Banks’ reluctance to modify mortgages leaves Marion family in precarious spot

Jason Tuttrup is happy to show a visitor around the basement of his family's home.

“I'm kind of proud of it,” he said as he heads downstairs. “We put a lot of work into it.”

Working on his own, Tuttrup framed the space that was unfinished when he, wife Angie and their two children moved in back in 2004. As the family grew to five children, Tuttrup hung drywall, painted walls and laid carpet. He helped an electrician wire what's now two bedrooms, a bathroom, a room lined with the Star Wars toys he and the children have collected, and what was to have been a home-theater room.

“Now it's just kind of a playroom for the kids,” he said.

The home theater is on hold. Since losing his job in August, Tuttrup has been trying to keep a roof over his family's heads through a modified mortgage.

After a three-month slog through the system, relief of a sort arrived this week. After being contacted by The Gazette, officials at Wells Fargo offered to place Tuttrup's mortgage in a program for homeowners who have lost their jobs. Mortgage payments will be reduced to 31 percent of his unemployment compensation for six months - after which he'll have to make a “balloon” payment covering all the deferred costs.

“It's not modifying much,” he said. “At the end of the six months, I have to make the full payment that was due” unless he can reach another agreement.

Still, it will buy Tuttrup some time. He's enrolled at Kirkwood Community College to learn computer-assisted mechanical engineering, a two-year course.

“I can't stay off work that long,” he said, “but if studying the classes and doing good in the classes gets my foot in the door somewhere ...”

A broken system

Don't think Tuttrup's experience with the system hasn't made him cynical.

“I already knew it didn't work,” Tuttrup said one recent afternoon as 4-month-old Thorin fussed in his jumper seat. “I didn't know it didn't work this bad.”

Still, “I'm pretty upset,” said Tuttrup, 38. “It sounded like they were going to help me out.”

“It's not unusual at all,” said Kathi Moss, financial wellness coordinator for Horizons, the Cedar Rapids non-profit that provides financial counseling for area residents. “It took me 10 months to get a modification approved through the Bank of America. They weren't working with me at all.”

The Tuttrups financed their home with an adjustable-rate mortgage with Commercial Federal Bank through the Federal National Mortgage Association, commonly called Fannie Mae. By the time Commercial Federal was bought by Bank of the West in 2005, their loan had been securitized, packed with other mortgages and sold to an investor.

Meanwhile, Tuttrup lost his job to the June 2008 flood. After a hitch in the Navy, where he had learned power-plant operation, he had gone to work for Alliant Energy as a shift operator at the Sixth Street Generating Plant, near downtown Cedar Rapids. The plant provided steam heat to downtown customers, notably Quaker Oats, until the flood wrecked it.

Alliant decided against rebuilding but brought in temporary boilers to help its customers transition to other power sources. Tuttrup was let go in August when the plant was shut down for good.

“I was one of the last to go,” he said.

Looking for help, not short sale

Seeing the layoff coming, “we were able to take care of a lot of debt,” Tuttrup said, paying off credit cards and putting off major purchases.

“I cashed out my 401k and cleaned out my kids' savings to stay where we are now,” said Tuttrup. He also called Wells Fargo, which services his repackaged mortgage.

“I let them know I wasn't going to be able to to make my house payments,” he said. “At first it sounded like they were going to help me out,” and some fees and service charges were waived.

Angie Tuttrup took a part-time job at Walmart, and the couple has made mortgage payments when they could, but Tuttrup expects to be 90 days delinquent on Monday.

When he was laid off, Tuttrup expected his lack of other debt would make him a good candidate for the Home Affordable Modification Program, the Obama administration's $50 billion program to help financially troubled homeowners keep their homes. The program has a provision specifically for borrowers dealing with a loss of income, but until Wednesday's call from the bank, Tuttrup doesn't believe Wells Fargo even considered his case.

Instead, he received letters from Wells Fargo and a local real estate agent offering him a short sale, in which the lender agrees to accept a payoff less than the loan's remaining balance.

“The banks, it seems like they're just ready to sell the house instead of helping the homeowner, which is what they're supposed to be doing,” said Tuttrup.

“We see that story all the time,” said John Gianola, managing attorney with Iowa Legal Aid in Cedar Rapids. “They've created this bullet-train system that rushes toward foreclosure, but this other train that's supposed to work with people is an antiquated steam engine that just breaks down.”

Lost papers, incompetent staff

As lenders repackaged and re-repackaged loans, documentation was lost.

“There were so many people on staff at these mortgage companies that didn't have a clue what they're doing,” said Horizons' Moss. “We have had just a huge influx in the past six weeks. We do the best we can, but sometimes we just get overwhelmed.”

Moss said Horizons' three financial counselors are carrying 180 active mortgage cases, including the Tuttrups'. Workers have made up to six modification applications to lenders without getting a reply, she said.

“I've got four of them that are just sitting there, and (the banks are) saying, ‘Oh, this is missing,' and the information's there,” Moss said. “It feels to me like they make us jump through double and triple and quadruple hoops.”

Iowa Legal Aid gets involved with Horizons' cases when and if they go to court, which Tuttrup still hopes to avoid. The agency handled 2,100 foreclosures last year and had 2,700 on the books through the end of November - 350 in the Cedar Rapids office, which serves Linn, Benton, Iowa, Tama, Marshall and Poweshiek counties.

Corey Luedeman, Legal Aid senior staff attorney, said the agency only takes cases that have a realistic chance at a successful modification.

“I am not trying to get anybody a free house,” Luedeman said. “I'm trying to make sure that someone who's suffering a temporary hardship is not going to be homeless. If they don't have a legitimate shot, we tell them in plain English.”

Between Legal Aid and credit counseling agencies like Horizons, “this is a pretty remarkable collaboration,” said Gianola. “There's no other state that has developed a statewide free response to the mortgage foreclosure crisis.”

Consumers get least help

Still, it's not working for the Tuttrups or millions of others. Nationwide, the Home Affordable Modification Program has started almost 1.5 million three-month loan modification trials, disbursing just $395 million of the $29.9 billion set aside for the program - down from the original $50 billion - according to ProPublica, the non-profit journalism organization tracking it.

ProPublica's Karen Weise, who's researched and written much of the organization's modification-program coverage, expects the program will distribute no more than $4 billion - less than the $5.1 billion originally allocated to Wells Fargo alone. Wells Fargo has disbursed $24.6 million of its share through Dec. 3, with borrowers getting $479,695 worth of modifications, investors $7.5 million and loan servicers $16.5 million.

Wells Fargo received $25 billion in the federal bank bailout, which the bank announced it had repaid about a year ago.

Jason Menke, spokesman for Wells Fargo Home Mortgage in West Des Moines, said the bank has modified 577,000 mortgages, only 11 percent of them through the federal program.

“HAMP is always the first program we consider borrowers for, but if they're not eligible for HAMP, we consider other proprietary modification programs,” Menke said.

Menke said 92 percent of Wells Fargo borrowers are current. Of those who are at least 60 days behind, “we are able to provide options” to 66 percent. He said the lender has hired 10,600 staff to work on mortgage modifications and has assigned specific workers to each troubled borrower's case since June.

Still, the congressional oversight review of the program released this week found Tuttrup's situation is common. The report notes: “It became clear that the private sector was either unable or unwilling to conduct mortgage modifications on its own of a scope and scale necessary to stem the tide.”

“It's made for pretty nasty holidays,” Tuttrup said. “Well, I guess it may depend how you look at it. You live within your means. When things are going good, (the children) get more than they should ...”

“ ... and when it's not, they get more of your time,” Angie Tuttrup said.

Jason Tuttrup is happy to show a visitor around the basement of his family's home.

“I'm kind of proud of it,” he said as he heads downstairs. “We put a lot of work into it.”

Working on his own, Tuttrup framed the space that was unfinished when he, wife Angie and their two children moved in back in 2004. As the family grew to five children, Tuttrup hung drywall, painted walls and laid carpet. He helped an electrician wire what's now two bedrooms, a bathroom, a room lined with the Star Wars toys he and the children have collected, and what was to have been a home-theater room.

“Now it's just kind of a playroom for the kids,” he said.

The home theater is on hold. Since losing his job in August, Tuttrup has been trying to keep a roof over his family's heads through a modified mortgage.

After a three-month slog through the system, relief of a sort arrived this week. After being contacted by The Gazette, officials at Wells Fargo offered to place Tuttrup's mortgage in a program for homeowners who have lost their jobs. Mortgage payments will be reduced to 31 percent of his unemployment compensation for six months - after which he'll have to make a “balloon” payment covering all the deferred costs.

“It's not modifying much,” he said. “At the end of the six months, I have to make the full payment that was due” unless he can reach another agreement.

Still, it will buy Tuttrup some time. He's enrolled at Kirkwood Community College to learn computer-assisted mechanical engineering, a two-year course.

“I can't stay off work that long,” he said, “but if studying the classes and doing good in the classes gets my foot in the door somewhere ...”

A broken system

Don't think Tuttrup's experience with the system hasn't made him cynical.

“I already knew it didn't work,” Tuttrup said one recent afternoon as 4-month-old Thorin fussed in his jumper seat. “I didn't know it didn't work this bad.”

Still, “I'm pretty upset,” said Tuttrup, 38. “It sounded like they were going to help me out.”

“It's not unusual at all,” said Kathi Moss, financial wellness coordinator for Horizons, the Cedar Rapids non-profit that provides financial counseling for area residents. “It took me 10 months to get a modification approved through the Bank of America. They weren't working with me at all.”

The Tuttrups financed their home with an adjustable-rate mortgage with Commercial Federal Bank through the Federal National Mortgage Association, commonly called Fannie Mae. By the time Commercial Federal was bought by Bank of the West in 2005, their loan had been securitized, packed with other mortgages and sold to an investor.

Meanwhile, Tuttrup lost his job to the June 2008 flood. After a hitch in the Navy, where he had learned power-plant operation, he had gone to work for Alliant Energy as a shift operator at the Sixth Street Generating Plant, near downtown Cedar Rapids. The plant provided steam heat to downtown customers, notably Quaker Oats, until the flood wrecked it.

Alliant decided against rebuilding but brought in temporary boilers to help its customers transition to other power sources. Tuttrup was let go in August when the plant was shut down for good.

“I was one of the last to go,” he said.

Looking for help, not short sale

Seeing the layoff coming, “we were able to take care of a lot of debt,” Tuttrup said, paying off credit cards and putting off major purchases.

“I cashed out my 401k and cleaned out my kids' savings to stay where we are now,” said Tuttrup. He also called Wells Fargo, which services his repackaged mortgage.

“I let them know I wasn't going to be able to to make my house payments,” he said. “At first it sounded like they were going to help me out,” and some fees and service charges were waived.

Angie Tuttrup took a part-time job at Walmart, and the couple has made mortgage payments when they could, but Tuttrup expects to be 90 days delinquent on Monday.

When he was laid off, Tuttrup expected his lack of other debt would make him a good candidate for the Home Affordable Modification Program, the Obama administration's $50 billion program to help financially troubled homeowners keep their homes. The program has a provision specifically for borrowers dealing with a loss of income, but until Wednesday's call from the bank, Tuttrup doesn't believe Wells Fargo even considered his case.

Instead, he received letters from Wells Fargo and a local real estate agent offering him a short sale, in which the lender agrees to accept a payoff less than the loan's remaining balance.

“The banks, it seems like they're just ready to sell the house instead of helping the homeowner, which is what they're supposed to be doing,” said Tuttrup.

“We see that story all the time,” said John Gianola, managing attorney with Iowa Legal Aid in Cedar Rapids. “They've created this bullet-train system that rushes toward foreclosure, but this other train that's supposed to work with people is an antiquated steam engine that just breaks down.”

Lost papers, incompetent staff

As lenders repackaged and re-repackaged loans, documentation was lost.

“There were so many people on staff at these mortgage companies that didn't have a clue what they're doing,” said Horizons' Moss. “We have had just a huge influx in the past six weeks. We do the best we can, but sometimes we just get overwhelmed.”

Moss said Horizons' three financial counselors are carrying 180 active mortgage cases, including the Tuttrups'. Workers have made up to six modification applications to lenders without getting a reply, she said.

“I've got four of them that are just sitting there, and (the banks are) saying, ‘Oh, this is missing,' and the information's there,” Moss said. “It feels to me like they make us jump through double and triple and quadruple hoops.”

Iowa Legal Aid gets involved with Horizons' cases when and if they go to court, which Tuttrup still hopes to avoid. The agency handled 2,100 foreclosures last year and had 2,700 on the books through the end of November - 350 in the Cedar Rapids office, which serves Linn, Benton, Iowa, Tama, Marshall and Poweshiek counties.

Corey Luedeman, Legal Aid senior staff attorney, said the agency only takes cases that have a realistic chance at a successful modification.

“I am not trying to get anybody a free house,” Luedeman said. “I'm trying to make sure that someone who's suffering a temporary hardship is not going to be homeless. If they don't have a legitimate shot, we tell them in plain English.”

Between Legal Aid and credit counseling agencies like Horizons, “this is a pretty remarkable collaboration,” said Gianola. “There's no other state that has developed a statewide free response to the mortgage foreclosure crisis.”

Consumers get least help

Still, it's not working for the Tuttrups or millions of others. Nationwide, the Home Affordable Modification Program has started almost 1.5 million three-month loan modification trials, disbursing just $395 million of the $29.9 billion set aside for the program - down from the original $50 billion - according to ProPublica, the non-profit journalism organization tracking it.

ProPublica's Karen Weise, who's researched and written much of the organization's modification-program coverage, expects the program will distribute no more than $4 billion - less than the $5.1 billion originally allocated to Wells Fargo alone. Wells Fargo has disbursed $24.6 million of its share through Dec. 3, with borrowers getting $479,695 worth of modifications, investors $7.5 million and loan servicers $16.5 million.

Wells Fargo received $25 billion in the federal bank bailout, which the bank announced it had repaid about a year ago.

Jason Menke, spokesman for Wells Fargo Home Mortgage in West Des Moines, said the bank has modified 577,000 mortgages, only 11 percent of them through the federal program.

“HAMP is always the first program we consider borrowers for, but if they're not eligible for HAMP, we consider other proprietary modification programs,” Menke said.

Menke said 92 percent of Wells Fargo borrowers are current. Of those who are at least 60 days behind, “we are able to provide options” to 66 percent. He said the lender has hired 10,600 staff to work on mortgage modifications and has assigned specific workers to each troubled borrower's case since June.

Still, the congressional oversight review of the program released this week found Tuttrup's situation is common. The report notes: “It became clear that the private sector was either unable or unwilling to conduct mortgage modifications on its own of a scope and scale necessary to stem the tide.”

“It's made for pretty nasty holidays,” Tuttrup said. “Well, I guess it may depend how you look at it. You live within your means. When things are going good, (the children) get more than they should ...”

“ ... and when it's not, they get more of your time,” Angie Tuttrup said.