Jill Jensen, staff writer

Homeowners experiencing troubles with mortgage lenders after their monthly mortgage payments are modified are common in Minnesota.

“We’ve had calls from all over the state on this problem,” said Malcolm Johannessen, the foreclosure prevention coordinator at Lutheran Social Service, an organization which offers financial counseling.

Struggling homeowners all over the state have been receiving false foreclosure notifications and inaccurate loan balance statements after getting their loan modified by mortgage lenders, he said.

Johannessen said the homeowners he has talked to have all been in the Home Affordable Mortgage Program, which he said is a federal program designed to help homeowners afford their home again.

He said this type of thing normally happens when a homeowner completes the paperwork for loan modification and receives “one of the better deals you’ll ever see.” Once someone sees the paperwork a few months later, he said he suspects they decide it’s not a good deal for the mortgage lender and revoke the offer.

“It looks that way from the paperwork,” Johannessen said.

Johannessen said most homeowners are pointing their fingers at some of the bigger loan servicing companies. He said many banks are having this issue, some by accident and others with malicious intent.

“People are saying that these big loan servicers are dragging their feet on purpose,” Johannessen, who did not want to name any specific banks as common offenders, said.

While Johannessen said this is a “common problem” in Minnesota, there have been no reports of any mishaps in Albert Lea.

“I haven’t gotten any local reports of it, but that doesn’t mean that it isn’t happening,” said Jon Ford, executive director of Albert Lea Housing and Redevelopment Authority.

The current mortgage problems are a result of the “perfect storm,” he said.

“Everything fell into place at the right time,” Ford said.

He said the blame lies on both mortgage lenders and at the federal level.

He said a combination of an economic recession, a federal push for more people to own homes and certain practices by mortgage lenders are at fault.

Some of these practices include setting a loan to value, the ratio of the outstanding mortgage to the property’s market value, higher than the worth of the house or setting adjustable mortgage rates, which could be lower than a fixed rate mortgage for the first year than skyrocket in percentage points the next.

And while mortgage lenders are only getting off with “a slap on the wrist,” with no serious repercussions, they will continue to “screw people,” Ford said.

“Some of it is intentional. It has to be,” Ford said. “What happened is they’re taking a hit on the property and they’re going to try to get back out of it what they can. And even if that means that they have to bend the rules a little bit, they’ll do it.”

Ford said the Albert Lea HRA can provide resources and referrals for homeowners experiencing the problem. He said he often refers homeowners to Lutheran Social Service because the Albert Lea HRA does not have “any funding mechanisms here to help them.”

Johannessen said the most important thing a homeowner can do if they are struggling to keep up with their mortgage payments is to document everything — cashed checks, notes from conversations with lenders, including the person’s name.

He said Lutheran Social Service will advocate on behalf of the individual and find the right channels for them, whether that be a local organization or involving the attorney general’s office, to solve their problem.

Johannessen also said the Emergency Homeowners Loan Program, which offers forgivable loans with no interest to eligible homeowners, was an available resource for struggling borrowers. Applications were due July 27.

But whether these mishaps are done by accident or on purpose, Johannessen said he hopes the crisis isn’t a side effect of short-staffing on the part of mortgage lenders.

“I would hate to think that people are losing their homes because someone can’t keep up with their paperwork,” Johannessen said.