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Merkley works to stem the tide of foreclosures

Standing on her doorstep with U.S. Sen. Jeff Merkley Wednesday, Kristie Duncan of Medford described how she tried for three years to get a loan modification while in foreclosure and failed — until she tapped the clout and savvy of ACCESS Inc. housing counselors.

"It's been a nightmare, with 50 different people working on my case and not one of them has a clue about the whole picture," said Duncan, a part-time employee of the Rogue Valley Transportation District who lives alone in a small house on Mace Road.

Merkley used that story — and a similar tale told by Bruce and Leslie Sherbourne of Medford — to unveil a six-point loan reform program he believes will help stem the tide of foreclosures. The program would establish a permanent tax credit for first-time home buyers, set up a "short refinance" program and require third-party review of foreclosures to see whether there are alternatives.

The program calls for a stop to "dual track" foreclosures, meaning banks would be barred from foreclosing while at the same time processing a loan modification. It also would require a single point of access with a lender, meaning homeowners would talk to only one person who had all the files.

As a final point, Merkley wants to alter the law so federal bankruptcy judges can change the terms of a mortgage. Presently, they can change terms on any loan except a home loan.

Pointing to the 300,000 monthly foreclosures nationwide in the past 20 months, including 28,000 in Oregon last year, Merkley said the situation is "devastating to families and the economy and is absolutely unacceptable."

Merkley chided a system in which foreclosed homes are being sold at fire-sale prices, when evicted former owners have incomes and, if they could get loans modified, would be able to afford them at the new price.

Duncan said she'd seen neighbors on two sides of her "get foreclosed on and pack it out," a situation that Merkley said is damaging neighborhoods and further bringing down values.

Homeowner Bruce Sherbourne told the story of losing his job, being unable to meet house payments and trying to get a loan modification, but being told he needed income to do that. While in loan modification with foreclosure going on, he said: "There was a knock on the door one morning and a stranger stood there. He told me to step outside so my child wouldn't hear. He told me they'd sold my house and I had 30 days to get out."

Both Duncan and Sherbourne contacted housing counselor Karen Cooper at ACCESS, whom Duncan called "a godsend."

"She stepped in and got to the second tier (management of the lending firm) and got the foreclosure rescinded in December," said Sherbourne. However, because of the multiple points of contact with lenders, he said, this month he has received another notice that the house has been sold and the family must leave.

"It (loan modification) can't be done at the basic level," he said. "There's no consistent person to talk to at the bank."

When Cooper steps in as the "moderator" between lender and defaulting homeowner, she said, "we have escalating resources and we know how to use them." These, she adds, include going to officials of Fannie Mae and the U.S. Treasury Department, which runs the Home Affordable Modification Program.

Merkley urged homeowners with troubled loans to contact ACCESS (Mortgage Counseling Department, at 541-774-4329) or similar agencies.

"I'm calling for a renewed national effort to help families stay in their homes," said the senator, adding that he plans to get other senators on board and forge legislation. "Let's use any means at our disposal."

While HAMP had good intentions when created with more than $50 billion in funding two years ago, Merkley said it's helped only 10 percent of homeowners who needed loan modifications "and that's unacceptable while families are seeing their financial foundations disappear."

The senator proposed a "short refinance," enabling underwater homeowners — those with mortgages worth less than what's owed, now one-fourth of all homeowners in the U.S. — to refinance loans based on present home values and interest rates.

The tax credit Merkley proposed for first-time home buyers would be $5,000 in the year of purchase, to be matched by $5,000 from the buyer for down payment or closing costs. The tax break, he said, would help absorb the glut of distressed homes on the market and open the door for working families to build a financial foundation.

John Darling is a freelance writer living in Ashland. E-mail him at jdarling@jeffnet.org.

Merkley works to stem the tide of foreclosures