AGTV: On the Record with Martha Coakley 
Episode 2, Part 1 of 3

Attorney General Martha Coakley:  
Hi. I’m Attorney General Martha Coakley. Thanks for tuning in to our second episode of AGTV: On the Record with Martha Coakley, coming to you from the Suffolk University Studio in downtown Boston. 
Our goal on this show is to provide you with information and resources on a variety of important issues that affect residences throughout Massachusetts. I also hope that this show will give you a glimpse into our Office and the work we do every day on behalf of the Commonwealth to protect consumers and to keep our community safe. 
Today we’re going to talk about issues related to homeownership. During our first segment, we’ll focus on homeowners who are struggling to keep up with their mortgages and facing foreclosure. Our guests have some helpful advice for such homeowners in navigating their options, as well as tips on how to avoid being scammed. And during our second segment today we’ll focus on prospective homeowners and how they can make the best decisions in purchasing a home. 
My guests for our first segment today are retired bankruptcy judge, Carol Kenner. Having retired from the federal bench, Judge Kenner generously volunteers her time in our Office, and has been an invaluable resource on issues relating to predatory lending and foreclosures. 
And Assistant Attorney General David Monahan, the Deputy Chief of our Consumer Protection Division. David has worked on a number of investigations and cases against unscrupulous business and individuals who prey on struggling homeowners. Judge Kenner and David, thank you both for taking time to join us today.

Assistant Attorney General David Monahan:
Thank you.

Coakley:
Now, Judge Kenner, as a result of the subprime lending crisis, coupled with today’s economy, many homeowners are having a hard time keeping up with their monthly mortgage payments. For people in this stressful situation – and it’s sometimes overwhelming – can you tell us what some of the options are? What should people think about as they face the pressures of a potential foreclosure?

Judge Carol Kenner:
General Coakley, there are many different options. They can look at a loan modification program, which will permit them to lower their monthly payment to an affordable level. They can consider refinancing their mortgage if they are eligible for some of the federal programs or even some of the state programs. If they decide that they really cannot afford to keep the home, they can consider doing what’s called a “short sale,” where they market the property and then remit the proceeds to the lender. Another option is that they can give a deed in lieu of foreclosure. This helps the homeowner because then they don’t have a foreclosure on their credit report.

Coakley:
And where should somebody really start, before they panic? What kind of processes can somebody use, sitting down with the co-homeowner, making sure that they don’t panic? Is there someplace they should start?

Kenner:
Good question. I think the most important thing is to first sit down and go through your finances. Pull together documentation that you’re going to need and information about what is causing your difficulty to pay the mortgage. Is it a problem with job loss? Is it a health problem that’s caused a drop in income? Is it a skyrocketing monthly mortgage payment? You need to gather all your documents together and then call your servicer, and that’s the person – the company – to whom you pay your monthly payments.

Coakley:
And can you then be specific, Judge Kenner, on what documents the homeowner should pull together? Because you want to be prepared when you make that call. What documents should you have lined up before you make that call?

Kenner:
Exactly. You need to have, most importantly, all the proof of your income, of your monthly income for whoever is liable on the mortgage. So, paystubs if you’re an employee, or deposit slips if you are self-employed. 

Coakley:
And if you own the house with somebody else, you need all of those.

Kenner:
That’s correct, that’s correct. You also need to pull together your most recent tax return and information about other assets that you own. Information about any debt you owe, particularly a second mortgage on the property, any liens against the property, that kind of thing. All of the information that you have on debts, whether it’s car payments, student loans, second mortgage payments, alimony, child support.

Coakley:
And your credit card balances would be important because they’re going to look at that. And when you have lined all that up, then you call your lender or servicer, and how does that conversation go? How do you get the attention of somebody to help you look at how you modify your loan and if so, how you would do it?

Kenner:
This is probably the most difficult part of the process. You need to call your servicer on the telephone number that’s provided on your coupon. You need to ask for someone in “Loss Mitigation.” Be sure to get the name of the person with whom you’re speaking, be sure to keep notes of when you called, how often you call, and explain to the servicer that you need to have the mortgage modified because you cannot keep up with the monthly payments.

Coakley:
And it’s true that you may not succeed on that first phone call but you need to stay determined. Is that correct?

Kenner:
That’s exactly correct.

Coakley:
Okay. Let’s talk a little bit about some of the help that’s available to people. Since taking office, President Obama has focused on the issues of foreclosures. Can you tell us a little bit about his program, “Making Homes Affordable?”

Kenner:
Yes. Yes, there are two aspects of the program. The loan modification aspect is the most important, and about 75 percent of Americans will have loans that can be modified in bankruptcy –I’m sorry, in the Obama administration plan. The plan permits the homeowners to reduce the monthly payments to 31 percent of their monthly gross income.

Coakley:
And how would people begin to figure out whether they may be eligible for that? What’s the best way for them to start to look at that? 

Kenner:
The best way to start is probably for them to go to our website, and from there go to links to the “Making Home Affordable” program. There are several eligibility requirements, but the fundamentals are: that you need to have a mortgage that you are either in default on or have difficulty paying; that the total mortgage debt on the first is $729,000 or less; that it is one to four units of housing; and that it is owner-occupied. So those are the four threshold requirements.

Coakley:
So people should look at their own situation. They can check our website – at Mass.gov/ago – to see if they would even qualify for that program.

Assistant Attorney General David Monahan:
Yeah. I believe that we’ll have a link there as well to the U.S. Treasury Program, and I think that one thing that’s important about that program is that loan modifications in that program will always result in a lower monthly payment. And if you’re seeking a loan modification directly to the servicer, and whether or not the servicer is participating in that federal program, an important thing to remember is to always make sure that you only enter into a loan modification that results in a lower payment. We have heard many stories in the past of people who go through the process, produce all the documents, and then for whatever reason – sometimes there are so many late fees or they’re tacking on other charges – the whole process is finished and they suddenly find out their new monthly payment is higher than the old monthly payment. Obviously, that doesn’t help anyone, and the good thing about giving lower monthly payments is that it often benefits both the borrower and the servicer or their investors. The idea being that, even with the lower monthly payment, the servicer is still going to do better than they would if they foreclosed and got just a fraction of the money.

Coakley:
And that’s the point we’ve been trying to make, both for homeowners and for servicers, and so part of that process, as you say, “I can’t make this payment,” but to try to figure out what you could be able to make, then you’re ahead of the game when you start to talk with your servicer or lender, look if you can get into one of these programs, because the loan modification goal is to keep you in the home, not just to modify it, as you said, David, and provide more fees for somebody else. 
So you have to think carefully through this before you go through all those steps to look for loan modification. Having said that, though, we really urge everybody who is in that situation to explore the options, and there are – there is help out there, at the local level, not-for-profits, around loan modification, and it is a goal, if you can stay in your home that’s where we want you to be.