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Loan Modification Nightmare - Journey To Foreclosure Despite Attempts To Modify Loan
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(Editor’s note: the name of the lender has been withheld.)

Smoke and mirrors — that’s what Charles Swarthout, an Oakland firefighter living in Oakdale found when he attempted a loan modification on his home that later ended in foreclosure and a three-day order of eviction that ousted his family without ceremony from the home they’d bought at the height of the market.

To be straight, Swarthout swears this is not a “poor me” story. It’s a cautionary tale, told by someone who did everything he was asked to without fail; he spent hours on the phone, submitted duplicate reams of paperwork, constantly updated his information as requested, only to find his efforts were in vain and his family had become — in essence — homeless.

All because he hoped to get a better mortgage rate.

“If I’d known then what I know now…I would’ve never done the loan modification. I would’ve gotten another job, anything, just so we could stay in our home,” Swarthout said. “You hear the stories but you just can’t believe it until it happens to you.”


The Beginning

Swarthout moved his family to Oakdale from the Bay Area and found a beautiful home to raise his family. Swarthout and his wife fell in love with the community and knew without a doubt, this was the place they wanted to put down roots. Everything was good until April 2009 when Swarthout started looking for loan modification on his Adjustable Rate Mortgage.

“We weren’t having problems paying our mortgage at that point but I knew looking down the road that things might get tough,” Swarthout recalled, adding that the firefighters in his department had taken an 8 percent pay cut in order to save positions and the income loss had started to pinch. “I called to see if I could just get a better rate…I wasn’t asking for anything other than a conventional loan but they told me I had to miss payments before help was available.”

Swarthout didn’t like the idea of missing payments but his hands felt tied. Then the lender came back with an offer of loan modification that was more than his current mortgage payment and Swarthout declined but he didn’t sit around. He went and found a HUD counselor to help him through the process.

And then, against everything his gut told him, he stopped making his mortgage payments in the desperate hope of receiving help. He was told his case was going to review.

Three months went by and he discovered no review of his case had been initiated.

“I followed procedure and did everything they asked me to,” Swarthout said of the process. “I did a conference call with HUD and the lender and then resubmitted my paperwork.”

Little did Swarthout realize that this paperwork submission process would be endless — and in the end — fruitless.


Total Devastation

Swarthout thought he was getting somewhere when HUD called saying the paperwork was in, receipt had been confirmed of his documents and the process had started to postpone the foreclosure action.

Except that wasn’t the case.

Not long after, Swarthout awoke to a guy pounding on his front door with a notice to quit the premises within three days.

“My HUD counselor was bewildered,” Swarthout said. “I mean totally baffled. We were being evicted. My family was in a panic.”

It was soon discovered that the lender had sold the house and all attempts to modify, mediate or manage had been nullified. And the new owner wanted Swarthout and his family out: pronto.

“It’s the eeriest call to get that your house has been sold out from beneath you,” Swarthout said.

Amidst the moving confusion, Swarthout received a call from his alarm company while he was at work. According to their sensor someone was trying to break into the home. The police were called. Someone had picked the lock on the house, ripped the alarm from the wall and dismantled the garage door opener. The new owner had hired an eviction company to take possession of the home, even though the Swarthout family hadn’t moved yet.

“I received a notice that said the property must be vacated and that the new owner will take possession of the house and change the locks. But when I called the eviction company the number listed connects to a phone that rings to nowhere.”

And for a slice of dark irony, Swarthout said he received paperwork in the mail on March 18 from his lender on how to save his home, yet the following day he received the notice to quit the premises.

“I talked to a lawyer but he said it would take $30-40,000 to fight it and even if it worked we would get the home back at $475,000 when it sold (to the new owners) for $225,000.”

Swarthout said after this followed a series of harassing phone messages and texts in an attempt to get Swarthout off the premises.

At this point, Swarthout had moved his family into an apartment but he stayed at the house, sleeping on the floor, to discourage vandals from destroying the house for the appliances.

“I wasn’t vindictive; I wasn’t punching holes in the walls,” Swarthout said.

But then Swarthout said the tactics turned strong-arm.

“They claimed I had a marijuana grow in my house based on the fact that there was plastic on the windows and I had a camera on the garage,” he said.


The Aftermath

Today Swarthout is a changed man. His family is splintered, his house is foreclosed and his dreams are shattered. It’s hard to decide which pieces to pick up to fix — everything is a mess.

“We wanted to stay here,” Swarthout said. “We had no intentions of ever leaving but here we are…kicked out of our home. I can see where a lot of people just get fed up and say ‘forget it’. All I wanted was a conventional loan.”

The process has left Swarthout disillusioned and angry.

“I’m just looking for answers. I had calls go nowhere, emails disappear…I just want to know where I went wrong. My credit is tarnished and I’m living out of my car.”

It’s been six weeks since Swarthout was forced out of his home and he’s still bewildered.

“No one wants to go into foreclosure. It’s embarrassing and upsetting to the family. Losing a house is like a death or termination. It’s amazing…it just blows me away. I’m at the point where I don’t trust anyone. It’s left a bad taste in my mouth,” he said, continuing: “You know if it was never going to happen, I just wanted to know. The legal side is too expensive but it’s not about the money. I want to live here. If they would’ve been upfront with me I would’ve done whatever I could to make it work.”


The Reality

Thomas LaFleur, executive vice president for Pacific Community Services Inc, a HUD-certified nonprofit counseling agency that specializes in providing intermediary services between the lender and their clients, said although he couldn’t comment on Swarthout’s case specifically, he could say that what Swarthout went through is unfortunately common.

“Theoretically, everyone wants to do a loan modification, however, for a lot of folks it’s just not in the cards,” LaFleur said, adding that 70 percent of their business involves mortgage default clients. “Nationally, there haven’t been a lot of loan modifications issued.”

LaFleur said the paperwork shuffle and trial modifications only postpone the foreclosure, which enables the lenders to manage their “shadow inventory” of homes.

“We are sometimes able to keep people in their homes for an extended period of time but that doesn’t always end with a loan modification,” LaFleur said.

LaFleur added that changes to the process are coming in July that may spell relief for some but it’s still a difficult process.

“Next year we might see more loan modification but the lenders have discretion whether or not to modify the loan,” LaFleur cautioned, calling the loan default crisis, a “national debacle.”

“There are a tremendously large number of folks with no value left in their home and increased unemployment. I don’t see the situation rectifying itself soon,” he said.

For Swarthout, he’s one of many who have tasted the bitter failure of loan modification, and, if LaFleur’s assessment is correct, he won’t be the last.



The following links are resources and information available to homeowners currently considering or attempting a home loan modification. Beware of home loan modification scams that offer false promises. Always double-check the source of the information before making a commitment.


Home Affordable Modification Program


Department of Housing and Urban Development (HUD)


Making Home Affordable


National Housing Institute