SEATTLE -- When the feds launched a big loan modification program four months ago, they promised help was on the way for millions of homeowners.

But many consumers claim lenders are turning mortgage rescue into a mortgage runaround.

Redmond homeowner Mary Vaughn says since the administration announced the loan modification program in March, her lender has put up nothing but roadblocks. First they wanted her to be at least three months behind in her mortgage payments. Vaughn is struggling to stay current.

"The first call you make if you're not behind, they don't put you through to the next -- the loan negotiation department," she said.

After more than four months of phone calls, applications, even hiring an attorney, Vaughn just learned her loan won't be modified unless she misses two payments, or increases her income by nearly $25,000 a month.

"All the point of trying to save your home is lost," she said.

Vaughn's complaint is echoed by struggling homeowners across the country. Mortgage counselors say the lenders have been slow to catch up with the rules of the program and many cases, homeowners are being misled about their eligibility.
Rodrigo Sepulveda is a housing counselor at Solid Ground in Seattle.

"I think one of the reasons why this is not being so effective is that it's a voluntary plan. And some of the lenders feel that they can sort of postpone modification of the loan until the borrower is one or two, or three months behind," he said.

New changes in the mortgage rescue program now allow you to refinance your home even if you owe up to 125 percent of the value. The maximum used to be 105 percent.

And now, if you're rejected for loan modification, your lender must evaluate whether you qualify to sell your home for less than the balance, or give it back to the bank, and walk away.

Because there's so much confusion, there are three day-long foreclosure prevention workshop is planned for later this month.

The first is scheduled for Thursday, July 23 at Cascade High School in Everett. The second will be on Friday July 24 at Cleveland High School in Seattle, and the third workshop is will be Saturday July 25 at Evergreen College in Tacoma.

For more information:

Upcoming Mortgage Intervention Workshop