Correction to This Article
An earlier version of this story identified Amerimod as a non-profit organization. This version has been corrected.

For Homeowners, Time to Be Cautious but Proactive

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By Marcela Sanchez
Special to washingtonpost.com
Friday, October 10, 2008; 12:00 AM

WASHINGTON -- There is something surreal about listening to a 35-year-old New York financial adviser describe his inability to put his own financial house in order.

"I am a finance guy with an ability to talk to people," he said, asking not to be identified for fear that it would hurt his reputation and that of his company. The self-described "Wall Streeter," who made more than a quarter-million dollars in 2006, owns a home in the Hamptons. As business faltered and his income plummeted, he tried to refinance to save his property. But when he went to the banks, "I got nothing."

Tracey Packer, a chief credit officer for a financial services company in Oregon, also sought help from the banks when she lost her job. Earning $135,000 a year plus bonuses, she bought a 2,600-square-foot house for her and her two children -- a purchase she could easily afford.

But when her company folded and she could only find temporary work, she couldn't make the payments. "The bank didn't give me any option," she said, and in January the house foreclosed. Recently the bank sold it for tens of thousands of dollars less than Packer paid, and now she waits to learn how much she owes on a house she no longer owns.

If the New York financial adviser had not turned to a mortgage modification agency for help, he could very well be where Packer is today -- out of his house. Instead, the agency, Amerimod, helped him slash the interest rate on his second mortgage from 11 percent to 7 percent, eliminate penalties and even reduce some of the principal. He is now waiting to hear about modified terms on his first mortgage.

Agencies such as Amerimod have leverage where individuals don't. They can present banks with several mortgages needing modification at one time. Often staffed by former real estate agents and mortgage brokers, these agencies know the system better than most individuals and have established relations with the banks.

However, some consumer advocates warn that these agencies proliferating at a time of crisis -- including those that present themselves as nonprofits -- are untested and could be a source of more consumer abuse. They are concerned that even as the federal government takes unprecedented steps to curb the excesses that led to the current financial crisis, some of the same individuals who were engaged in unsavory lending practices may now be moving to this new arena.

Aracely Panameno, director of Latino affairs at the Center for Responsible Lending, says that "caution" is crucial in this crisis, which her center estimates will extend until 2012 and put more than 6 million people at risk of losing their homes.

Panameno acknowledges that she is turning to some of the new nonprofits for assistance with her workshops such as "Mi Casa es Mi Casa Foreclosure Avoidance and Legal Clinic," to be held later this month in Prince William County, Va., where house values have dropped as much as 50 percent over the last two years. She believes that those who so successfully sold homes during the housing boom will use the same skills to advocate on behalf of borrowers facing foreclosure.

While recent government intervention should make banks more willing to modify mortgages, some real estate agents continue to encourage owners to agree to short sales, from which the agents take a 6 percent commission, according Pablo Geymayr, a former real estate agent and now regional director of Amerimod in Brentwood, N.Y. (A short sale is when the lender agrees to take less than what is owed in order to move the property, often forgiving the debt.) Geymayr said his agency charges only 1 percent on new loans they help negotiate and will return any fees if the agency is unable to help. "We don't want to cause more suffering," he said.

Asked who people can trust when they are in trouble, Louis Barajas, certified financial planner and author of several books including "Overworked, Overwhelmed and Underpaid," suggested that borrowers can turn to well-established nonprofits such as the National Endowment for Financial Education or the Financial Planning Association.

Last weekend Barajas was invited to an event in California sponsored by Wachovia to help individuals, particularly Latinos, modify their mortgages. More than 2,000 fliers were distributed but Barajas said only 30 people showed up. Regardless of their anxiety or sense of helplessness, borrowers "need to become more proactive," he said, and start to take matters into their own hands.

Marcela Sanchez's e-mail address is desdewash@washpost.com.


© 2008 The Washington Post Company

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