The anxiety started last fall for A'Lisa Scott. That's when the phone at the construction business she runs with her husband stopped ringing. New projects dried up, and the couple was unable to make their monthly home loan payment.
Watching her bank account drain, Scott couldn't shake the feeling of impending doom. But that didn't stop the 51-year-old and her husband from fighting to keep their five-acre property, which has been in her husband's family for three generations.
Since last November, Scott pleaded her case to her mortgage servicer, Bank of America, with hopes of keeping the home out of foreclosure. Each time she called the bank, she spoke to a different representative. She was placed on hold. Her calls were transferred to several different departments. Each time she recited to yet another Bank of America employee all of the reasons why the couple should be allowed to modify their mortgage loan, or lower their monthly payment to a level that's sustainable in the short run. Each time she explained it simply didn't make any sense to kick her out of the home she's lived in for 17 years. The couple would make payments. They just needed time to regain their financial footing.
That fight, now going on 11 months, has been, and continues to be, the most difficult Scott has ever waged. She says it's taking a toll on her health; since last November she's lost close to 30 pounds. She no longer sleeps well and has a perpetual kink in her neck.
"It's stress," Scott says. "It's day-to-day living with not knowing whether or not you're going to be living in your house. Where are you going to go?"
Scott's husband, Dale Frey, received the property off Mullan Road as a family gift, and today it houses the couple, three cats, several chickens, a black lab named Zoey, and llamas that graze in the yard.
Scott says she and her husband refinanced their first mortgage and took out a home equity line in 2007. They used the money to modernize the historic residence and grow their construction business. Scott, who's always been resourceful, juggling several jobs at one time, says when they took out the loan, they never saw the bust coming.
"That's not why you work all your life," she says. "I will never see the very modest lifestyle that my husband and I had two years ago, ever. I have no health insurance anymore. I don't have any IRAs, nothing."
Millions of other Americans are in a situation similar to Scott and Frey's. Foreclosure filings nationally have soared above 300,000 for seven consecutive months, according to RealtyTrac, a national company that charts repossessed homes. The company reports that in September owners of 347,420 properties were subject to such filings, including default notices or warnings the home was slated to be seized or auctioned, marking a 3 percent increase over the previous month. Arizona, Florida and Nevada have been hit the hardest; during the last quarter in Nevada, RealtyTrac found one of every 29 homes received a foreclosure notice.
Missoula's real estate market doesn't reflect such a drastic drop, but it's certainly not immune to the issue of declining home values, bad debt and increasing bank repossessions. According to the Missoula Organization of Realtors, foreclosures in Missoula more than doubled between 2007 and 2009, jumping from 108 to 262.
As the flurry of foreclosures continues, mortgage servicers are having a hard time keeping up. In fact, employees of some of the nation's largest banks are coming forward asserting that institutions, ill equipped to handle the workload, are taking short cuts. Specifically, employees of JP Morgan Chase & Co., GMAC and Bank of America allege the institutions hired "robo-signers" who received little training and were charged with signing off on thousands of foreclosure documents monthly. The whistleblowers say they had neither the time nor the expertise to investigate the validity of the legal actions. In some cases, the former employees allege, foreclosure documents were falsified to cover for lost paperwork.
Those claims prompted GMAC and JP Morgan Chase & Co. in late September to announce that they were suspending foreclosure proceedings in 23 states, not including Montana.
Scott's lender, Bank of America, halted foreclosures in all 50 states.
When the allegations went public, a flurry of outrage ensued. U.S. Secretary of Housing and Urban Development Shaun Donovan said the mortgage servicer practices have been "shameful." The federal government started investigating allegations of criminal wrongdoing as attorneys general in 50 states also jointly look into the legality of servicer actions.
Montana Attorney General Steve Bullock says it's early on in his investigation and he has little to report. But the sheer size of the investigation, he says, indicates a significant level of concern.
"At times getting AGs all on the same page is like herding cats," he says. "Here's where all 50 of us have said we need to dig into this, and we need to find out what's going on. For most people, the most important asset you have is your home. And the notion that somebody could lose their home without state law being followed is real concerning."
Scott's servicer, Bank of America, resumed repossessing property in 23 states little more than two weeks after it initially halted the proceedings. The bank is reviewing its foreclosure procedures in 27 other states, including Montana, pending further review. Scott remains unsure about how her fight will end. But she is sure that, from her perspective, the mortgage industry's actions are inexcusable.
"Probably three million people in this country are going to lose their homes by the end of this year," she says. "Is there really a justification in that? What are they going to do with all of these homes?"
Since she started trying to negotiate with Bank of America last November, Scott has accumulated two three-ring binders full of form letters from the mortgage servicer along with meticulous notes taken during conversations with bank representatives located in cities all across the country. Each time she talks to a bank representative, Scott records their name and identification number, along with the time and date she called. She also notes the duration and gist of the conversation on yellow legal paper.
"Because if you don't document," she says, "they don't believe you."
Last November, the bank agreed to allow the couple into a trial loan modification program, which entailed three months of lower payments. Scott says they paid the modified mortgage monthly during the trial and for months after the fact, as the lender stayed mum on whether or not they qualified for a long-term modification. Finally, at the end of June, the couple received a letter from Bank of America stating that it appeared they weren't eligible for a long-term modification. The letter also stated the bank would notify them in 10 days about its final decision.
"That notification never came," Scott says.
Anxious to secure a long-term solution, Scott says she contacted Bank of America twice by phone and continued making monthly payments. The bank sent a letter to the couple in July, notifying them in a "notice of intent to accelerate" that it expected to begin official foreclosure proceedings. The demand letter explained the only way to avoid repossession was to pay off money owed, including the difference between the modified mortgage amount they'd been paying for nine months and the original higher monthly payment. They'd also have to pay an array of legal fees, including the cost of having a bank-contracted inspector visit the home to ensure that it was occupied. The total amount due was more than $11,000.
The bank stated in the demand letter that the home was slated for foreclosure on Aug. 27. Scott was frantic. Her worry switched to anger two weeks later when a second notice to accelerate arrived, stating she owed $11,914 rather than $11,268, and the onset of foreclosure was slated for Sept. 13, not Aug. 27.
"I called them. I said, 'What am I supposed to believe here?' And the woman told me that the first one was sent out by mistake," Scott recalls. "That's when I started thinking this is just absolutely ridiculous. You cannot send somebody a letter [saying] you're threatening to take their home away from them and you want $11,000 from them and tell them that that was a mistake.
"I was at my wits end," she says.
When contacted for comment, Bank of America did not elaborate on specific negotiations with Scott. The bank did refer the Independent to a press release, which states that the mortgager completed 700,000 mortgage modifications since January 2008, including roughly 16,500 in September alone.
Scott shared her correspondence with Bank of America with the Independent for verification.
After the frustration stemming from the two different notices to accelerate, Scott continued making her modified payments, still hoping to negotiate a deal. On Oct. 8, when she attempted to pay the mortgage, the bank told her she couldn't, because it initiated foreclosure Sept. 28.
Scott says though she got the notice of intent to accelerate, Bank of America never advised her through the legally mandated protocol for launching foreclosure, a notice of trustee sale, that her home was being repossessed.
She doesn't have to refer to her notes to remember the subsequent conversation she had with the bank.
"I said, 'How were you going to notify me?'" Scott recalls asking a Bank of America employee over the phone. "They said, 'Well, through the mail.' And I said, 'It's been 10 days, it should have gotten here by now, don't you think?' And they didn't have a very good answer for that. She said, 'Well, here's the number for you to call. They might be able to help you.' So, I called yet another department of Bank of America, and I said, 'How did I get into foreclosure?' And he goes, 'Well, you're just in it.'"
HomeWORD foreclosure prevention specialist Brendan Moles works as an advocate for Scott, and he says her story is typical of the current foreclosure market. People being foreclosed upon are rarely if ever able to speak to the same person at a mortgage servicer, and are often transferred multiple times to a variety of different departments. Moles, who's been in the lending business for 14 years, says case review is sloppy, with lost paperwork a common problem.
"Basically, it's a frustrating, daunting, confusing process for all people involved," he says. "You have to be a bulldog in this process."
Moles tries to be a bulldog, but negotiating with mortgage servicers is exhausting. He handles the majority of foreclosure prevention cases in Missoula and the surrounding area. He's currently working with 23 clients, averaging roughly two new cases per week.
"I'm getting files from Polson. I'm getting files from Thompson Falls," Moles says. "It's a pretty tremendous load."
The job is also emotionally draining. Moles admits he has a tough time leaving work at the office.
"It's been a very hard process," he says. It's very hard for me. It's very emotional for me. It's very frustrating for me. I take it on personally."
NeighborWorks Montana pays a portion of Moles' salary in Missoula. The nonprofit also funds similar foreclosure prevention efforts across the state.
Largely because of challenges dealing with mortgage servicers, NeighborWorks foreclosure prevention specialists statewide have a success rate of roughly 4 percent, meaning only four of every 100 Neighbor-Works clients who attempt to negotiate a permanent loan modification actually completes the deal.
Moles' supervisor, NeighborWorks Director of Operations Maureen Rude, says instances like A'Lisa Scott's are becoming so pervasive that the banking business has coined a new term: "foreclosure fatigue."
"I think there's a lot of people who've been trying really hard to save their homes, and there's just a point where they just can't do anything else," Rude says. "I feel for them. And then, especially in areas where the values have gone down, they can't sell the house for what they owe and there's nobody to buy it."
Rude has worked in banking since 1992, holding positions with both the Montana Board of Housing and mega-lender Fannie Mae. When she joined NeighborWorks two and a half years ago, she took over supervision of the foreclosure prevention program and also the nonprofit's lending arm, which provides real estate loans to qualified low- and moderate-income applicants. Rude's experience with multiple banking specialties gives her a unique perspective on existing challenges.
"I'm kind of seeing, frankly, it from all areas," she says.
While it's clearly tough to face the prospect of losing a home, Rude says it's not a lot of fun to being on the other end of the conversation, fielding dozens of calls a day from people in distress.
"I know my servicer is completely overwhelmed," she says. "She's making call after call after call to these folks. [Borrowers] say they are going to pay, and then they don't follow through. That's a really hard job. I think they are really overwhelmed. I think a lot of people have been put into those jobs with very little training. I have some empathy for them, too."
Rude explains that the loan servicing business was once, before the real estate bubble deflated, simple and profitable. Mortgage company employees simply had to process payments.
"And then all of a sudden you've got this whole economic downturn and this whole flood of people who now can't make their payments," Rude says. "In many cases, their homes are under the value; we have that even in Montana. You know, people owe more than their house is worth."
Unemployment rates locally have increased steadily since 2005, settling in August at 6.6 percent. That trend is mirroring one that marks declining home value. According to the Missoula Organization of Realtors, the median price on a home sold this year was $199,000. That's down from a $212,750 median price tallied between January and September of last year. The overall equation of rising unemployment and declining home values makes it clear to Rude that the foreclosure crisis is a product of a nuanced set of variables.
"The main issue has been people losing income," Rude says.
It's clear the situation is complex and there are no easy solutions. But that's not the answer either Scott or Moles were hoping for, as they continue haggling with mortgage servicers.
"It just depends on how many phone calls you make before you give up," Moles says. "A lot of people just throw their hands up and walk away, put their keys on the counter and walk away."
Bonnie Williford from Fidelity Real Estate drives slowly through a sleepy Lolo subdivision on a Saturday afternoon in early October. She points to a large house on newly developed Stella Blue Drive at the base of the northern tip of the Bitterroot Mountain Range, and talks about how frustrating it's been trying to sell the property.
In 2007, the Stella Blue Drive residence appraised for $350,000. The owners found themselves in financial distress last year and tried to sell it for $337,000, hoping to break even. It didn't work. Financial challenges worsened, and the owners faced a potential foreclosure. Aiming to avert the long-term financial consequences of a bank repossession along with thousands of dollars in fees that would be lost to attorneys and bankers during a foreclosure proceeding, Williford decided to try to unload the home in a short sale.
A short sale involves selling a property for less than the value of the mortgage note and offers a way for homeowners facing foreclosure to salvage their credit. Whereas defaulting on a home loan blemishes the owner's credit for seven years, a short sale lingers on one's credit report for roughly two years. With that in mind, Williford found a buyer willing to offer $285,500. The only hitch, the broker says, is persuading Bank of America to sign off on the loss. After filling out reams of paperwork, she's been waiting for more than a month to hear from the lender if they have the go ahead to close the deal.
As is the case in the foreclosure process, communication proves to be the main challenge. Since there's no dialogue between sellers' agents and the mortgagers, it's a frustrating process.
"The short sale is difficult, because you cannot contact the bank," Williford says.
Mortgage servicer actions in these situations appear to have very little rhyme or reason, says Judy Fountain from Western Brokers real estate in Kalispell. Fountain saw the baffling behavior at work this past summer as she tried to short-sell a Lakeside property on a quiet street with peek-a-boo views of Flathead Lake and a 1,500-square-foot wraparound deck for $210,000. The bank didn't bite and foreclosed on the property. Once the bank assumed the title, it then turned around to sell the property at $157,000.
"I was blown away when it came on the market at 157,000," Fountain says. "There are numerous examples of that."
Even though working with mortgagers can be extremely frustrating for homeowners in trouble, the process offers a way to avoid the long-term financial scar of foreclosure. Because of that, short sales in Montana are also increasing. They're up 100 percent this year over last, with 60 filed statewide in June alone, according to CoreLogic, a real estate data services company.
Just about everybody in the industry says short sales are tremendously challenging. Banks are fickle, uncommunicative and unpredictable. The process is nerve-wracking for sellers. Buyers should also be prepared for a headache. Once a prospective buyer submits a bid, they simply have to wait—often for months—to receive an answer from the mortgager. After a buyer's bid languishes with no word, it's not unusual for a lender to deem the offer inadequate and foreclose on the property anyway, says Sean Chapin, who facilitates real estate closings at First American Title Co. in Missoula.
"Expect to not hear anything for three to four to five months," Chapin says. "We've had several deals fall apart...It's kind of a vicious game."
Though it may not be a popular take on the foreclosure crisis, Patrick Barkey, director of the University of Montana's Bureau of Business and Economic Research, sees things from the banking industry's perspective. He says from a purely economic level, one untainted by the emotions of a foreclosure or short sale, lenders don't have much of an incentive to bargain with people in financial distress.
Barkey says banks act in a completely rational manner. Most borrowers faithfully make their monthly mortgage payments. Letting individuals slide on contractual responsibilities, which is essentially what short sales and loan modifications entail, sets a risky precedent.
"If you're in economic distress and I'm the bank, and I help you out, I help you out in a way that basically relieves part of your obligation. What's to stop all the other people who are performing, who can make their payments and so forth, from not wanting the same thing?" he asks. "That's the kind of thing that makes people who make loans stay up at night."
And it's not just the people making loans who lose when borrowers default. Investors who purchased pieces of those mortgages through, for instance, hedge and mutual funds also lose when borrowers evade contractual obligations.
"I think in the foreclosure story, there seems to be a genuine belief that all the pain is on one side—and that's the person leaving the house," Barkey says. "There are actually people who own these mortgage-backed assets who are losing. They lose value when loans don't perform."
Barkey knows it's easy to demonize bankers, portraying them as uncaring individuals wearing power suits and making big bucks for doing little, but it's those very investors, he believes, who will help the economy rebound.
"You know, it's the same thing about Wall Street, Wall Street versus Main Street, all this sort of thing," Barkey says. "You've got to have both. That's where capital comes from. It's a collection of people who buy into ideas and help them grow.
"The problem for me goes way beyond evicted households," Barkey continues. "Evicted households, unfortunately, I hate to say it, but it has to happen. If you have something you can't afford, if you made a commitment that you can't honor, something's got to give."
Scott doesn't buy it. She says it's easy for someone who has a job and no fear of losing everything they've worked for to simply write off her house as a faceless asset, a tool to generate capital. Why should banks be bailed out, she asks, when individuals struggling to maintain something so basic as a roof to sleep under are left to fend for themselves?
"We not only had to give them a bunch of money so they didn't fail, but they're making a bunch of money," she says. "Somewhere along the line, they need to take responsibility for their own gambles."
That said, Scott recently received encouraging news. When she arrived home on Oct. 11, a Fed Ex package was waiting. Inside the package, she found a contract detailing new terms for her home loan. It was the modification package she's been pushing for since last year.
The bank has agreed to let her tack outstanding charges, now totaling $20,000, onto the tail end of the loan, which spans a 40-year term, rather than the typical 30. The bank is offering a 2 percent interest rate for five years, when the rate will increase to 6.25 percent.
"It's a sweet deal," Scott says.
When contacted for comment, Bank of America confirmed in a written statement that it has agreed to Scott's modification.
Scott, however, is not ready to call it a done deal. While the news sounds encouraging, she hasn't yet received the signed contract back from Bank of America. That leaves her worried the deal could still fall apart.
As she waits, Scott says she'll continue trying to stay afloat, working as an independent bookkeeper, as an employee in an embroidery shop and as a youth director at Holy Spirit Episcopal Church. Every day there's no word back from Bank of America, she says the pain in her neck persists, just as it has since the whole saga began.
"It's still there," she says, "because I still don't feel like I can really trust it, after what I've gone through."