By Cynthia Burton, The Philadelphia Inquirer
Feb. 22--Jim Townsend is a retired Philadelphia sanitation worker with a decent pension and a love of the Jersey Shore, where he bought a home for his retirement.
Miles away is Talina Johnson, who bought a rowhouse in Clementon.
Both planned their moves with care.
Townsend bought his North Cape May home, just two blocks from the Delaware Bay, four years before he retired. Johnson took an eye-opening class in homeownership that prepared her to become the first person in her family to own a house.
But both of them got sucked into the nation's convulsive financial crisis, and each is trying to navigate the government's stumbling efforts to turn back the mounting number of home foreclosures.
Under the worst of circumstances, Johnson has become an expert on the financial crisis.
More than a year ago, she lost her job at a bank that went kaput, and now she is struggling through a web of government programs to get her mortgage modified so she can keep her home.
Under the $75 billion federal Home Affordable Modification Program (HAMP), banks may voluntarily modify a distressed homeowner's mortgage by reducing the interest rate, forgiving fees, extending the life of the loan, or, in rare instances, cutting the loan principal to reduce monthly payments.
The program, launched last spring, is the latest iteration of the federal government's attempts to help consumers; it has been disappointing, with only 116,000 borrowers getting permanent modifications since it started out of 940,000 who received temporary three-month payment adjustments, according to Treasury Department statistics. In New Jersey, about 27,900 people are waiting for a permanent mortgage modification and only 3,700 have received it. In Pennsylvania, 19,500 are waiting for permanent help, while only 2,400 have received it.
Johnson has been trying to get her mortgage modified since May, when the program geared up. She learned last week that it might not happen.
In 2007, she bought the dream of homeownership in a stable Camden County community for her and her son, Tousiant, 11. She had a steady job at Wachovia Bank, saved her money, and was ready to buy a rowhouse on a wide, sunny street in a small Clementon development with playing fields down the block and an abundance of nearby strip malls.
Ever the planner, she took a homeownership class from which she learned to manage and save money.
"It was life-changing," she said. "Instead of paying rent to someone, I would own a house. I wanted to leave something to my son when he graduates from college, because I didn't have that."
She took out a $163,930 mortgage from Wachovia Bank with a fixed 5.5 percent interest rate over 30 years. The home cost $169,000. She was helped with a $10,000 housing grant from Camden County.
"I had just turned 30. I was ready. Everything was going as planned," she said.
But in July 2008, she got sick and was out of work as a teller supervisor at Wachovia's Wenonah branch. She fell behind on some of her bills.
She went back to work at the bank in November and was fired a week before Christmas 2008.
For Johnson, the job loss was the beginning of a slow and painful slide into and out of foreclosure, and now she is trying to figure out if she can save her home.
In February 2009, her lender and her old boss -- Wachovia Bank -- started the foreclosure process against her, according to property records.
Desperate to keep her home, she took in boarders -- her mother, sister, and brother. But that proved to be unreliable. Her mother moved into a subsidized apartment in Camden, and her brother and sister did not make their rent payments this month.
With the help of New Jersey Citizen Action, a nonprofit housing-counseling group, she was able to persuade Wachovia to give her a break in May 2009. She would make up $4,500 in missed payments and keep paying her original mortgage amount of $1,514 a month.
By September, court records show, the bank withdrew its foreclosure proceeding.
In the interim, Wells Fargo & Co. was completing its takeover of Wachovia Corp. and took over Johnson's mortgage in October 2009.
In January, the lender offered to cut her monthly payment to $1,249, which ends in March. Last week, though, it sent her a letter saying it probably would not permanently modify her mortgage because the payment would be too high for her to manage.
"I've just been waiting for a modification since last May, and they were giving me the runaround," she said. "I need stability. I need to make some decisions and my decisions are based on what's going on with this mortgage company."
As she has tried to adjust her mortgage, she has also tried to find work. But she could not find a job in her field. So she is planning to go back to school at Camden County College to build up skills in a field where there may be more jobs.
Declining to discuss Johnson's case in detail, Wells Fargo spokesman Tom Goyda said, "We will continue to work with her and hopefully she'll have an improvement in her income."
Wells Fargo modified 500,000 mortgages last year, through government programs or negotiations with borrowers.
Still, Goyda argues that many people simply cannot afford to stay in their homes.
"No matter how far you stretch the HAMP program, take the interest rate down as low as you can, extend the term as long as possible, set aside as much principal as the program will allow, you still can't get to an affordable payment level," he said. "Some people, no matter how much you do, really can't afford the home they're in."
Advocates see it differently, saying banks are unwilling to lower interest rates or principals enough to make mortgage payments affordable.
The Rev. DeForest B. Soaries Jr., a former secretary of state whose Somerset church runs a housing-counseling agency, said banks had been so unwilling to lower principals that a $25 million state program to lower principals failed for lack of interest.
"It died in the womb because with all the people in New Jersey who needed help, not one single instance occurred where a bank was willing to lower the principal," he said.
Jim Townsend, 61, is hoping for help, but starting to lose faith.
He bought his North Cape May rancher in 1999 for $87,000 and took out a mortgage for $78,750 from a local bank. He retired in 2003 from the city, where he drove a trash truck in the Northeast.
Soon, the plan started falling apart. The Juniata Park native's pension was not enough to cover health insurance and his expenses, so he did not buy health insurance.
He refinanced his home in 2003, upping the loan to $102,000. He refinanced again in 2005, bringing his debt up to $195,570, according to mortgage records.
He got into a car accident in 2006. His vehicle was totaled and he paid doctors' bills out of his pocket.
"I had to borrow money to get another car. I didn't have gap insurance" to pay off the debt on the totaled car and buy a new one, he said.
He used credit cards to cover daily expenses. He lived on Cheerios. Eventually, he took out a loan from a credit union.
Then the credit-card companies shut him down by cutting his credit limits.
"It turned into a nightmare," he said.
And in 2006, he refinanced his mortgage again, this time with an adjustable-rate mortgage "for the money. It was so alluring," he said. The monthly payment is $1,153.
Now, he owes $205,000 on the house he purchased for $87,000. He also took out a $40,000 second mortgage in 2007 to consolidate his debts.
In December 2009, he had a heart attack. He has yet to pay those medical bills.
But Townsend says he is a good planner. Months ago, he knew his adjustable-rate mortgage would be causing him heartache and he tried to refinance his home again, or get help through a government program.
As Townsend was trying to renegotiate his mortgage, his mortgage was going through some twists and turns of its own.
The mortgage was purchased by IndyMac. That bank went under in July 2008, crushed by having given out too many exotic loans like the one Townsend has, which is an interest-only loan with a balloon payment due in 2011. The bank and Townsend's mortgage are now owned by One West Bank, of Pasadena, Calif. The bank did not respond to requests for comment through its public relations firm, Sard Verbinnen & Co. Inc., of San Francisco.
In the last 15 months, Townsend said he spent hours on the phone trying to figure out whether he has been rejected or approved for a mortgage modification. He learned earlier this month that he had been rejected because the bank did not think he could afford to pay his mortgage.
He is not satisfied with the answer.
"I find it ironic" that taxpayers bailed out banks, but the banks "don't want to return the favor and give mortgage modifications," he said.
Townsend is among untold numbers of homeowners who may not get government help dealing with mortgages they cannot pay. His best hope now is to try another way to refinance his home, or walk away from it when his bills become unpayable.
The government has tried a variety of approaches to slow the nation's stunning foreclosure rate. Last year, about 15 percent of mortgage borrowers were either in foreclosure or behind in their mortgage payments, according to the Mortgage Bankers Association, which conducts quarterly national delinquency surveys.
The New Jersey judiciary reports that 63,000 residential properties were in some stage of foreclosure in 2009.
But the government solutions have a fatal flaw, said Phyllis Salowe-Kaye, head of Citizen Action, which is trying to help Johnson. They are voluntary, and banks are not obligated to give people affordable monthly payments.
When banks offer a modification, she said, sometimes they do not lower monthly payments enough and a borrower may soon find himself behind in payments.
Meanwhile, people like Townsend and Johnson, stuck in a limbo of hoping for government help and wondering what to do next, are growing in numbers.
Contact staff writer Cynthia Burton at 856-779-3858 or cburton@phillynews.com.
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