Foreclosure commonly represents the end of a struggle. A borrower can’t pay a mortgage, loses a home and moves on.
But Karen Mena, a 38-year-old county worker, never gave up. Mena fought even after her San Bernardino home was no longer hers. And she won the three-bedroom house back — at least for now.
The ordeal isn’t over yet. The eviction was stopped and Bank of America canceled the foreclosure because of the possibility that the loan would be modified to make it more affordable.
But Mena continues to negotiate with the bank over loan terms. She could still lose the house where she built a life and raised two sons.
“I have had the home since I was 21,” she said. “It is my primary residence. My son goes to school in the neighborhood and has an after-school program nearby.”
Even getting as far as she has is notable, experts said, because it is difficult to get a foreclosure rescinded. That is particularly the case in states such as California, where the foreclosure process is streamlined and largely unfolds outside of court.
Some consumer attorneys say foreclosure reversals like Mena’s could become more common as they learn to better exploit foreclosure errors.
“We are making some headway, even in California, though it has been slow,” said Walter Hackett, an attorney who represents Inland Empire homeowners. “As attorneys become more savvy about the realities of mortgage lending, they are starting to file more meaningful lawsuits.”
In 1996, when Mena and her husband bought their house, the region’s last real estate bust was just beginning to recede.
“It was good,” Mena said. “You could still afford to buy a house, there was work and I was young.”
Her husband, who declined to be interviewed for this article, worked as a licensed contractor, slathering buckets of paint on walls for homeowners looking to spruce up their properties. Mena worked for Riverside County managing the medical cases of handicapped children.
In 2002, they brought a second son home to the tree-lined street not far from the San Bernardino National Forest.
As home values surged and the region’s real estate bubble inflated, the family’s starter home became a source of income as well as an investment tool.
The pair refinanced their property several times to pay off vehicles, consolidate bills and complete home repairs and upgrades, Mena said. They also used some of that money to launch a contracting company. The last time the home was refinanced, the mortgage remained in her name alone.
“You kind of take a gamble, like, ‘Hey let’s just do this, let’s be self-employed, let’s have our own business,’” Mena said. “Then all of a sudden it came to a screeching halt.”
The van, spray guns and other newly purchased tools sat idle as construction work in Southern California dried up. By 2008 the two-income household was relying on one income, and the couple was forced to draw on a line of credit to pay the mortgage.
When that final means of survival was tapped out in August 2008, Mena pleaded her case to Bank of America. The bank put Mena on a temporary payment plan that allowed her to pay half of her mortgage note.
In early 2009, Mena was demoted in a cost-cutting measure by her employer. She faced some unexpected expenses in February 2009 and missed a mortgage payment, breaching the terms of her agreement with Bank of America.
The bank told her she could no longer make partial payments, according to letters of financial hardship she wrote applying for mortgage assistance. She tried to make full payments when she could, Mena said, but quickly began falling behind.
“We were still hoping it would work itself out, not only as a family, individually, but as a country, that this will fix itself, and then it didn’t,” Mena said. “Nothing was working.”
President Obama, who took office in January 2009, unveiled plans that spring to help as many as 4 million borrowers such as Mena through its foreclosure assistance plan, the Home Affordable Modification Program. The plan would reduce monthly payments by lowering borrowers’ interest rates, extending the length of time on some mortgages and deferring portions of some mortgage debts to the end of the life of the loans.
The program has fallen well short of its goals, and last year the Republican-controlled House of Representatives voted to end it, arguing that the program is a waste of money and gives homeowners false hope. The measure didn’t go beyond the House, but the Obama administration has taken steps to improve the performance of banks participating in the program. Last year it withheld financial incentives from some of them, including Bank of America.
Separately, federal regulators have ordered banks to improve their mortgage servicing and foreclosure practices after widespread revelations in 2010 that banks improperly repossessed the homes of delinquent borrowers through a system rife with errors and misconduct. The nation’s state attorneys general remain locked in settlement talks that would, according to people familiar with the negotiations not authorized to speak publicly, overhaul the way mortgages are serviced and homes are foreclosed on in the U.S.
Mena submitted her first application through the Home Affordable Modification Program in June 2009 and then again in July after she was told her paperwork was never received. A frustrating process ensued: She would fax financial documents to the bank and wait for weeks or months for word back, only to be told to send the information again because the papers were incomplete, missing or outdated. Mena kept some of her correspondence with Bank of America, a journal of letdowns and false hopes.
“To Whom It May Concern,” she scrawled informally in pen on one set of papers faxed to Bank of America in January 2010. “I am resending these documents because I was informed yesterday … that they were not received even though I was informed to the contrary on 10/02/09.”
In August 2010, the bank began formal foreclosure proceedings against Mena. She reapplied for a loan modification. Her home was scheduled for sale at auction Dec. 6, 2010. The bank asked her for more documents.
She was caught in the gears of the bank’s dual-track process, where a lender continues to foreclose on a home even as it works with a borrower on modifying the home’s mortgage — akin to lining up the mortician as the patient checks into the hospital.
“I couldn’t tell you the amount of times I talked to Bank of America and they told me, ‘We are not going to foreclose on you,’” Mena said, sitting for an interview at her dining room table. “‘Don’t worry about the notices, don’t worry.’”
The bank agreed to postpone the auction, and Mena faxed in two more pieces of paperwork. She waited, and received a letter dated Dec. 14, 2010, telling her that “within 30 days, you will hear from us about your eligibility for a loan modification.”
With that letter, at least according to the guidelines of Obama’s program, no foreclosure can occur until a decision on the loan modification is made. Fannie Mae, the government-owned investor behind Bank of America’s loan, sets its own guidelines for such modifications. The foreclosure process moved forward, Mena’s home went to auction and the property reverted to Fannie Mae.
A Coldwell Banker agent carrying a Fannie Mae form letter appeared on Mena’s front step two days after Christmas and informed Mena that her home was no longer hers.
“Fannie Mae has engaged a real estate agent to manage this property, and as an occupant of this property, to make you aware of some options that may be available,” the letter read.
The options were to rent the home or receive a cash payment to leave voluntarily — “cash for keys,” in industry parlance. But those choices did not still well with Mena, who believed she had a right to stay. She refused to take any cash and declined any rental agreements, but her stand was beginning to take a toll.
“I was missing hours of work trying to figure out what to do, and at that point in time everything seemed to be crumbling,” she said. “It was a feeling of just being lost.”
In the new year, a letter from Bank of America arrived and changed everything.
“We are pleased to tell you that you are approved to enter into a trial period plan under the Home Affordable Modification Program,” it read. Mena had been accepted into the program that she had spent more than 18 months pursuing, but she had been tossed a lifeline by the bank too late.
She faced a choice: Start making the trial payments or save her money in case she was evicted. Mena decided to begin making the payments, telling herself, “Let’s see what happens. This validates everything I have been trying to do.”
Still, Fannie Mae pressed on, taking Mena to court to get her out of the house. Mena replied with her own lawsuit, written with the help of a paralegal because she did not have enough money for an attorney.
The lawsuit makes a series of arguments accusing Bank of America and Fannie Mae of deception as well as questioning their authority to foreclose. A key contention is that she was accepted into a trial loan modification program even after she was foreclosed on.
But before that lawsuit could be resolved, Fannie Mae won the eviction case. She appealed and lost.
The next day, a Friday she had off, Mena spent the morning in shock, driving around the neighborhood considering potential rental properties, then looking through the piles of things in her garage and closets wondering where it would all go. That was when a Bank of America attorney, new to the case, called Mena.
The eviction never happened and BofA repurchased the loan from Fannie Mae, but the negotiations with the bank stretched on.
Last October, Mena got the call she had been waiting for: The foreclosure had formally been retracted.
She went home that night, pushed aside the huge stack of documents that sat on her dining room table and served herself a meal. That night she got her first good night of sleep in months. “It felt like it was home again,” Mena said. “That feeling had been stripped from me.”
Mena said her determination was fed by anger at the lender she felt had led her astray. “The principle of how Bank of America went about doing the foreclosure was wrong,” she said.
Representatives of Bank of America declined to comment in detail on Mena’s situation, citing litigation and privacy concerns, but confirmed that she was foreclosed on while she was working with the bank on a modification.
Bank of America issued a statement that “we regret and apologize that this foreclosure was completed while we were working with Ms. Mena toward a mortgage modification. We took timely action and necessary steps to rectify the unfortunate situation, including reversing the foreclosure sale. As a result, Ms. Mena remained in her home throughout the process.”
“We are awaiting Ms. Mena’s decision on the modification terms we extended to her, which we believe will provide an affordable payment solution and the opportunity for her to sustain homeownership.”
Mena and the bank are still tussling over the terms of a loan modification. She received one offer from the bank but rejected it because, she said, it was not one offered through the Obama program and its terms weren’t affordable.
She is not sure when the matter will be settled. Her case remains open. She has no attorney, but for now she is still at home.