NorthJersey.com

New Milford Family Struggles To Stay In Home

The Record (NorthJersey.com) — Sunday, December 26, 2010

BY KATHLEEN LYNN
The Record
STAFF WRITER

Luis and Maria Valenzuela of New Milford struggled to pay their mortgage after a cascade of setbacks — including illness, a car accident, their daughter's layoff, and a granddaughter's autism diagnosis.

The family's mortgage company agreed to a temporary loan modification, which lowered their monthly payments (including property taxes) from $3,250 to $2,156. But the Valenzuelas say that although they paid faithfully, their mortgage company refused to make the modification permanent.

"They told us they deal with numbers, they don't deal with people," Luis Valenzuela said recently. "But they're dealing with people, with the lives of people and children."

The Valenzuelas have filed suit in Superior Court in Bergen County, accusing their mortgage servicer, Wells Fargo, of violating a contract — as well as consumer protection laws — by refusing to grant them a permanent loan modification.

They're among a large number of homeowners in similar situations, according to Phyllis Salowe-Kaye, head of New Jersey Citizen Action, the state's largest housing counselor.

"We see this all the time," said Salowe-Kaye. "The banks don't even give a reason. The people have paid every month, and the modification is pulled back for no reason, and it turns into a foreclosure."

Lenders have granted about 1.4 million trial modifications, but only about 519,000 permanent modifications, under the federal Home Affordable Modification Program (HAMP), according to the federal Department of Housing and Urban Development. Lenders and servicers say that many homeowners have not sent in the required documents or made the payments to qualify for permanent modifications. And the Mortgage Bankers Association has said that it's harder to find a solution for the many homeowners who got into financial trouble because they lost their jobs, rather than because they had subprime mortgages, as was the case in the early days of the foreclosure crisis.

A spokesman for Wells Fargo Home Mortgage said the company will try to work with the family.

"We will reach out to them and work with them to determine whether we are able to offer payment relief," said spokesman Jason Menke. He said that from the beginning of 2009 to October 2010, Wells Fargo has initiated more than 577,000 mortgage modifications, mostly outside of HAMP.

Mario Blanch, the Valenzuelas' lawyer, acknowledges that there was no written agreement to make the temporary loan modification permanent. But he said Wells Fargo employees told the family they were on track for a permanent lowering of their monthly charges. Moreover, he said, by accepting the family's modified mortgage payment for 11 months, the lender led the family to believe the deal would become permanent. As a result, he said, the family did not pursue other possible solutions, such as declaring bankruptcy.

"They were given a promise, and that promise was breached," Blanch said.

The Valenzuelas and Maria's brother, Jose Luque, bought their 1932-vintage gray cottage on busy River Road for $285,000 in 2004. The house badly needed renovation, so they refinanced their mortgage to pay for the work. Ultimately, they ended up owing more than $400,000 on the property, which they say is now worth only about $250,000 to $260,000.

Luis, 61, has been a doorman and concierge at a Hudson County high-rise for 20 years, but has missed time from work over the past several years because of a serious car accident, heart disease and diabetes. His 52-year-old wife has been disabled by lupus since 1995.

Their daughter, Elizabeth Lee, 33, and her three children have lived with them since her marriage broke up and she lost her job — ironically, in the mortgage industry, which has been devastated by the housing downturn.

Lee's 4-year-old daughter, Mariah, was diagnosed as being on the autism spectrum two years ago, forcing Lee to spend large amounts of money on therapy.

"I lost everything, but I gained my daughter," Lee said. The therapy has helped enormously, unlocking Mariah from a life of sitting and rocking in the corner.

One of the reasons the Valenzuelas are so determined to stay in their home is that Mariah is doing well in New Milford's school system. If she has to adjust to a new school, they worry that she'll lose ground.

But they have been frustrated in their dealings with the lender.

"We want to work with the bank," Valenzuela said. "We can assume our responsibility."

"They kept saying, 'We don't have your paperwork.' They don't call you back," Lee said. "I literally broke down and cried so many times. Nobody cares. How can they run a business like that?"

The family is terrified they'll have to split up, upending the children's lives. "Without my parents, I probably would be homeless," Lee said.

"We're not asking to live for free," she continued. "We're just getting by. I need time to get back on my feet."

Valenzuela can't fathom why the lender would rather foreclose than reduce the amount of the mortgage to equal the current market value of the house.

"One thing I don't understand is that the bank wants to take the house away," he said. "If they put it on the market, they're going to sell it for $250,000." Why not, he asked, simply let the family stay and pay on a mortgage of that amount?

Salowe-Kaye agrees that many families need a reduction of the mortgage amount to "have a chance of being able to keep their homes." Many modifications offer lower interest rates or forgiveness of fees, instead of cutting the amount owed.

And foreclosing on a home often leaves the house unused, reducing property values in the neighborhood.

"I don't know why they would prefer to have a boarded-up house than have a family stay there," Salowe-Kaye said.

Luis Valenzuela says he is hurt by the lender's behavior.

"I feel there's a lack of respect for families," he said. "I used to pray for other families. Now I pray for us."

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