MANCHESTER — Local homeowners Jeff and Maryann Bennet aren't in imminent danger of losing their home, and that's the crux of their problem in trying to get out from under a bad mortgage loan.

Payments on their interest-only loan, which started out as a negative amortization loan, will go up by $500 a month in July 2013 from the approximately $1,685 they are currently paying.

“For the past two years, I've been trying to work with Bank of America to get a fixed loan rate with a low interest rate,” Maryann Bennet said in a recent interview at the New Hampshire Union Leader offices.

“One woman said, 'Are you behind in your loan?' I said, 'No.' She said, 'Well, there is nothing we can do to help you,' ” Maryann Bennet said.

But then in early 2011, hope appeared on the horizon. “Another woman said, 'If you are up to date, we can help you,' ” she said.

But the loan officer they saw in Bedford quickly dashed those hopes.

“He said to me, 'To be honest with you, nobody in this country will ever touch your loan. You will never get help from anybody; nobody would ever help this type of loan that you have.'

“He made me feel like we were the lowest class of people,” she said.

Fast forward a year later, and the Bennets went to a Bank of America seminar in Manchester.

“They told me all the information to bring,” she said. “I brought all the information, and I had to bring more information to them, and she said it looks good,” Maryann Bennet recalled.

But as the process went on, a loan officer wanted more paperwork, sometimes asking for the same paperwork to be sent over again.

“Then they had two different departments call me, and they didn't know about each other,” she said. One was in California and one in Texas.

After several months of documenting her own and her husband's income from self-employment, obtaining verifications from her husband's three previous employers and showing all their assets, including a small savings account, they were denied a loan modification, she said.

“They sent me a letter saying if we qualified for the loan modification our interest rate would have gone down to 2 percent, but we don't qualify for it,” she said.

Spokeswoman Jumana Bauwens said Bank of America has offered loan modifications to more than 4,000 New Hampshire homeowners since 2008.

She confirmed the Bennets were declined for a loan modification in June, but said the bank gave them a temporary modification in 2008 that capped their interest rate at 5.25 percent for five years. The Bennets didn't qualify for either the Making Home Affordable Program or other traditional modifications.

“The number one thing we look at from the principal reduction program is when they were delinquent,” she said. But the Bennets were not delinquent on their mortgage payments.

“When their payment is ready to adjust, we will review them again to make sure they are in the best situation moving forward,” Bauwens said. She said the Bennets should come back to the bank 60 to 90 days before their temporary modification expires in July 2103.

James Boffetti, senior assistant attorney general in charge of the Consumer Protection and Antitrust Bureau, said a settlement last winter to help troubled homeowners, including Bank of America borrowers, does require borrowers to be underwater to get help reducing their principal or interest rates. That is, they have to owe more than their home is worth.

The program aims primarily to help folks who bought homes at inflated prices in the years 2004, 2005 and 2006 when the big banks made lots of risky loans, bundled them and sold them on Wall Street as securities, he said.

Easy money drove up demand and prices, and after the housing bubble burst, many who bought at the peak couldn't make their payments and couldn't refinance because their homes were worth less than they paid.

“This settlement was to say we need to help people who got caught in that cycle, in that housing bubble that was created in part by the bad behavior of the banks; we need to offer relief to people who cannot refinance,” Boffetti said.

Meanwhile, the Bennets wonder where to find help for people like them.

“We had to get letters after letters after letters to verify everything, and it took them three days to say we don't qualify for a loan modification because we have assets.

“We have a 2001 pop-up camper, Jeff drives a 1992 car that has thousands of miles on it, and we have a very little in a 401(k),” Maryann Bennet said.

“Because we had a very small savings account, I guess that might be considered an asset, too,” she said.

“But we don't have any medical coverage,” Jeff Bennet said. He viewed the savings account as little more than an emergency fund to cover a furnace or roof, while his wife viewed it as earmarked for emergency medical expenses.

The Bennets have a single-family, three-bedroom ranch and live a modest lifestyle with four children, they said.

Jeff Bennet is still hoping to get a permanent fixed-rate, low-interest loan. He is convinced their negative amortization loan was a predatory loan.

The loan was originated by Quicken Loans, and the day they signed papers, it got sold to Countrywide, he said. “I'd like to get something back from that. The government knows it's bad,” he said. (Bank of America acquired Countrywide on July 1, 2008, creating the largest U.S. mortgage originator and servicer.)

Bauwens said the Bennets' original loan was a “pay option ARM (adjustable rate mortgage)” that offered customers a choice of four payment options. They could make payments based on a fully amortized 15-year term, they could make payments based on a fully amortized 30-year term, they could make an interest-only payment, or they could make a payment of less than the full amount of interest due. That last option, in which any shortage of monthly interest was added to the principal, is what made it a negative amortization loan, in which the amount of the loan principal goes up instead of down as in a traditional mortgage.

Bauwens said at end of the five years in 2013, the Bennets' loan will likely go back to the pay option ARM.


On the Net: www.homehelpnh.org

Correction

An earlier version of this story incorrectly stated Jeffrey and Maryann Bennet's mortgage originated with Quicken Loans. Public records show the couple's adjustable rate mortgage originated in 2005 with Aegis Wholesale Corp.