Darren Hendon worked in the mortgage business for years. He sold many home buyers on adjustable-rate loans with low-interest "teaser" rates that rocket higher, typically after two years.
He was laid off last April as the housing slump and credit crisis pinched demand for loans. Now, wearing a crisp-collared shirt emblazoned with the words "Financial predators beware!" Hendon is helping borrowers get out of the kinds of loans he once sold. And, once again, he has plenty of clients.
"I never thought that I was selling anything that was bad," he says. "I thought I was being part of the solution, and I guess I eventually was part of the problem."
Amid the rising tide of foreclosures, lenders across the country are under pressure to modify hundreds of thousands of adjustable-rate loans to more affordable terms. Some of the biggest lenders are steering struggling borrowers to nonprofit groups like Neighborhood Assistance Corp. of America, where housing counselors such as Hendon determine whether a new deal can be hammered out.
On a recent day at his Inglewood storefront office, Hendon, 40, has his hands full.
His first client is Carol Richards, 47, who is hoping to keep her lender from foreclosing on her three-bedroom North Hills home. She bought the house for $355,000 in 2004, then refinanced in 2005 and again in 2006.
Richards' loan papers stipulated monthly payments of $3,700, but Richards says her broker insisted that was a typo and that her actual payments would be $1,000 less. In fact, $3,700 was the correct amount.
Shortly afterward, the adult novelties company that Richards worked for went out of business and she lost her job. Then she underwent jaw surgery -- and says she had to pay $16,000 out of pocket for the procedure because her insurance wouldn't cover it.
Although she is now working again in a sales job, Richards tells Hendon that she is unable to pay the mortgage on the home she shares with her 83-year-old mother. She wants to refinance into a fixed-rate loan and is hoping to pay about $1,600 a month.
"I've depleted my savings trying to keep my house," Richards tells Hendon. "That's my main concern right now, protecting my mom and making sure she's OK and that she has a home. . . . I can live anywhere by myself, but it's not just me."
Hendon opens a program on his computer in which he records Richards' income, expenses and assets, angling the screen so that she can follow along. He also scans many of the documents Richards has brought with her -- years of mortgage statements, paycheck stubs and correspondence with her lender -- and adds them to her electronic file.
"Your situation is nothing to be embarrassed about," he tells her. "We're going to stop this sale. It's not going to happen."
Hendon has several possible solutions. Neighborhood Assistance qualifies borrowers for new loans or refinancings with Bank of America Corp. and Citigroup Inc. It has also partnered with Countrywide Financial Corp. and other lenders to perform "workouts" for borrowers who are facing foreclosure, in which the terms of the loan are restructured.
Options include getting the lender to lower the monthly payments by extending the length of the loan, or negotiating a lower interest rate.
Lenders will sometimes lose money in a workout, Hendon acknowledges, but not as much as they might in a foreclosure -- especially with housing prices continuing to fall.
Neighborhood Assistance is paid by lenders for approved loans and some workouts, and, like most mortgage brokers, Hendon earns a salary plus commission.
At the end of the 90-minute meeting, Hendon asks Richards to compile a budget of her expenses and provide some additional documents.
The completed file will be submitted to the nonprofit's Home Save department for review, but Hendon thinks Richards' odds are good because she is able to show steady income from her new job. (Indeed, Hendon is able to secure a 30-day postponement on the auction date of Richards' home, although a workout plan has not been finalized.)
Hendon's next client is Joel Marroquin, 29, who has fallen behind on the mortgage on his Victorville home.
Like Hendon, Marroquin is a former loan officer for a mortgage company. But he was laid off last year after home sales plunged and he didn't close any deals for three months.
Now a salesman, Marroquin and his wife, a baby-sitter, have been unable to make their $2,926 monthly payments. They are about $30,000 behind. "It's a little bit of embarrassment," he says.
The lender, EMC Mortgage Corp., has already offered a workout deal of its own that would require the Marroquins to pay $9,000 of the money they owe upfront. As part of the deal, the lender offered to lower their monthly payments to about $2,300.
Marroquin is hoping that Hendon can help him do better. He says he doesn't have the $9,000 and can't afford to pay much more than $2,000 a month.
Hendon tells Marroquin that he will try but that it is unlikely he can negotiate a workout better than the one EMC already offered.
Later Hendon concedes that he can't help everyone. Neighborhood Assistance submitted 1,057 loans for refinancing or restructuring in November and December, and about half of them have been approved.
"I have a lot of people who bought more house than they could afford," he says. "Sometimes, I can't save them from themselves."
Next up is Eric Mikell, 30, who bought a home in Las Vegas in 2006 when he was working as a salesman for Coca-Cola. He was later demoted to a merchandiser -- a $10,000-a-year salary cut -- and says he can no longer afford his two mortgages, which total $2,300 a month.
Mikell heard about Neighborhood Assistance from his sister and made the 300-mile trip from Las Vegas with his mother, Ollie. In addition to reworking his loan, he wants $5,000 in missed payments waived or added back to the loan so he can pay it off over time.
Hendon reviews Mikell's finances and isn't optimistic. Even with a part-time second job at Smart & Final, Mikell estimates that he'll need to spend 70% of his income before taxes on his payments.
"He has no money to buy groceries with," Ollie says. "He can pay absolutely nothing."
Moreover, Hendon says, Mikell already has "a pretty darn good loan" -- a 30-year, fixed-rate mortgage at 6.5%.
"There's no way we can ask a lender to modify a 6.5%, 30-year, fixed-rate loan," Hendon says.
At 3:30 p.m., Hendon takes his only break of the day, eating a sandwich at his desk. Lately, a typical day begins at 8 a.m. and doesn't end until 9 p.m.
"For most of these people, we are their only hope," says Hendon, who lives in Inglewood with his wife and 9-year-old son. "You can't put them on the back burner."
Twenty minutes later, he's meeting with Berta and Gerardo Rodriguez of Lancaster. The Rodriguezes bought their home in 1999 and refinanced three years ago. The lender, they say, didn't inform them that their interest rate would adjust every six months after two years of fixed-interest payments.
Hendon is skeptical of their account. More likely, he says later, the Rodriguezes just didn't read their loan papers.
Regardless, the couple is in trouble. Over the years, they repeatedly tapped their home equity line of credit, taking out money to cover household expenses including a new heating and air-conditioning system and to pay off credit card debt. As a result, the Rodriguezes now owe $162,730 on a home they bought for $69,427.
Like many people with less-than-perfect credit, the Rodriguezes have a sub-prime loan, under whose terms the lender charges a higher interest rate to compensate for the increased risk.
The loan, issued by a sister company of now-defunct Ameriquest Mortgage Co., started at 8.65% in 2004. Because of resets, it's now about 11.5% -- nearly double the current rate for 30-year, fixed-rate mortgages for borrowers with good credit.
The Rodriguezes have been behind on their monthly payments since last year; foreclosure proceedings began in September.
Without a workout of their loan, Gerardo, 49, a cafeteria worker at Antelope Valley Hospital, says he and his wife will have to accept a short sale, in which a homeowner sells his or her property for less than the outstanding loan amount.
The Rodriguezes hope it doesn't come to that.
"We don't know where to go -- we have no place to go," says Berta, 43, a nursing contractor with the California prison system.
Hendon thinks he can help them, although they've forgotten to bring some of their paperwork and will need to fax in the rest before he can submit their file. A few weeks later, however, he learns it's too late: The home was repossessed, and he hasn't heard from the Rodriguezes since.
Shortly after 5:30 p.m., Hendon meets his last appointment of the day: Paul Olea, an insurance broker from Temecula.
Olea bought his home in 2005 when his business selling insurance -- including homeowner's insurance -- was booming.
He and his wife had some reservations about taking on an adjustable-rate loan, but Olea says their mortgage broker assured them that they would be able to refinance "within six months."
"That was his pitch," Olea, 49, says. But "when I went to call him, he was gone. I had no one to help me."
As the housing market cooled, Olea's work selling insurance stagnated. His income dropped by one-third in just two years, he says.
Then his wife lost her job at a commercial insurance company. Olea filed for bankruptcy protection last summer and, after falling behind for three months on his payments, received his first notice of default in November.
Now the couple is trying to negotiate a short sale, but the offers are disappointing. Recently, a potential buyer offered $325,000 for the home the Oleas bought for $440,000.
Olea's loan is "interest-only," which means he has to pay only the interest on the mortgage for the first 10 years. But that also means he isn't paying down the balance. With home values falling and the full amount left on his mortgage, Olea estimates that he owes $100,000 more than what his home is now worth.
And his interest rate adjusts every month. Initially, he paid $1,613 a month; now his payments are $2,309.
"That loan is a stranglehold," Hendon says. "He will not pay off his balance with any affordability."
Olea wants to get a 30-year, fixed-rate loan, and Hendon says he has a good chance of doing so, because a new loan would probably be cheaper for the lender than a foreclosure.
In the frenzy of the housing boom, borrowers, lenders and brokers made bad decisions, figuring that as long as home values kept rising there was little to worry about.
"Blame is everywhere," Hendon says. "The best thing we can do is be part of the solution."