Struggling to stay afloat
BY TERRY SAVAGE Sun-Times Columnist Mar 18, 2009
Debra and Rob Eyrich are facing foreclosure on their dream home.
Updated: May 3, 2013 12:14PM
When Rob and Debra Eyrich moved into their dream home in Elgin three years ago, they thought it would be their family home forever. The swings are set up in the backyard, the kids are happy in school, and even the dog has settled in. Both of them have full-time, secure professional jobs. So what could go wrong?
As Deb tells it: "We were supposed to have a 30-year, fixed-rate mortgage. But the mortgage broker told us that kind of loan was 'for your grandmother.' " Instead, he gave them an adjustable-rate mortgage, which was fine -- for a while. Then the recession hit, reducing Rob's salary as a residential architect, and eliminating his bonus.
Then, at the same time, another adjustment on their mortgage kicked in, causing the monthly payment to nearly triple from the original figure! Making the new mortgage payment would take nearly two-thirds of their newly reduced after-tax income.
CATCH 22: The Eyrichs immediately contacted their lender, Downey Savings & Loan of California, but were told they'd get no help on a loan modification until they were two months behind on their payments. They were in shock. They always had good credit, and could manage to keep paying the original amount, before the adjustments, even on a lower income. But the huge, new payment was beyond their means.
They did fall behind last fall, and immediately contacted the lender, which offered them forms for a modification. Meanwhile, Downey was sold to U.S Bank. They kept trying to call the bank about the modification -- right up until they were turned down in late January.
THE REASON: It seems their loan had PMI insurance, which would completely repay the lender in case of a foreclosure. So the bank, with nothing to lose, wouldn't give them a modification! Would they really lose their dream home?
RAY OF HOPE: We contacted U.S. Bank last week and were able to reach a sympathetic ear. While the bank says it hasn't yet created a new system for dealing with these acquired loans under the Obama administration's new "Making Home Affordable" guidelines, they did agree to take a second look at the Eyrichs' situation. Unfortunately, those new guidelines deal with "gross" income (before taxes), so Deb and Rob may not qualify.
Their other hope is a lending fund managed by Neighborhood Housing Services. They buy some loans at a discount (a "short sale") from banks, and then restructure the terms based on a new, lower loan value. The Eyrichs also have applied to this fund.
BOTTOM LINE: The Eyrichs did everything they were supposed to: contacted their lender early, kept after them for an answer, proposed a solution that was affordable on their budget. Still they wound up facing foreclosure!
It is ironic that banks won't talk to the most likely candidates for restructuring -- those who care enough about their property to call early, when they realize they're going to be in trouble. The advice to "wait until you fall behind" is absolutely self-defeating for the system, as well as the families involved.
Those who truly want to work out a plan and have at least some resources to do so -- by requesting lower rates or a longer term so they can keep paying -- have become the least likely to qualify for help.
That doesn't make sense. And that's The Savage Truth.