Editor's note: This is the first of a four-part series looking at the local impact of the foreclosure crisis.
Claudia Davis stood in the middle of her living room and sighed as she surveyed the boxes and all the belongings she still had to pack into the waiting moving truck that would take her family away from their home that was in foreclosure and to a rental condo.
"This is too much," she said. "We had plans, but now that's not going to happen."
Still in her pajama pants, having only gotten a few hours of sleep between painting the condo and taking her daughters to school, she was exhausted, but as she spoke about her family's situation, and their attempts during the past year and a half to stay in their house, her voice rose with anger.
"We got behind when we both lost our jobs when everyone in the country was losing their jobs," Claudia Davis said. "Now we're just at the point where they won't work with us. They haven't said yet we have to be out at a certain time. I have two kids. I can't wait around and see what they're going to do."
Wells Fargo Home Loan spokeswoman Vickee Adams said the bank has worked closely with the family and that it wasn't too late. She acknowledged that the process can be challenging, especially because requirements have changed often in the past two years.
"We are doing as much as we can to service customers and help them avoid foreclosure," Adams said. "The dedication to help people stay in their homes is a real belief around here."
Josh and Claudia Davis, both 36, are hardworking people who live within their means and have been financially responsible - exactly the type of homeowner that the banks and government programs are supposed to help avoid foreclosure.
Like thousands of other homeowners on the Grand Strand and millions nationwide, they are facing foreclosure and having trouble getting help to stay in their homes.
When they both lost their jobs, victims of the economic downturn, they knew it would be a challenge to pay the mortgage so they took action, calling Wells Fargo to ask about their options. That began a year and a half struggle to get a home loan modification that would let the couple and their two daughters stay in their home.
"It just went downhill from there," Claudia Davis said. "It's been a lot of work physically, emotionally, mentally. It's draining."
The couple spent countless hours on the phone, faxed in reams of documents and went through four failed mortgage modifications. The complicated process has left them feeling that their lender, Wells Fargo, doesn't want to help them and foreclosure is inevitable.
"After everything that everyone's gone through they're supposed to be there to help and they haven't," Claudia Davis said.
A widespread problem
The Davis family is not alone in their attempts and failures to receive a permanent home loan modification.
In October, 930,437 properties in the United States were in some stage of foreclosure, including 1,460 in Horry County and 38 in Georgetown County. Horry County has more foreclosures than the national average, with about one in every 118 properties in some stage of foreclosure, according to RealtyTrac, a company that tracks foreclosures.
Since April 2009 when the U.S. Department of Treasury started the Home Affordable Modification Program, which is part of the Troubled Asset Relief Program, about 1.3 million trial modifications have been made and about 460,000 of those have become permanent modifications, according to a Treasury Department report released last month. About 11 percent of the homeowners who got the modifications had defaulted again within nine months.
"Most of the programs involving the government's intervention into this crisis have been ineffective," said William Harrison, a real estate professor at the University of South Carolina.
The October report from the Treasury Department conceded that the number of permanent modifications early in the HAMP program was lower than anticipated.
Harrison said that many homeowners in foreclosure today face a situation similar to that of the Davis family. While the first phase of foreclosures was mostly speculators who let go of properties as prices dropped and the second phase was property owners with subprime mortgages, more of the homeowners foreclosed on today are struggling because of the economy.
"It is no longer investor problems, speculator problems or subprime. The problem now is pure and simple jobs and job loss," he said.
The initial plans provided an incentive for reducing mortgage payments when the more effective incentive would have been to get lenders to reduce principal, especially on properties that had significantly dropped in value, Harrison said.
If banks or loan servicers were given different incentives, there might be more loan modifications and fewer foreclosures, he said.
Harrison said that sometimes it seems foreclosing banks are acting irrationally, but there can be lots of factors behind the scenes that are influencing how lenders react.
The options and response from the loan servicer are dependent in part on whether a homeowner's loan was repackaged and sold as part of a mortgage-backed security, which would mean it is now owned by a group of investors. If that's the case, the ability of the bank may be limited in what modifications it can offer because the bank has to represent the interest of the bond holders, he said.
"Sometimes it appears it doesn't make sense, but the only thing that I can assure you is that from that particular bank's interest, it probably makes sense," Harrison said.
Economy hits hard
The Davis family describes their attempts to work out a modification as something of a nightmare, with a lot of confusion, stress and anger.
When the Davises bought their home in 2006, a modest double-wide mobile home in Conway, they put $20,000 down on the $83,000 property. They didn't get one of the subprime mortgages that helped lead the country into the recession; it was a fixed-rate mortgage they could afford. The family was on track, never missing a payment in the accelerated program they were on to pay off the house in about 20 years.
But then in early December 2008, Josh Davis lost his job at EB Games and a month later Claudia Davis was laid off from her job in ticket sales for The Palace Theatre. The couple didn't have any savings, and they knew money would be tight. They got in touch with the bank before even missing a payment, something Wells Fargo highly recommends, according to Wells Fargo Home Loan spokeswoman Adams.
Initially they were told they wouldn't be able to get a modification until they had missed payments. It was the first of several reasons the Davises would hear why they couldn't be helped.
A confusing maze
Thinking it was necessary, the couple missed several payments. They then applied for a mortgage modification, their only income at the time from Claudia Davis' unemployment checks.
They were denied, the Davises said, and told that she would have to prove she would collect unemployment for nine months to qualify for the loan. Wells Fargo was asking the impossible. No one in the state can prove they will collect unemployment for nine months as all recipients have to renew their claims every couple of months.
"That's the state of South Carolina. I have no control over that," Claudia Davis said.
Wanting to keep their house, they submitted more paperwork - an income and expenses worksheet, a hardship letter, tax returns and other financial documents. They were given a modification based on a $300 a month income and paid on time for three months.
To their surprise, they got a letter saying they had failed that modification. Over the phone Wells Fargo told them that an investor said it wasn't enough return.
There would be other reasons that they would fail modifications. They made three payments on one modification only to find out that their debt-to-income ratio was above the 31 percent required by the Home Affordable Modification Program, so they were rejected.
On one modification they made regular payments but then found out they were rejected at the end of the trial period. They were told they failed to submit all their updated paperwork each month, something the Davises said they were never told they needed to do either in writing or over the phone.
Adams said the bank gave the Davises options and after they were rejected from the HAMP modification, Wells Fargo sent letters and called asking for additional information to try one of the bank's own modification programs. The bank spoke to Josh Davis in June and he said he would send in some information, which was never received, Adams said.
So the bank sent several more letters: One recommended doing a short sale, and another prequalified the family for a modification. The family said by phone that they could pay some money down and the bank continued to try to get financial information, which was never provided, Adams said.
Another proposed modification offered little relief, only a $20 reduction in their $654 mortgage payments, something they couldn't afford and had to reject.
The family was barely making it on the unemployment money, using food stamps and falling behind on bills, paying different utilities each month to keep everything turned on. And the financial troubles were taking a toll at home.
The couple started to fight a lot between the strain of the finances, worries about the house and having much more time together at home searching for work. The pressure caused the couple, who had been together 16 years, to separate for six weeks last year.
"That stress of finances will push you over the edge," Claudia Davis said.
The pair worked through their issues and say now that they are stronger having been through the challenges together.
It helped when in October 2009 Josh Davis got a job in sales at QVC at the Tanger Outlet Center. The couple sent updated information to the bank hoping for another modification.
Several months later, in January, almost a year to the day from when she'd been laid off, Claudia Davis was rehired at The Palace Theatre.
Now that they were both back to work they could afford their mortgage payments, even at the old rate, but what they couldn't afford was to pay off the missed payments up front.
Trying to work with the bank
Throughout the process one thing was constant, Claudia Davis said, that communication with Wells Fargo seemed to give her few answers and more frustration.
The family would sometimes receive letters days apart that often came with post marks from different states and which had different, sometimes contradictory information.
Adams said some of the letters were required by rules and laws either from the state, the servicer or the investors. For example, a letter may be required by law at a certain point after payments have been missed, warning homeowners that they were at risk of foreclosure, while at the same time a letter may be generated internally letting homeowners know that their application for a modification is moving forward.
Once after receiving a letter that had two different payment dates, they called to clarify, wanting to make sure they paid on time. They were told that they should follow what the letter said.
"It's extremely frustrating," Claudia Davis said. "You don't have a main contact person. It's a different person every time. You have to go through the whole scenario every time you call every single time."
Adams said that Wells Fargo heard the concerns from homeowners that they had to deal with a different representative every time they called. The bank started rolling out a new program in June, which matches each homeowner with a single contact to see them through the process. All new modifications since June are working through that process and Wells Fargo is working to get previous homeowners into the program.
Claudia Davis said being asked to pay the missed payments didn't seem logical. After all, how could someone with no savings who just got back to work afford to pay thousands of dollars up front? She sees the family as a good borrower and one that can now afford to pay a mortgage, which makes it all the more frustrating.
"If they would help people by individualizing their situation, try to come up with a game plan for them ... you could negotiate to where the bank benefits and homeowner benefits and both people have to take a loss," Claudia Davis said.
The runaround was cold, impersonal and disheartening, she said.
"I did not exist as a person, and that was apparent," Claudia Davis said. "You're just a dollar bill sign and a loan number. Your situation obviously doesn't mean anything to them."
Bank hampered, too
Wells Fargo Home Loan spokeswoman Adams said the company does care about keeping people in their homes. She looked through the Davis file, which is a record of all their interactions, and said the family was communicating well and had paid on time before defaulting in 2009.
Adams acknowledged that the process can be difficult and frustrating but said that the rules and requirements for the bank have changed several times due to government program updates and internal efforts to improve, which might have created some of the problems.
At the beginning there seemed to be a lot of communication, she said, but now the family is about 15 months delinquent and hasn't communicated with the bank for several months.
"They are able to at times pay the modified amounts, but then when it comes time to get information to turn the trial modification into a permanent modification, there's something we're not getting," Adams said.
On Oct. 14 the case was closed because the bank didn't have updated financial information.
But Adams said that while a foreclosure notice has been filed there has been no court date set so there is still time to work something out.
"They still have time to exhaust their options," she said. "Any time we're working with someone who indicates they have some ability to pay ... we will continue trying to work with them as best we can."
Giving up, moving on
In late August after so many failed attempts the Davis family gave up and moved out before they were forced out.
"I was really afraid at that time they're going to give us 30 days [and] we're going to have to get out," Claudia Davis said
A few weeks ago they packed up their stuff with the help of some friends and family and moved into a condo in Carolina Forest.
"We lose everything. We had to leave the house, our credit is jacked up, lost a few good neighbors, good friends," Claudia Davis said.
The Davises owe about $71,000, according to documents they received from the bank, which is more than the original loan amount. Last month the family got the tax reassessment that valued their house at $46,000. If the bank had worked with them earlier, they would have paid what they owed, even with the drop in value on their house, Claudia Davis said. But now, with lawyers fees and late fees tacked on it makes less and less sense to make payments, she said.
"I don't want to deal with that again. What if something happens to us again? It is not a company I want to deal with," she said.
In addition to wanting a stable place to live, Claudia Davis said she just didn't feel right staying in a house she wasn't paying for.
"I don't want to stay there and not make a payment," she said. "I'm not a freeloader."
The Davises are upset but they're also trying to make peace with their situation and are trying to see the upside. They now live closer to work, to school and to their parents and everything in the condo is new. Kaitlyn, 10, and Rayna, 7, are excited about the new place, especially the pool at the complex.
Rent is $800 including all utilities - but it's not quite home yet.
They still own their house and are awaiting a hearing, where a date will be set to sell the property at the county's foreclosure auction. The Davises are trying to sell the property first, possibly in a short sale, to help their credit.
"We believe that everything kind of happens for a reason anyway," said Josh Davis. "When you look for the doors and you go through them. I'm just convinced it's all happening for a reason anyway."
Contact ADVA SALDINGER at 626-0317.