loan modification with Chase and he wished me the best.
I was both surprised and touched when Mr. Shaw phoned me in early March and said my situation was really sticking in his craw and that it just wasn’t right. He wanted to send a letter to Alan J. Heavens at The Philadelphia Inquirer and asked for permission to reference my case. I agreed and on March 7, 2010 he sent me a copy of his email to Mr. Heavens.
The subject line of the email: The “Wright” mortgage is not “right”…….