Like many New Jerseyans on the precipice of foreclosure, Diane Ostering keeps clawing her way back. Then, it seems as if the State of New Jersey always stomps on her fingers.
After once being approved for a mortgage modification, she lost it when the state cancelled previously approved assistance. Again on the brink of a deal, she has learned the state has a lien on the home.
While Ostering’s experience is unique to her, its broad outlines tell a story that too many New Jerseyans know -- at least in part -- all too well. She has been struggling for several years to save her home, which she shares with her elderly father and sister. She has been promised help from lending institutions and state programs, only to have promised assistance disappear for no reason.
Still, she remains guardedly -- and surprisingly -- optimistic, though wary that something can always go wrong.
Ostering admits she combined bad moves with bad timing while trying to save her terminally ill father’s Bloomfield home. She moved back in, acquired it from him for $1, then refinanced, “stupidly” taking out an adjustable rate mortgage from a new, high-flying lender that would soon collapse.
She borrowed more than needed, intending to use the extra money to fix up the house. As her Dad’s chronic obstructive pulmonary disease worsened, she planned to sell the house and move him to a handicapped-accessible residence. Then, the Great Recession cut her work hours at an IT consulting firm before eliminating her job entirely.
But Ostering found help -- or so she thought. She was accepted into a federally funded, state-administered program, New Jersey Homekeeper. The program aimed to help unemployed or underemployed people, as well as those with “underwater” mortgages costing more than the actual value of their properties.
The money came from the U.S. Department of the Treasury’s “Hardest Hit Fund.” Announced in 2010, it provides $7.6 billion in federal aid for the 18 states and District of Columbia with the highest unemployment and biggest drop in housing values as a result of the Great Recession.
But performance has varied. New Jersey was initially slow to spend its $300 million, discouraging would-be borrowers with onerous conditions. Such complaints eventually contributed to the ouster of Lori Grifa as commissioner of the state Department of Community Affairs.
Her immediate replacement, Richard Constable III, delivered some promised improvements. But through December 2014, Homekeeper was still rejecting more applicants than it approved, with a running total of 6,928 denied to 5,993 accepted, with others still under review.
As of December, when it stopped accepting applicants, DCA reported having committed $229 million of the $300 million it received from the U.S. Treasury for Homekeeper. The DCA expects to have an undetermined amount of money left over, which will be “reprogrammed” rather than returned to the Treasury, according to spokeswoman Tammori Petty. The state has allocated $17 million toward a new program, New Jersey Home Saver, “to encourage a loan reinstatement, modification, recast and/or refinance,” she said.
Still, Ostering felt like she had turned a corner in 2012, when the state Housing and Mortgage Finance Agency, affiliated with the DCA, accepted her into the Homekeeper program. The State agreed to make several months of payments for her, then approved her for $47,252 in no-interest financing.
With that, the new holder of her mortgage, Wells Fargo, notified Ostering at the beginning of December 2012 that it would modify her mortgage. Before that could take effect, though, the state dropped her from the program and pulled its assistance payment from her bank account at the end of the month.
“The state told me I had to have a mortgage modification in place to keep the money,” Ostering said. “The bank told me they couldn’t process the modification without the money.”
“The Hardest Hit Fund requested that we return the funds originally issued on Ms. Ostering’s behalf commenting only that they were issued in error,” Kevin Friedlander, a regional vice president for corporate communications at Wells Fargo, said via e-mail.
Ostering protested, and has spent the last two-and-a-half years fighting. With the help of allies including Sen. Robert Menendez (D-NJ) and New Jersey Communities United, a grassroots community action group based in Newark, she got Wells Fargo’s mortgage-serving arm to resume negotiations.
But last month, again on the verge of a modification, Wells Fargo notified her that the state has a lien on the property. Ostering was aware the state imposed liens on properties enrolled in the program, “but I was told by someone in Homekeeper that it was just a formality and took a couple of months to come off after they took back the money.”
After she complained about the lien, Ostering received an April 22 email from Katone Glover, supervisor of servicing for Homekeeper, that he would “work with my staff” to remove the lien. Under a trial modification offer by Wells Fargo, Ostering was scheduled to make a payment on May 1. But the date came and went with no action by the state.
Indeed, the DCA takes the position that there is no problem.
Spokeswoman Emike Omogbai said that in the department’s view, “Ms. Ostering successfully completed the Mortgage Payment Assistance portion of the Homekeeper program.” According to Omogbai, the DCA reported her to the Treasury as a success story, “Borrower Still Owns Home.”
In fact, according to the state reports cited by Omogbai, Ostering’s experience never happened. While some people voluntarily withdrew from Homekeeper, nobody was disqualified after initially being funded, according to the reports.
But Ostering isn’t at all confident that everything is as it should be -- and that’s because she’s heard it before. “Borrower Still Owns Home” wasn’t the story back in 2012, when the DCA notified her by letter on December 27, that she was being dropped from Homekeeper. At that time, eight months after DCA determined Ostering was eligible for the program, Glover told Ostering that “you are ineligible to have your arrearages paid to your mortgage servicer at this time.”
In other words, the state had reversed its decision to make payments on Ostering’s mortgage. The reason was not she had mishandled the money. Instead, Glover wrote that her mortgage costs were too high, more than 40 percent of her household income. Glover held out no hope for another review. An underlined portion of his letter stated the program funds assigned for Ostering would be “permanently returned to the NJ Homekeeper program.”
Ostering argued the decision was wrong on two counts. In calculating “household income,” HMFA had not included her father Albert’s pension and disability income, or the earnings of her sister Nicole, who had moved home. Both had written to the DCA, pledging a total of $1,700 a month toward the mortgage. In an August 30, 2012, letter, though, the agency had defined income more narrowly, as coming from a “co-borrower or your spouse/civil union partner.”
Ostering’s second point is that the August 30 letter repeated the phrasing scattered throughout Homekeeper literature. The requirements outlined for applicants require them to obtain sufficient income “and/or” a mortgage modification.
Ostering persisted with the state, writing, “I will work three jobs if I have to… I just can’t, and won’t, lose my home to foreclosure.” In reply, she got was the same denial letter over a different signature.
When this correspondence was cited to Omogbai, she merely repeated that DCA has not dropped anyone from Homekeeper.
Ostering’s take is different, “[T]hey discounted the household income, then blocked my mortgage modification by saying I didn’t have a mortgage modification,” she said. “It’s unbelievable that they say I successfully completed the program.”
A spokeswoman for the U.S. Department of the Treasury noted recipient states set up and administer their own programs, which simply must address the goal of helping unemployed, underemployed, or underwater mortgage borrowers keep their homes.
But speaking on background, she added that she is unaware of a grant being rescinded in another state except in cases where the recipient failed to make a mortgage payment. When recipients elsewhere default, aid is terminated without attempting to collect previous assistance, she said.
New Jersey’s performance in applying Hardest Hit funds is middling compared to other states. Federal reports, based on state data, show New Jersey’s 45.7 percent acceptance rate beats the overall average of 42.3 percent. The latter is skewed by the 40.5 percent rate in California, which accounts for one-fifth of participants.
Nationally, just as many applicants are listed as having withdrawn from the program as rejected. The category covers people who decided not to proceed with applications, or whose financial conditions changed before a decision was made.
In contrast, New Jersey classifies only a handful of applicants that way. And at least one recipient, Ostering, who was dropped yet is listed as a successful completion.
At Wells Fargo, Friedlander said that the bank is acting responsibly. He noted in December that the bank has “engaged with Sen. Menendez’s office” about Ostering and other New Jersey foreclosure cases. He promised Wells Fargo would work with Ostering directly. But a Menendez spokesman declined to take credit, saying the outcome remains to be seen.
Ostering is mildly optimistic about her prospects with the bank. But their dealings have been long and difficult enough that she remains cautious. After all, she said, when her mortgage landed with the America’s Servicing Company arm of Wells Fargo, “they said I was two months behind,” Ostering said. “I was not and had to send them all sorts of documentation to prove it.”
Ostering publicized the situation and her father’s ill health with an.
In one area, though, her perseverance already has paid off. After several years stringing together contract jobs to make ends meet, Ostering was hired back by her old employer. So she can afford to keep the house, she said, if she gets that modification.