If anyone is a poster child for people who should not be facing foreclosure, it's Debra Dahlmer.
Dahlmer, who is retired and legally blind, has never missed a mortgage payment on her home. She lives in Gloucester, Mass., in a modest house with her 80-year-old mother and several small, well-fed dogs.
But Dahlmer says that for a year and a half, her lender — Bank of America — has been losing her documents and dragging out a loan modification she qualified for. And lately, the bank has been threatening to foreclose.
"Are they going to take my house even though I've always made the payments?" she asks.
The nation's largest banks are under investigation in all 50 states. Prosecutors are looking into allegations that banks are improperly foreclosing on thousands of American homeowners. The banks acknowledge some paperwork problems but deny that they are foreclosing on people without justification.
A Tough Two Years
With her long white hair and easy smile, Dahlmer is the quintessential nice lady next-door.
NPR first reported on Dahlmer's case in December. After her husband died, she couldn't afford her mortgage. But she has guaranteed disability income that could cover her payments if she had a lower interest rate. She should qualify for a rate reduction through President Obama's foreclosure-prevention effort, the Home Affordable Modification Program (HAMP).
A Broken Payment Program
Bank of America enrolled Dahlmer in a temporary plan for making reduced payments. And even though she is following the bank's instructions and has never missed a payment, the bank told her it considers her to be delinquent.
The bank told her that's because Dahlmer has been making smaller payments through the government-sponsored foreclosure-prevention program. And Bank of America told her that if she doesn't pay the difference by the end of July, it would start foreclosure proceedings.
Dahlmer says all of this scared her.
"I kind of dread waking up," she says. "I know that sounds awful. But I know my mind's going to start thinking of this and thinking of this."
And she says she doesn't know what she would do if she lost this home that has housed her family for nearly 50 years.
"What would I do? Where would I go? What would I do with my mom?" she says. "It just terrifies me."
When NPR first reported on Dahlmer's situation, Bank of America said it would review Dahlmer's case and that it hoped to resolve it within several weeks.
But three months later, her case still hadn't been resolved.
The bank did enroll Dahlmer in another temporary loan modification. But in what appears to be a mix-up, Bank of America also threatened to foreclose on her house.
The foreclosure letter from the bank is sitting on her coffee table.
"And I'm disabled," she says. "I stay in the house most of the time. ... I had to walk out of here the other day just to clear my head."
The Quest For A Lawyer
Despite the stress, Dahlmer hasn't just spent her time worrying. She searched for a housing advocate or a lawyer who could help her.
That led her to a prominent consumer rights lawyer, Gary Klein, who is suing Bank of America on behalf of homeowners like her.
"There's every reason to believe that there are tens of thousands or hundreds of thousands of affected families," he says.
Klein is suing Wells Fargo, JP Morgan Chase, CitiMortgage and others. He says the banks are required to approve a qualified homeowner for a loan modification within three months of an application.
"People are getting the runaround, people aren't getting access to a decision-maker, they're told their documents are lost, and in many cases what they're getting is a decision that makes no sense in light of their personal circumstances," Klein says.
He says he's hearing from people at all stages of the foreclosure process. "People are being foreclosed on when they shouldn't be," he adds.
A Permanent Loan Modification
All of the major banks deny this. Meanwhile, state prosecutors are negotiating a settlement that would change the banks' foreclosure practices. Federal regulators could come out with their own new foreclosure regulations as soon as this week.
And for Dahlmer, there might just be a happy ending: When NPR contacted Bank of America this time around, the bank said it has approved a permanent loan modification for her — and that her new paperwork was sent out over the weekend.
RENEE MONTAGNE, Host:
NPR's Chris Arnold has our report from the fishing port of Gloucester, Massachusetts.
CHRIS ARNOLD: If there's a poster child for somebody who should not be getting foreclosed on, that would be Debra Dahlmer. Dahlmer is retired and legally blind, and she's never missed a mortgage payment. She lives in a modest house with her 80-year-old mother, and several very small but very well-fed dogs.
MONTAGNE: Louie, come on. Come on, Buddha. Come on.
ARNOLD: Why do you call him Buddha?
MONTAGNE: Because he's so big.
ARNOLD: With her long, generous head of white hair and an easy smile, Dahlmer's less than 5 feet tall and is the quintessential nice lady next door. And she even takes care of another dog that's disabled. It's a little, black, Chihuahua-size dog with some kind of nerve damage so that it walks all sideways and twisted up.
MONTAGNE: She has her own little bed and...
ARNOLD: She's cute in her own - sort of sad way.
(SOUNDBITE OF LAUGHTER)
ARNOLD: Dahlmer hasn't lost her sense of humor. But the past couple of years have been very hard. NPR first reported on her case back in December. After her husband passed away, it was difficult for Dahlmer to afford her mortgage. But she has guaranteed disability income, and she could afford her home with a reduced interest rate. And she actually should qualify for that through President Obama's foreclosure prevention program. But for a year and a half now, she says that her lender, Bank of America, has been losing her documents and dragging out that process. And now, the bank has been threatening to foreclose.
MONTAGNE: Are they going to take my house even though I paid the payments - and always paid the payment?
ARNOLD: Dahlmer has been making reduced payments as part of a temporary plan that the bank enrolled her in. But now, even though it was the bank that told her to make those reduced payments, Bank of America has been telling her because she hasn't been paying in full, she's now considered delinquent. And the bank will foreclose if she doesn't pay up.
MONTAGNE: I kind of dread waking up. I know that sounds awful. I know my mind's going to start thinking of this and thinking of this. What would I do? Where would I go? What would I do with my mom? It just - it terrifies me.
ARNOLD: Bank of America originally told NPR that it would review Dahlmer's case, and hoped to resolve it within several weeks. But now, more than three months later, it still has not been resolved. The bank did enroll Dahlmer in another temporary loan modification. But in what appears to be some kind of a mix-up, the bank at the same time has been threatening to take her house. The foreclosure letter from the bank is sitting on Dahlmer's coffee table.
MONTAGNE: And I'm disabled. I stay in the house most of the time. I had to walk out of here one day to go clear my head.
ARNOLD: Dahlmer says she just walked alone for three hours, around the town of Gloucester. Even though she can barely see, she just didn't know what to do.
MONTAGNE: And I don't like not being in control like that. But that's what I had to do. So - I don't know.
ARNOLD: Dahlmer has actually been doing more than just sitting around and worrying. She persistently called around, looking for a housing advocate or a lawyer who might be able to help her. And she eventually got in touch with a prominent consumer rights attorney who is suing Bank of America on behalf of homeowners just like her.
MONTAGNE: There's every reason to believe that there are tens of thousands, or hundreds of thousands, of affected families.
ARNOLD: Last week, attorney Gary Klein was at a federal courthouse in Boston for a hearing in the case. Klein is suing many of the major banks for stringing along homeowners - Wells Fargo, JP Morgan Chase, CitiMortgage. Klein says all these banks, and others, are required to approve qualified homeowners for a loan modification within three months of their application. But often, that doesn't happen.
MONTAGNE: People are getting the run-around. They're being told their documents are lost. And in many cases, what they're getting is a decision that makes no sense whatsoever in light of their personal circumstances.
ARNOLD: And are a lot of these people actually getting foreclosed on when they shouldn't be? Or...
MONTAGNE: We hear from people at all stages of the foreclosure process, and we hear from people after foreclosure. People are being foreclosed on when they shouldn't be.
ARNOLD: Chris Arnold, NPR News, Boston. Transcript provided by NPR, Copyright NPR.