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Joe and Dee Setzer, embroiled in a long battle with their lender to modify their mortgage, also narrowly avoided spending thousands with what state prosecutors say appear to be illegal foreclosure assistance firms.
The Iredell County couple considered paying $1,290 last September to a Florida firm advertising help with mortgage modifications. At the last minute, they backed out because she felt uneasy about the service.
More months passed as they implored Bank of America to lower their payments because their income had fallen. Their desperation grew. Last month, they almost signed a $1,500 contract with a man who recently relocated to North Carolina from New York and pitches help with mortgages.
She called the Observer about their struggle and learned of an N.C. law that bans upfront fees for foreclosure prevention assistance, such as loan modification.
"When you've got to keep a roof over your head, what are you going to do?" said Dee Setzer, who has a young son. "Where do I go?"
The Attorney General's office said Wednesday it will issue cease and desist orders to the two firms after reviewing copies of contracts obtained by the Observer. There is extensive free foreclosure-prevention help available. Regulators and lawyers say the services that charge can't do any better for homeowners and sometimes do nothing.
Rising mortgage delinquencies mean more desperate homeowners, who are vulnerable to services promising help. Last year, the N.C. Attorney General's office issued 166 cease and desist orders to foreclosure assistance and mortgage modification outfits. That's more than four times the 40 orders in 2008.
N.C. consumer complaints about foreclosure scams also jumped, reaching 448 last year, compared with 82 the previous year and a mere seven in 2007.
Dee Setzer, 41, and her husband, who is 47, bought their Iredell County home in January 2008, a first house for both. She says they qualified for a bigger mortgage, but didn't want to stretch their budget. They took a 30-year, 6 percent, fixed-rate loan for $160,000 from Bank of America to buy the house they'd been renting for five years. They were comfortable with monthly payments of $1,168, including insurance and taxes. Setzer adds, they have no credit cards, no auto loans.
It's not like we were ... maxed out to the hilt," she said. "We waited until we both had decent jobs and had things paid off."
He's a municipal employee near their home in Troutman. She'd been an office manager for a Charlotte firm for about 18 months, but quit in August 2008 over what she says were safety concerns after robberies. Then she needed major surgery, which piled on medical bills.
Early last year, she landed an office manager's post, but it's part-time and pays less than she used to make. The couple began asking Bank of America for help as far back as September 2008, according to a copy of a letter from the bank acknowledging their request.
Setzer says she repeatedly sent requested documents and followed up only to be told she needed to resend papers. Such complaints are common among homeowners applying for modifications and those trying to help them. She also says the bank has never told them why it wouldn't approve a modification.
They tried to sell the house but couldn't.
Late last month, the Setzers received a notice that foreclosure proceedings had started. They seriously considered signing with Richard Howard's RVH Modifications. The firm's contract calls for "an upfront fee of $500 due at submission," then two more $500 payments.
Asked if he was aware of the N.C. law that bans upfront fees, Howard said he was not. If he'd known, he said, "I wouldn't be calling these people and putting my name at risk."
He said he has been in the modification business more than two years, works in "a lot of different states" and has contacts at banks who help him. He said clients fill out a worksheet, listing income and debts.
"I will have to start finessing those numbers, to bring that debt down," he said. "I would have to bring it down to fit a certain ratio. I know what the banks are looking for."
The firm's contract cites a federal law, saying it is a crime to make "any false statements" on the application.
Howard said there are companies "that are not doing the right things," but that he has helped people.
"This is all very unexpected," he said. "Here I'm trying to help a client."
The Florida firm the Setzers first considered, Mortgage Solutions Experts in Fort Lauderdale, said on Friday that it is no longer operating in North Carolina.
Bank of America spokesman Rick Simon said the Setzers' mortgage must meet additional modification requirements because it is a government-backed loan from the Federal Housing Administration. FHA loans are typically used by lower income or first time buyers and borrowers who can't afford a conventional down payment.
Simon wouldn't say what requirement the Setzers haven't met.
"We will continue to work with the Setzers," he said in an e-mail, adding the bank just received updated financial information. "A home retention specialist will reach out to them to discuss their current options, including an explanation of steps they will have to take to meet the government guidelines before we can consider a modification."
FHA modification guidelines require that the loan be at least one year old, although borrowers aren't required to have made all the payments, said Joe Phillips, a spokesman with the U.S. Department of Housing and Urban Development. Borrowers also can't be more than 12 months behind.
The Setzers closed on their loan in January 2008, so it is more than a year old. The Setzers appear to be more than 12 months behind, but they have been trying to get a modification for even longer.
In addition, Dee Setzer said: "We tried to send partial payments, and they sent them back."
Brian Sullivan, a HUD spokesman, said a waiver might be available "under extenuating circumstances."
Meanwhile, Dee Setzer isn't sleeping much.
"We don't want them to give us the house," she said. "We just want to make arrangements."
