Within a couple of years the administration acknowledged that the results of the voluntary program had been “disappointing.” They had prepared to subsidize between 3 and 4 million mortgage modifications, but in two years the banks approved only some 670,000.
When I arrived in California, the disappointing results were already trickling in anecdotally. People dealing with different major lenders complained in almost the same words that the paperwork was overwhelming, that they were asked for the same information over and over, and that the process seemed to have no end. While many were applying, few were chosen. No one I questioned had heard of anyone who’d actually had his mortgage modified.
But if anyone was capable of dealing with paperwork, it was Balty Alatas.
Before he was laid off, Mr. Alatas earned $80,000 a year at a private company that trained professionals working in the area of child welfare. Most of his firm’s clients had been state or municipal agencies. As a top administrator, Balty not only had to work his way through government paperwork in order to get the contracts; he’d also helped create curricula to teach field workers how to handle the paperwork necessary to access services for needy children. But when their government clients suffered big budget cuts, his employer had to cut its staff in turn. Mr. Alatas was one of the last to go.
When I phoned him at home in Vallejo, he’d been out of work for a year and had been negotiating a mortgage modification with Bank of America for nine months.
Balty and I speculated about the bank’s motives for making the modification process so complicated. He was coming to believe that the baroquely embellished procedures were deliberately designed to give people just enough hope to keep them paying on the mortgage as long as humanly possible. That’s what he himself seemed to be doing.
I tended to think that the banks were confused, overwhelmed, and making it up as they went along. Neither of us was sure of our analysis. Balty suggested I come examine his files to see what I made of them.
Sticks for Borrowers
Vallejo is twenty-five miles north of San Francisco. According to my map, we were already in his neighborhood. But there wasn’t any neighborhood. The city once housed the largest shipyard on the West Coast. It was finally closed in 1996, and nothing had replaced it. The only open enterprise I’d seen since I’d entered Vallejo was a gas station. The only person I’d encountered on the street was a thin pregnant woman who talked to herself loudly enough for us to hear her through closed car windows.
Finally, according to the map, we were just about at the Alatas house. But I couldn’t find any street signs or even anything that looked like a street. Then I tilted my head, just slightly, and saw a tiny landscaped cul-de-sac shimmering like the mirage of a 1950s suburb. The fantasy came complete with polished house numbers, so it was easy to find the address.
Mr. Alatas settled me under the backyard arbor and brought out a tea tray. “Are those real?!” I pointed at what seemed a second mirage. My host picked a glowing fruit from a bush, and I shaved the zest of a Meyer lemon into my cup. What an aroma.
Now properly refreshed, I took note of the fifty-five-year-old man, his mildly frazzled and younger wife, and their appropriately playful four-year-old son, Stefan. The name Balty had conjured up a jolly, and probably plump, elf. But this Balty, short for Balthazar, seemed a temperate and sober man whose solid frame suggested dependability.
First I asked about this Edenic enclave.
“It has twenty-six homes,” Balty told me. “In the last two, two and a half years, about eight, so almost a third, of the owners have been distressed. We’ve had neighbors who moved out in the middle of the night, and on the east side of the circle you’ll notice three houses in a row whose yards look like they haven’t been taken care of in a while.”
I asked how he and his wife wound up there. He answered by telling me how his Indonesian family wound up in Holland. His father had been in the Dutch air force. Indeed his family had served loyally in the Dutch colonial military for generations. “When Indonesia gained independence in the late 1940s, my dad and three thousand other men had the option of going to prison or leaving the country. So they went to Holland, where they were spread out in military camps.”
“How did your family get from Holland to Vallejo?”
Balty’s grandmother bought the house in the 1980s as a base for several young relatives going to school in the Napa area. After the last of them returned to Indonesia, the house stood vacant. But Balty’s part of the family settled in California, and in 1996 he moved in and began paying $600 a month to cover the mortgage. When he and Debbie married in 2001, they decided it was time to buy the house from his grandmother.
“It can be hard for people to blend households,” I suggested. (It was a second marriage for Balty, and he seemed to be a person of deliberate habits.)
“Well, we’ve renovated just about everything since we bought it,” Debbie said. “So it’s become ours over the years.”
The renovation was part of a five-year plan. Debbie, like Balty, had worked in child welfare. When they married, they’d decided to “give something back.” Over their married years they’d been foster parents to five children, three who had been successfully reunited with their parents, one out of the house to whom they still acted as legal guardian, and Stefan, whom they’d adopted soon after he was born.
The plan began with expanding the small house to accommodate the children. (At one point Balty and Debbie were sleeping on mats on the floor.) But there was no way Stefan would go to Vallejo schools. They’d seen what some of the foster kids endured.
So the five-year plan, as Balty summarized it, was “refinance, redo, and, by the time Stefan enters kindergarten, sell the home. We didn’t know that the market would fall out on us within two years.”
Their mortgage debt, including the original purchase plus $150,000 borrowed for the renovation, was currently $390,000. “We had this house appraised once at $625,000,” Balty said. “I’d be surprised if we could get $225,000 now.”
The bust that deflated individual house values wrecked the city’s already rocky finances, and Vallejo filed for bankruptcy. Firemen and policemen accepted 35 percent pay cuts. Two of three police stations were closed; the third is open to the public only three days a week. A city official advised citizens to use the 911 emergency number sparingly.
In many recession-hit cities, business shifts from better shops to the discount stores. In Vallejo, the Walmart moved out.
Even before the recession, Vallejo public schools had been unacceptable to the Alatases. Now the schools were worse, but they couldn’t move away, so Debbie was preparing to homeschool her son in the fall. Mrs. Alatas had been a stay-at-home mom at the time that Balty lost his job. She’d now found a few freelance jobs as a parenting coach (a kind of super-nanny). I judged from the exercises on Stefan’s little desk that she was probably qualified to teach him at home. But she didn’t like the idea of keeping him isolated like that.
The economic crisis had boxed them into a tiny cul-de-sac, and they couldn’t afford to move out. But how long could they keep paying enough to stay locked in?
After Balty lost his job, the couple continued paying their $2,900 mortgage for two months. “He had vacation pay and stuff,” Debbie explained. “Then my parents began helping, thinking he would have a job by now.”
Lest I take that as an implied criticism, Debbie made sure I understood that her husband job hunted tirelessly. “It got to the point where I actually asked him to only put in a few hours a day because Stefan and I were here in the home and we were losing him to the job search.” In the last nine months her husband had had six interviews, she told me.
I gasped at that low number, then realized that it was a tribute for a middle-aged man to get to the interview stage on jobs for which there had been many applicants. “On three of those I was one of two finalists,” Balty told me. “But if you’re one of two and you’re not chosen, all you can think of is, what more can I possib
ly do to actually get it?”
Turning to another source of despair, Balty cleared a space and set down a pile of printed correspondence about a foot and a half thick. He also kept a handwritten log of his phone communications with Bank of America. Each entry included the date, the name of the customer service representative he spoke to, anyone he’d been transferred to, and a brief summary of the conversation. Some of the entries were annotated with a smiley, frowny, or neutral face. That bit of whimsy surprised me.
The icons, Balty explained, described the tone of the conversation rather than anything about the outcome. “You can’t tell much about the progress you’re making by what one person said on the phone. But it feels better to talk to someone pleasant.”
The first papers I drew randomly from the stack were requests for documents verifying income and expenses. Like everyone else who’d entered modification negotiations, Balty complained, “I kept getting letters asking for the same documents over and over.” He’d learned that it was quicker to send things again than to try to locate the person at the bank who’d already received and even discussed the documents with him.
“No matter how many times they ask, I’ve always complied in full,” Balty said.
“I bet you didn’t submit this in full,” I said, indicating a request for utility bills and death certificates.
“Well, there hadn’t been any death in the family. That was my response.” He had, however, resubmitted the utility bills.
One letter I pulled from the pile indicated that Balty’s case was being transferred to another unit within the bank. To me that sounded hopeful, especially since he’d been transferred to the Hope Team. (“It had something to do with the stimulus package,” Balty said.) More recently, he’d been transferred to the Escalation Q Unit. An escalation also sounded hopeful. But in Balty’s experience each transfer meant that he had to start all over with someone new.
The letter on the top of the pile was in answer to a formal complaint he’d lodged. I read a paragraph:
At times the process can be repetitive and lengthy. Our work-out negotiators work diligently to minimize delays, however, at times unforeseen occurrences beyond anyone’s control may further delay the process. We appreciate your continued patience as we work toward completing the modification of your loan.
The bank’s own description of its “repetitive and lengthy” process with “unforeseen occurrences beyond anyone’s control” sounded a lot like Balty’s description.
After examining this and other documents, I still couldn’t make up my mind whether Bank of America’s modification process was carefully crafted to squeeze out the last possible payment—I could imagine a consultant saying, “Statistics indicate that people will continue to pay for an average of two and a half months if given a direct phone extension to call”—or if it was an ad hoc agglomeration of procedures that grew up while the bank tried to figure out what to do with all these underwater houses.
Whether the process was planned or ad hoc, the bank was stalling. To prevent homeowners from stalling in return, its first modification communication warned that any mortgage payments missed during the negotiations may be reported to credit bureaus and that the bank could go forward with foreclosure regardless of the state of the negotiations.
I could understand why the bank would want to delay making a decision while the borrower was still paying in full. But I was losing track of Balty’s strategy. Mr. Alatas was fifty-five years old and unemployed. There seemed to be no way he could go on paying any mortgage, no matter how modified, unless he found a good job. But that was statistically unlikely. Mightn’t it be better to stop paying his mortgage sooner and save some cash for the inevitable move?
As Balty continued pulling documents from the pile, I remembered a scene from Catch-22. Yossarian is tending a soldier’s arm wound when he notices that the man’s guts are spilling out. Since there’s nothing he can do about the guts, he turns back and busies himself bandaging the arm. Was Balty’s meticulous form filing a way to hold the truly insoluble at bay?
“What if you tried to sell now?” I asked the Alatases.
“I think we would owe about twice as much as we could get from a sale,” Balty answered.
“Well, what if you just stopped paying?”
“That’s what everybody says,” Debbie said with a sigh. “But we’ve worked really hard to have good credit.”
“And maintain that credit,” Balty added. “And besides, it’s …” He seemed almost embarrassed as he said the next word: “Ethics. It’s a question of ethics or—”
“Feeling responsible,” his wife said to help him out.
“My parents did not cross two continents and live on three continents in order to move backward. They were serious about what they wanted out of life for themselves and for their future generations, and that meant living up to traditional values and commitments.”
To Balty’s father, honor had required remaining loyal to the Dutch colonial army till the very last minute. His son seemed to be almost as loyal to Bank of America.
So they sat amid the lemon trees in a landscaped cul-de-sac out of which they daren’t send their child to play. They were trapped sociologically, trapped ethically, and trapped financially.
As I was leaving, Debbie gave me some lemons, and Balty printed out a map to my next stop. I couldn’t imagine the Alatases stealing away from their house in the middle of the night. But it was even harder to imagine them paying all that Bank of America demands on their underwater property. Something’s gotta give. As the couple waved from the doorway, I worried that it would be Balty’s heart.
Two Surprises
A year later I checked back with the Alatases and got two surprises.
First, Balty has a full-time, permanent executive job. He works at his former level for a company that does the same kind of training as his old firm. He’d taken a $15,000 pay cut, but, he said, “Everyone in my position is ready to make that kind of sacrifice. We’re just happy to be working.”
“How’d you find it?” I asked.
“I spotted it on Craigslist, I called, I came in, they hired me.”
“You must have been a perfect fit,” I said.
“I am a perfect fit,” he answered factually. “But when I came on board, I kept looking over my shoulder, sure that I was going to get axed. My program is growing, my supervisor likes what I’m doing, but I’m still looking over my shoulder. It’s PTSD [post-traumatic stress disorder]. I’m sure it’s not that uncommon for folks who’ve gone through what we’ve gone through in the last few years. I wonder how long it lasts.”
Follow-up studies from previous recessions indicate that after a decade most workers who’d been laid off hadn’t reached their pre-layoff expected earning levels. But I’ve never seen a study of how long it takes to recover pre-layoff emotional levels. I have no idea how long Balty’s PTSD is likely to last.
I wonder about the lasting emotional effects on children who’ve watched their parents live through long bouts of unemployment or other forms of insecurity.
“How’s Stefan?” I asked. “Is Debbie homeschooling him?”
When their four-year-old hadn’t made it through the lottery for Vallejo’s one charter school, the Alatases enrolled him in a Catholic preschool. “We liked the program and he loves it. My other children were athletes, but school is going to be his thing!”
Even over the phone (Balty was talking to me on his commute from work), I could feel the warmth as he described his son singing his heart out in a preschool choral performance.
“But it’s five hundred a month, and that is cheap for a private school. Five hundred a month for kindergarten?”
Schools open in September, but Balty hadn’t started his new job until November. I wondered aloud how the couple had paid Stefan’s fees in the interim. “Your in-laws again or …?”
Here’s where I got the second surprise.
After a year and a half of negotiations, Bank of Ameri
ca had formally rejected the Alatases’ request for a mortgage modification.
“When Bank of America sent us that letter ‘you’ve been denied,’ we stopped paying.”
“You stopped paying your mortgage?!”
“What I’ve told every single Bank of America person who’s called since then is ‘We worked with you in good faith for a year and a half. I understand that from your perspective me continuing paying you would look good. But if I pay for another year and a half, what will change?’ Now we’re using some of that money for school fees.”
“So what do you think is gonna happen?”
“The bank basically says, ‘Well, we haven’t moved on your house.’ And I say, ‘If you want it, come take it. I was out of work for fifteen months; we depleted our savings; we paid you in full for a year and a half. You’ve taken practically everything else we have. If you want this house, come take it.’ They haven’t done that yet.”
“You know, Balty, you sound terrific.”
“We’re still willing to work with them if they give us something. But right now we’re not paying them anything, if that makes sense?”
“Not only does it make sense,” I said, “it seems almost liberating.”
“It truly is,” Balty agreed. “Before we were kind of feeling like we were bad consumers, we weren’t responsible people, all those things. But after having tried to work with the bank for a year and a half, I know that we were not irresponsible. I know we’re not deadbeats.”
“Was that a dog?” I asked.
“Well, I just got home,” Balty answered. “Did you want to check in with Debbie?”
When I heard Debbie’s voice—sweet and still tired sounding—I sputtered about how often I’d put off calling them. “I feel like a ghoul calling people whose bad outcome is my story. But Balty’s job, Stefan’s school, you’re my first happy ending.”
“Yes, we’re thrilled,” she said.
“What will you do now?” I asked. “Do you want to stay in the house as long as you can, or are you just waiting for a chance to move on, or to …?”
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