Similar to 10,000 other Santa Cruz County residents, Vonda McCray-Hodges experienced a close-call at losing her home in Watsonville to foreclosure, because she owed more on her mortgage than the value of her home. But Vonda, age 67, refused to give up the home that she and her husband John spent over a year finding when they were looking to purchase a home a little over a decade ago. The nearly 3 acre property, the home, and the extraordinary views from the hilltop location were all in jeopardy with the escalating payments of their mortgage.
More than 700 other Santa Cruz County residents experienced a similar situation in 2009, but unfortunately the majority of them lost their homes to foreclosure. Vonda wasn't going to let this happen to her, so by being persistent, returning to work, and finding a banker who would listen to her, she was able to get a modified loan and keep the home she loves so much.
The Hodges purchased their home in 1998 for $265,000. They had an adjustable rate mortgage from Merrill Lynch with interest at 6.625 percent for 7 years. In 2004, things were going very well for the Hodges. Their business, Hodges Moving and Storage, was booming, and Vonda saw an opportunity to invest in her business and get a better deal on her mortgage, and decided to take it. Over the phone, she made arrangements for a $460,000 adjustable rate mortgage loan from Homestar Mortgage in Paramus, N.J. Although the interest rate was lower, at 5.25 percent, Vonda didn't notice the less favorable provisions in the last few pages of her loan documents. The required monthly payment covered interest only for the first ten years, making no contribution to their loan balance. The interest rate was going to change after two years, and there was a penalty if their loan was paid off early.
Homestar Mortgage was a fast-growing company in the mortgage industry. However, within 18 months of lending to the Hodges, the company had 1,000 employees, a new name, Opteum Financial Services, and a new owner, Bimini Mortgage Management of Vero Beach, Florida. The company was able to pool $986 million of mortgages for sale to investors. To find a new loan, Vonda would end up turning to her nephew who was in the mortgage business, and by the end of 2005 Vonda had a new mortgage loan.
Her new loan was from Downey Savings and Loan in Newport Beach, and they approved a $581,000 mortgage at 6.724 percent after the home appraised for $960,000. The initial payment was an affordable $1,936 per month, however after 15 months the interest rate would change yet again. When it did, their mortgage payment exceeded $4,000. According to the fine print on Vonda's documents, her monthly payment could be less than the amount that would be sufficient to repay the unpaid principal. Basically, the mortgage debt could increase instead of decrease over time. These types of loans are best suited for someone who is expecting more income in the future, rather than a woman nearing retirement age.
Vonda tried to improve her situation by selling items on Ebay, and her husband who had been retired returned to work. But they still couldn't afford the higher mortgage payment. Refinancing wasn't as easy as it had been in the past, and they were unable to refinance their home. A year after their initial refinance, Opteum revealed their losses of $15 million for the first three quarters, $34 million in the fourth quarter, and $78 million the quarter after that. Then they shut down. The California Department of Corporations revoked Opteum's lender license, then closed the case after Opteum agreed to pay $3,000.
Downey Savings was in trouble too. As borrowers stopped making payments, similar to the Hodges situation, Downey started reporting losses. By October, 2008, Downey's losses for the year had reached $547 million. Federal regulators closed Downey and arranged to sell it to U.S. Bank in Minneapolis.
Vonda Hodges was not going to give up though. She filled over ten binders with articles, letters she wrote, and the responses she got regarding help for borrowers in her situation. She also wrote to state Assemblyman Bill Morning and state Assemblywoman Anna Caballero. She also wrote letters to Governor Arnold Schwarzenegger, Representative Sam Farr and even President Barack Obama.
February, 2009 rolled around, and the Hodges had high hopes when President Obama announced the unveiling of the Home Affordable Modification Program. Vonda started reading about forbearance, or postponing payments for a specific time period, and predatory lending, which is a term used to describe unfair and deceptive lending practices. Within two months, Vonda had applied for a loan modification.
Only eight more weeks passed when a notice of default was posted at the Hodges' gate to their property, citing a debt of nearly $24,000. Buyers offered to pay $75,000 for a property that was appraised at $503,000. The Hodges' lawyer even asked them to just 'let it go,' but they continued to have faith, and were certain they would find someone who could listen and help.
After receiving a letter stating loans from Downey Savings were not eligible for the Obama program, Vonda's nephew connected her with Denise Moeller, a senior Vice President for U.S.Bank. After exchanging phone calls and letters, the bank finally shifted $400,000 of the loan balance to the back end of the loan, a balloon payment which can be repaid when the home is sold. Their interest rate was reduced to 3 percent, and their payment is $1,350, which is certainly reasonable to the Hodges.
Vonda went back to work aiming to make $1,200 a month. She picked up a few nights at Macy's in Capitola, and cares for her grandchildren while her daughter works. She's also taken on a temporary position as a census-taker. Their current payment will stay the same for five years, and Vonda is hopeful that by then the economy will be up and running again. "You can't quit. The door will open to something," Vonda said. "I just have to keep the faith."
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