Can These Mortgages Be Saved?

ON Christmas Eve two years ago, as Shannon Rivas-Spivey wrapped gifts for her two young sons, she was interrupted by a knock at her door. Standing on her front steps in Somers Point, N.J., was a man from the Atlantic County sheriff's office, delivering foreclosure papers on the three-bedroom home that she and her fiancé, Harold Spivey, had owned for almost 10 years.

Jane and Neal Connor with their daughter, Annie, in Arlington, Mass. She made hundreds of calls to Countrywide.

The visit was unwelcome, but not a surprise. Ms. Rivas-Spivey had been battling foreclosure for over a month, ever since the Countrywide Financial Corporation , the huge lender that services her loan, charged her escrow account for flood insurance she did not need and could not afford to pay. During the months it took to have Countrywide fix the error, she said, she fell behind on the loan.

Now the sheriff's office had come calling. "It totally destroyed our Christmas," she said. "I feel like a failure. I let my sons down, I let my dogs down. It's senseless."

There are two sides to every story, of course. Countrywide disputes Ms. Rivas-Spivey's contention that billing her for unnecessary flood insurance essentially forced her into foreclosure. It said it has worked extensively with her to rescue her loan from default but that its efforts have failed.

Such painful, personal and financially damaging tugs of war between lenders and borrowers are likely to continue for quite some time. As the home mortgage boom of recent years continues to deflate, hundreds of thousands of borrowers are facing escalating monthly bills on adjustable-rate loans that are either in foreclosure or near it. In August, according to RealtyTrac, a home loan database, foreclosure filings across the country - default notices, auction sales notices and bank repossessions - soared to almost 244,000, up 36 percent from the previous month and more than double the number in August 2006.

Lenders, government officials and loan servicers, who take in borrowers' monthly mortgage payments, contend that troubled borrowers everywhere are being helped to stay in their homes by those overseeing their loans. But neither data nor anecdotal evidence supports this view. A recent survey of 16 top subprime loan servicers by Moody's Investors Service found that for the first six months of 2007, an average of only 1 percent of loans experiencing an interest rate adjustment, or reset, had been modified.

Moody's did not identify the servicers it surveyed. But borrower advocates who work with a broad array of lenders say that none make it harder to modify loans than Countrywide, the nation's largest mortgage originator and loan servicer. Countrywide deploys a 2,700-member unit, called the HOPE Team, that it says helps borrowers modify their loans and hold onto their homes. HOPE is an acronym for "Helping homeowners, Offering solutions, Preventing foreclosures and Envisioning success," but some Countrywide borrowers say the company's practices have left them hopeless.

According to a dozen borrowers interviewed for this article, and thousands more who are working with borrowers' advocates, it is often difficult for homeowners to reach HOPE staff members. When they do, these people said, they encounter hostility and are charged large and unexplained fees throughout the foreclosure process - whether or not they wind up keeping their homes.

"Countrywide is trying to say they are doing workouts, but they are doing them with as little financial sacrifice for the company and as little effort as they can," said Senator Charles E. Schumer, Democrat of New York and a member of the Senate Committee on Banking, Housing and Urban Affairs. "They are trying to get away with doing a good job here when you can prove by digging even a half an inch deeper that they're not."

Countrywide strongly disagrees. Last week, it described its efforts on behalf of troubled homeowners. "Our No. 1 priority is to help borrowers stay in their homes," said Steve Bailey, a Countrywide executive, in a news release. The company said it has saved 39,582 mortgages from foreclosure so far this year.

But according to Countrywide's own data, it currently services almost nine million mortgages, with a value of .45 trillion. Of those, roughly 450,000 are delinquent. So providing home preservation assistance on the 39,582 loans amounts to just 8.8 percent of Countrywide borrowers who have fallen behind.

Even so, the workouts that Countrywide boasted about last week include two types of deals that wind up forcing borrowers from their homes. Almost 14 percent of its homeownership preservation efforts involved borrowers who agreed to sell their homes for less than their loan amounts, called a short sale, or involved homeowners turning over their deeds to Countrywide to prevent a foreclosure. Countrywide did not disclose in its news release that such arrangements were included in its workout figures.