Part I of this series, Part II, Part III, Part IV, Part V.

David Lenchner of Santa Rosa, California was entering a new chapter. He had a home with his wife that they fully paid off in 2004, in just 12 years. But like many entrepreneurs, he took a chance. He wanted to open a small business, an Aveda Beauty Salon, and he needed to dip into his home equity to cover the startup costs.

Lenchner’s biggest sin was one of bad timing. The economy turned on him harshly over the past couple years, making his new mortgage payments prohibitively high. With the family in their late 50s and not wanting to give up their home of nearly 20 years, they went to their mortgage lender at the time, Wachovia, to inquire about HAMP, the government program that could help them with a modification. Wachovia later got bought by Wells Fargo Financial.

What follows is a familiar story:

We have been filing paperwork with first Wachovia and now Wells Fargo Financial since early 2010 and have not made a mortgage payment since December 2009 as we waited for our paperwork to be completed and our new loan to start. I have faxed and mailed over 30 pages of documents including bank account statements, Social Security payment statements, health care payments, income statements and house and credit card monthly bills for this year. We also had to get current with all our personal and business taxes and send in copies of 2007 and 2008 to show that we had not received any income from our business

The point of all of this was at no time during our discussions with Wells Fargo going back to at least February of this year were our 2009 taxes mentioned. Now we are being told that there is a new government regulation requiring that we have our 2009 taxes also done or an extension on file with the IRS. If we don’t have any extension for this year or our 2009 taxes completed we will lose our application for the HAMP and then possibly lose our home due to foreclosure.

The loose, on-the-fly nature of changes to the documentation part of the HAMP program frequently catches borrowers short. Not only does HAMP require significant documentation, it often changes the rules mid-stream. More common is the fact that a drawn-out modification process requires current information on the financial status of the borrower. HAMP trials are supposed to only last 90 days, but I’ve yet to meet anyone who passed through the application process and the trial modification in that short a time. The extended process means more documentation to keep current. And new requirements keep cropping up.

Lenchner has bank statements proving their income level throughout 2009, and had he known about the need for a 2009 extension document, he would have filed it at the time, he says. But he didn’t find out about it until the deadline for an IRS extension already passed.

The conclusion of this story is not a happy one:

On August 17, 2010 we received a letter from Wachovia Mortgage informing us that their Final Decision on our HAMP was “we are unable to offer you a Home Affordable Modification because you did not provide us with the documents we requested.” We were never told that we did not qualify financially for the loan but the only reason I can ascertain from their letters is that we were missing the tax extension for 2009. I keep asking them what does a tax extension have to do with our financial situation and how could it possibly affect our ability to make payments on our home. The only answer I get now is that we have 30 days to come up with $17,301.84 or we will lose our home to foreclosure.

Lenchner, who has a 20 year-old austistic son who lives with the family, and who is on disability himself, feels he has nowhere to turn to stop the banks from foreclosing. “How do we go about getting this fixed and having someone with power realize that people are losing their homes because of the failure of this program,” Lenchner asks. It’s not clear to me anyone has that answer.

I want to tell more of these stories. If you or someone you know has experience with the HAMP program of any kind, please contact me at david-dot-dayen-at-gmail-dot-com.