A homeowner loses her job. A spouse gets sick and the couple starts missing mortgage payments.
The lender isn't accepting partial payments, so the family applies for a loan modification through a federal program to prevent mortgage foreclosures. The goal is to get the lender to agree to lower the principle and/or the interest rate to make the monthly payments more affordable.
This is where many borrowers run into trouble. And confusion about who to contact is a top complaint by delinquent borrowers.
Alicia Lang of Billings, who had good credit and made full payments on her Billings West End home, experienced the ups, downs and confusion of trying to find out who actually owned her mortgage and who to send her check to.
Her mortgage, taken out at a local bank, was quickly resold nationally, as most home mortgages are, and that meant she couldn't drive to a local lender and talk things out.
The Florida company that bought her note, Taylor, Bean & Whitaker Mortgage Corp., declared bankruptcy and was shut down by the federal government in August 2009. Then, her mortgage apparently was sold to one of the three largest mortgage servicing companies, Ocwen Financial Services in West Palm Beach, Fla.
"I repeatedly called Ocwen. When you call Ocwen, you call India," Lang said.
Unsure where to send her checks, Lang put $10,000 in mortgage payments into an escrow account. Last summer, Ocwen offered Lang a modified mortgage at 5.5 percent for 40 years, or 10 years longer than her current mortgage, plus hefty fees.
"I'd be in my 90s before I paid if off. It's insane," she said. "How many people are going through this with Ocwen?"
Ocwen then scheduled Lang's foreclosure sale on Oct. 19, but canceled it after Lang hired Billing attorney John Heenan.
"We're asking Ocwen to provide proof they are the current owner of the deed of trust or mortgage," Heenan said.
Lang wants to refinance with another company, but Heenan said he's waiting for Ocwen's response before advising his client on her next move.
Ocwen declined to comment specifically on Lang's case.
However, Ocwen President Ron Faris testified before a congressional subcommittee in February that 75 percent of his company's portfolio of 350,000 mortgages originally were riskier subprime loans, but almost one-third have been modified.
"We are proud to have saved well over 100,000 American families from foreclosure, or approximately one out of every three loans we service," Faris told Congress.
For 20 years, attorney Charles J. Peterson at Mackoff Kellogg has represented lenders and other companies, including Ocwen, during foreclosures. He cannot speak for Ocwen, but said his law firm is easy to reach.
"We are contacted by regulators, by debtors and other attorneys and we respond promptly with the information we receive from our clients," Peterson said.
Mortgage servicing companies don't issue mortgages; they collect the payments for the lender and handle foreclosures when necessary. And they aren't regulated in Montana, a vacuum that State Banking Commissioner Annie Goodwin wants to fix during the upcoming legislative session in January.
Goodwin is backing a bill giving her office authority to regulate the mortgage servicing industry.
"We can license mortgage brokers and lenders. We thought it was also important to bring investigations against mortgage servicers," Goodwin said.