On Monday, Jim Shafer learned by mail that he had been denied a modification for his home loan.
Also on Monday, Jim Shafer learned by phone that he had been approved for a modification of his home loan.
Welcome to Shafer’s world, where every message from the bank, JP Morgan Chase, is more confusing than the last. For the past two years, the Shafers have been caught in a bank-world snare, lost in a bureaucratic labyrinth and tangled in the new federal program intended to help struggling homeowners.
“It’s just a complete, utter fight to be treated right, and that’s what I’m pissed off about,” said Shafer, 51, a Spokane Valley man who works as a house painter. “Somebody’s going to have to be accountable for what they’re doing to our family.”
The story of Shafer, his wife, Sheri, and their 96-year-old home in the Spokane Valley is long and tortuously complex. In an overstrained nutshell: About two years ago, they tried to modify their adjustable-rate loan into a fixed rate and thought they had done so. Six months later, after making the new, lower payments, they were informed they’d been rejected – and that they now owed Chase $9,000.
Pay up or face foreclosure, the letter said.
Jim got on the phone and started pursuing a solution, and Chase suggested a “trial modification” – the federal program to allow homeowners facing foreclosure to stay in their homes while the terms of their loan are reworked. It now appears – Monday’s letter to the contrary – that the Shafers have been approved, almost eight months after the trial began.
A cynic might begin to suspect the bank didn’t want people to understand what’s going on.
“I think they take advantage of that,” Shafer said. “They count on that.”
Problems with the Obama administration’s loan modification program have been documented by ProPublica, the online investigative journalism organization. In the year or so since the program began, about 1 million people have entered trial modifications. The trials are intended to last three months, but less than a fifth have been made permanent and some 90,000 have dragged on past six months, ProPublica reports. Of those, about 60,000 were Chase loans.
Chase spokeswoman Darcy Donahoe-Wilmot said the company couldn’t discuss details of the Shafers’ situation. But she said delays in trial “mods” are often the result of difficulties in compiling the necessary paperwork. Chase has made some 731,000 loan modifications, she said, and is setting up centers where people can meet face-to-face with a bank representative to discuss modifications.
“We’re trying to do the right thing,” she said. “We’re trying to help people.”
The Shafers’ story is marked by many of the characteristics that have brought grief to so many homeowners in recent years. They borrowed about $100,000 in 2003 to buy and reroof the home, refinanced in 2005 to pay off business and consumer debt, and then got that loan modified to fix the interest rate at 7 percent in October 2008.
At least they thought they had. Jim Shafer said all he wanted at that point was to keep his interest rate steady and his monthly payment at $1,246. But he began having trouble using the automated phone system to make payments. No one he got on the phone could help him. One department said it appeared he hadn’t been approved for a fixed-rate after all, and then another said he had. This went on for months, and he kept making payments that were held in reserve, he said.
Then came the letter notifying them that they had not, in fact, been approved for the fixed rate, and that they owed Chase $9,000, payable in 30 days.
“I thought I was going to pee my pants,” said Sheri Shafer. “I thought we were making our payments on time.”
Months of frustration lit a fire under Jim Shafer. He called the office of Chase CEO Jamie Dimon. He called financial guru and radio host Clark Howard. He bugged everyone he could think of. Finally, he found himself working with someone at Chase charged with resolving customers’ problems – and he was into a trial modification by September.
The Shafers, like a lot of us, aren’t financial experts. They may not have made perfectly savvy choices. A lot of scolds like to blame those who get crossed up with banks – they signed the contracts, after all. What did they expect?
Allow me to speak for the financially ignorant – those of us who sign away 30 years of our lives to people we barely know, in terms we can barely understand, to people who hold a massive advantage in information and experience. We expect to be treated honestly, and honesty does not include using terms we cannot understand and obscuring consequences behind jargon. We expect someone to answer the phone when we call. It’d be nice if you didn’t milk us like a money cow.
This last point pertains to the loan modification that is putting the supposedly happy ending on the Shafers’ story. It gives them an interest rate of about 5 percent and nice, small payments of $892. Of course, for a decade, those payments are only applied to the interest. After 26 years of payments or when the house is sold, the Shafers will still owe Chase a balloon payment of $102,000. That’s more than they originally borrowed, back in 2003, to buy the home.
Wilmot-Donahoe says that type of loan is meant primarily to lower payments so people can stay in their homes. Down the road, they might refinance or sell before the payment becomes due.
Jim Shafer says he’s OK with it. He’ll try to make extra payments on the principal as he goes, and do everything he can to avoid a huge debt in a quarter-century.
In the meantime, he and his wife are hoping this is finally resolved.
“How do you know, though?” he asks.