Help hard to get for troubled home owners

By Nick Carey

DETROIT (Reuters) - As the housing crisis deepens, major lenders say they will help borrowers avoid foreclosure, but nonprofit groups and others say their actions are not living up to their promises.

"Some lenders are willing and able to work out loan modifications," said Juanita Bryant, a loss mitigation officer at Michigan Neighborhood Partnership, which covers one of the worst-hit states in the country. "Those lenders are in the minority."

Among the people Bryant's group is trying to help is Will Clark, 53, who bought his home in Detroit in 1996. After being diagnosed with diabetes in 2006, and with his savings wiped out by medical bills, he contacted his lender.

"I wanted to work something out because I couldn't afford the house anymore," Clark said.

His lender, JPMorgan Chase & Co unit Chase Home Lending, told him he could try a short sale -- sell the house for less than the outstanding debt and the bank would forgive the rest. Or he could hand over his property to the bank in a process known as deed in lieu of foreclosure. Both would harm his credit rating, but not as badly as foreclosure.

Clark found a buyer who offered him $70,000 for his house. But, according to both Clark and MNP, Chase ignored the offer until after the home went into foreclosure. Michigan allows borrowers up to six months to try to regain a foreclosed property, and Chase then said it would accept $80,000. Clark's buyer agreed, but wanted Chase to put it in writing. MNP said the bank refused, and the buyer gave up.

"If I had known this would happen, I wouldn't have bothered finding a buyer and just given them the keys," Clark said.

Chase spokesman Tom Kelly denied that the bank had ignored Clark, and said it had been "willing to work something out."

"We made a counter offer and got no response," he said.

MNP's Bryant said that Chase was both unresponsive and unwilling to cooperate, adding that Clark's experience is common.

Nonprofit groups around the country say many lenders either have no system for dealing with stricken borrowers, or they are not interested in cutting deals.

"Our experience on the ground does not reflect lenders' claims they're helping people," said Robert Pulster, executive director of ESAC, a Boston-based group that helps people with mortgage trouble. "Occasionally we have a breakthrough with a lender, but they need to do much more."

Or, lenders are not telling the truth when they claim to be helping people and are simply engaged in a public relations exercise. "They're lying bastards," said Mark Seifert, executive director of East Side Organizing Project (ESOP) in Cleveland, on a tour of the city's ravaged Slavic Village district. On some blocks here almost every last home is boarded up.

Some nonprofit groups say that just as lenders packaged and sold their mortgages to investors around the world during the property boom, the solution lies in persuading those investors to approve more loan modifications.

Gabe del Rio, vice president of lending at Community Housing Works in San Diego, said the problem is investors outside the United States bought the mortgages, so lenders no longer own them.