Six months of writing, faxing and calling his mortgage company got Gary Palagruti nowhere.
He didn't owe them $1,200 a month. He owed them $800 a month. He had the paperwork to prove it, and they wouldn't admit it until last week, when The News Tribune began asking questions.
"The government gave them money to help us, " Palagruti said. "So why is it so damn hard?"
Palagruti, 57, has lived in his South Tacoma home on South 49th Street since 1983. Last fall, he fell into a bureaucratic rabbit hole visited by millions of Americans since the housing crisis erupted.
Dealing with mortgage companies can involve endless frustration, often requiring hours on the phone and repeatedly providing the same documents. Corporate ineptitude was so widespread that a recent settlement
between 50 states and five big banks set new rules about how they deal with customers.
Palagruti's problems started a year ago, when Litton Loan Servicing of New York reduced his monthly payment. In September, Ocwen Loan Servicing of Atlanta bought Litton.
Until Friday, Ocwen wouldn't acknowledge Litton's deal. In a dozen letters since last fall, Ocwen indicated it was running Palagruti through the process for a new loan modification. The company told him he was about $11,000 behind.
In the space of 10 days in early March, the company gave two different reasons for why he wasn't eligible for a modification he'd already received.
Palagruti hung in there because he was afraid he would lose his home. He faxed. He called. He faxed again.
"Every time, I fax it to them, " he said in early March. "(Then) they send a letter saying it was unreadable. Then I start to look at their financial statement. Maybe they couldn't read it. It is kind of small. So I think, I'll mail it.
"The same day, I get a letter from my lawyer containing a letter from Ocwen telling me I've been denied because they didn't receive the proper paperwork.
"What the hell are they talking about?"
Ocwen, through a spokesperson who would not be named, said Friday that the confusion over Palagruti's situation was the result of incorrect records inherited from Litton. The records indicated Litton's modification still was being reviewed, the spokesperson said.
The company now has found the agreement, the spokesperson said, "and now it's all in place."
The company's explanation doesn't address why the agreement was found only last week, six months after Palagruti twice provided the company copies. The discovery happened less than 24 hours after The News Tribune sent the company a list of questions.
How it started
Palagruti contacted The News Tribune on March 12 after Ocwen first told him he was ineligible for a modification and that foreclosure could begin within a month.
"If I sit here and do nothing, they'll foreclose and still put a lien on what I have, " Palagruti said. "No matter where I turn, I can't get any help."
Palagruti, who owns a janitorial business, took out the loan on his home in 2005 partially to pay other debts. He began preparing the house to be comfortable as he grew older. He put on siding, and installed central air conditioning.
He cared for his wife, who died at home in 2002.
In 2009, his business almost collapsed. He laid off five employees and took a second job at a convenience store in Lakewood.
He had started working on refinancing the adjustable-rate loan in 2008. By December 2010, his monthly payments were to go from about $1,200 to about $1,600.
"I just couldn't afford it, " he said.
Palagruti earns about $3,000 a month. He owes about $200,000 on his house, which the tax collector says is worth about $147,500.
He started the write-call-mail-fax dance with Litton. Like Ocwen, the company doesn't have local offices. They have corporate headquarters and call centers.
Litton no longer exists. Ocwen employs about 5,000 people. About 4,100 of those are in India.
Borrowers with problems have no local office to visit. The phone and the Internet are it.
Palagruti had heard about various programs to help people like him, including government incentives to encourage lenders to modify mortgages. Housing counselors helped him with paperwork.
On the phone, he was on his own.
The soft-spoken man makes off-hand remarks about how his grandkids need to pay attention in school, so they can read and write better than he does. Years of scraping by have started to wear. He's tired. He admits to being unsure what to say, or ask, when dealing with a faceless corporation.
The counselors "can't tell you what to do, " Palagruti said. "They say, you might call this number or this number."
He hired a lawyer, who helped him file for Chapter 13 bankruptcy to save the house while he kept negotiating. Chapter 13 is called a "wage earner's plan." It helps people in mortgage trouble, because it lets a debtor keep his property while working out a repayment plan.
"I have made financial decisions that maybe I should have gone the other way, " Palagruti said. "But I did (this plan) because I wanted to pay what I owe."
"And if someone wants my hot tub, they can come and have it, " he said.
Finally, in March 2011, Litton offered a modification. It took about a year.
The government's Home Affordable Modification Program, which Palagruti qualified for, provides cash payments to mortgage companies for modifications. The process is designed to take just a few months. But in 2010, the investigative journalism nonprofit ProPublica surveyed about 350 HAMP borrowers. They reported modifications taking an average of 14 months.
Litton reduced the principal, lowered the interest rate and set his new monthly payment at about $800.
"I could afford that, " Palagruti said. "So I took the house out of bankruptcy and paid on it."
Six months later, on Sept. 19, he received a letter from Ocwen stating he'd be paying the company from then on. The payment was based on the original terms - $1,200.
Palagruti called Ocwen.
"They say, 'We have no paperwork.' I said, 'Call Litton and get it from them.' They said, 'It would be faster to get it from you, because Litton would take twice as long.' "
"So I sent it, " Palagruti said. "And I've been doing that ever since."
Ocwen's letters arrived at Palagruti's home about once a week. They asked for documents. Palagruti faxed them. He'd call a few days later. Did Ocwen get the paperwork? The answer was usually no, and another letter was on its way.
ProPublica's survey also found that homeowners seeking modifications "reported having to send the same documents nearly six times on average."
Palagruti sent his Litton modification agreement twice. His pay stubs and financial statements? Eight times between December and February.
In January, during one round of faxing, he included a one-page, handwritten letter.
"Thank you for helping me keep my home, " he wrote in cursive, in blue ink. "If you can give me a mortgage at 2 or 3 percent for the life of my mortgage, I will not have to worry about this again. Or I can keep making payments to you at 2 percent and when I die the home is yours."
Ocwen is the nation's largest subprime mortgage servicer and the nation's 12th-largest servicer overall. Servicers are the ones who send the bills, collect the payments, pay taxes and insurance, and otherwise manage the loan. Lenders hire servicers to do this work.
Ocwen started in 1987 as a lender but now is exclusively a servicer. According to its 2011 annual report, Ocwen handles 671,623 loans in the U.S. State-by-state breakdowns aren't provided, but most of the properties are in California, New York, Texas and Illinois.
It reported annual revenues of $496 million and post-tax income of about $78 million.
According to its 2011 annual report, Ocwen brought in $460 million in servicing fees last year. About 70 percent of that came from lenders. The No. 2 and 3 sources of fees were taxpayers and borrowers.
The second-largest source of fees was HAMP payments - those federal incentives for modifying loans. Ocwen earned $42 million, or 9 percent, of its revenue that way. Late fees charged to borrowers rang in at $38.5 million, or 8 percent.
In 2009, The New York Times reported that many mortgage servicers might have an incentive not to help homeowners because fees were so lucrative, especially on delinquent loans. A former top Ocwen official was quoted in that story, calling them "junk fees."
Ocwen didn't address those allegations with The News Tribune. In its annual report, the company states that a fast resolution to delinquency is the heart of its business model.
The company says it doesn't collect the lender-paid servicing fees - the ones that make up most of its revenue - until a borrower pays, or the loan is modified or foreclosed. The company touts its $150 million "servicing platform" that "integrates into the borrower communication process artificial intelligence . . . that enhances our ability to provide dynamic solutions to borrowers."
People who have tried to convince Ocwen of an error might dispute the system's effectiveness. Still, Ocwen hasn't tripped many alarms.
Since 2005, Washington's Attorney General's Office has received about 100 complaints about Ocwen - a number the office says is typical for mortgage servicers. In Western Washington, Ocwen faces a handful of lawsuits alleging communication breakdowns similar to Palagruti's.
Ocwen told Kathleen McCourt, a physical therapist for special-needs children in Camas, in 2009 that her mortgage was in default. She had never missed a payment.
For more than a year, McCourt, while having radiation treatments for cancer, submitted documents and payments to Ocwen while continually receiving late notices and foreclosure warnings. She finally sued in 2011. According to her lawsuit, she sent documents so many times, she stopped counting at 10.
"I don't know that the reason (Ocwen tries) to make sure people are in default is to increase profits, " said William Robison, McCourt's lawyer. But "then we have the question of just why it is they have such a byzantine system set up.
"How could a for-profit business benefit from having a system that's completely unresponsive?"
In McCourt's case, Ocwen's response has been to settle the case. Robison and Ocwen's lawyers were negotiating the terms last week.
The $25 billion mortgage settlement between 50 state attorneys general and the nation's five biggest banks set up new servicing rules for those banks. Ocwen technically isn't bound by the rules, but a state attorney involved in the settlement said the rules are meant to be the new national standard.
"We're intending to move the industry, " said Dave Huey, senior counsel with the Washington attorney general's consumer protection division. To get to the settlement with the Big Five, the government started by looking at 19 institutions, including Ocwen.
As is standard practice, Huey wouldn't comment on whether the state was investigating Ocwen. But as the company grows, he said, "they're one of the servicers that it would be accurate to say is on the radar screen."
"We always intended to expand the settlement beyond the five, " Huey said. "I think it's fair to say that the remaining 14, if I was one of their CEOs, I'd want to be thinking about what I would do if I got a call."
Ocwen is gobbling up other subprime servicers. Last year, it took over loans representing $38.6 billion from Litton, a subsidiary of Goldman Sachs, and loans worth $26.8 billion from Saxon Mortgage Services, a subsidiary of Morgan Stanley.
Ratings agencies are concerned about Ocwen's growth. Both Standard & Poor's and Fitch downgraded Ocwen one notch last year, with Fitch calling Ocwen's growth rate "aggressive" and expressing concern about off-shore staffing.
This month, Ocwen closed a deal to service a tiny slice - 2 percent - of JPMorgan Chase's loans. Chase took over the Seattle-based Washington Mutual when it failed. That deal transfers 82,000 loans representing $15 billion. Some Chase customers in Western Washington were notified of the change a week ago, about three weeks before their next payment is due.
A call comes
On Friday morning, Palagruti got a call at home from someone at Ocwen. She told him the company was honoring Litton's modification.
When he asked her to fax him confirmation of the terms, as well as something indicating that the almost $11,000 deficit had been removed, she wouldn't do it.
"We're just honoring Litton's deal, " she told him.
He plans to call his lawyer today.