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Editor's note: A family member of the reporter was one of the people who applied for a rate modification with United Home Relief but is not a subject of this article.

NEW YORK (TheStreet) -- Failed by her lender, her government and her own better judgment, Rosemary Lundgren is now standing in the middle of a mortgage crisis that's three years running with no end in sight.

Lundgren, a 60-year-old cashier from Astoria, Queens, has been trying to get a mortgage modification for nearly half that time, spurred by news of a federal assistance program that the Obama administration unveiled in February 2009. Since then, she's received no assistance from her lender or the government, and paid a purported mortgage specialist $400 upfront for help she says she never received.

In the meantime, Lundgren's finances have become more grisly, with an out-of-work husband and tens of thousands of dollars in unexpected bills. Her mortgage payments are still the same $1,767 per month, at the same interest rate of 6.75%, as they were when the Home Affordable Modification Program was announced. Had Lundgren gotten even a 5% rate when she initiated her efforts, she would have saved $7,330 in the intervening time.

Lundgren's dilemma is illustrative of what struggling homeowners face today. Often, they must navigate a complex, haphazard system that is fraught with risk.

"If you go to a bank manager, they say it's out of their hands; you have to go through a 1-800 number," explains Lundgren. "And if you go through a 1-800 number, they say they didn't get the paperwork. Then I tell them I sent the papers in and got approved for a mortgage. And then they tell me I have to reapply with all this 'new' paperwork that I already filed."

Lundgren says she first approached her bank, HSBC (HBC) , for a lower rate in April 2009. Representatives told her it would take a significant amount of time to even begin the process because HSBC was first handling delinquent borrowers. Though Lundgren was struggling to make ends meet, she was still current on payments.

"The banks are all tied up," says Lundgren. "We went to the bank four times and they said it'd take at least six months before they could even look at it."

Lundgren says she received paperwork much more quickly, but only because HSBC had mistakenly processed her for a new mortgage rather than a modification. When she explained the error, Lundgren says HSBC sent a new raft of paperwork and asked for fresh copies of documents she had already provided.

HSBC spokesman Neil Brazil says the bank doesn't comment publicly on individual cases for privacy reasons. He points out that HSBC has helped nearly 26,500 customers through the Home Affordable Modification Program since April 2009.

"HSBC has a long-standing commitment to home preservation," says Brazil.

By late summer 2009, Lundgren was frustrated by her interactions with the bank and didn't want to wait any longer for a cheaper loan.

A close family friend recommended she speak with a mortgage specialist named Jim McInerney who could offer a quick fix. He ran a small start-up called United Home Relief Corp., based in a nearby suburb of Smithtown, N.Y.

In one of their first conversations, Lundgren recalls McInerney saying he had worked on Wall Street but lost his job after the terrorist attacks on Sept. 11, 2001. His story seemed plausible and assured her that he had the expertise and connections to get the job done. Because the two shared a common heritage -- the surname McInerney runs in her family as well, something she considered a token of Irish luck -- Lundgren felt comfortable taking a chance.

"I didn't trust the situation in a way because, you know how you're always cautious?" says Lundgren. "But I told my husband, 'Well, we're only out $400 if it doesn't work out.' And at that time, I was already desperate to get on the bandwagon."

Despite her misgivings, Lundgren filled out the paperwork and mailed McInerney a check, but progress stalled after that point. She says McInerney brushed her off when she suggested they meet or when she became impatient with delays. He soon stopped responding to inquiries, then disconnected phone lines and a Web site for United Home Relief.

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Zennie Matematico, who works for the Ronkonkoma, N.Y.-based mortgage broker Atlantic Home Capital Corp., referred two clients to United Home Relief as well. She says they also paid upfront fees for services without receiving any assistance and were also unable to reach McInerney a few months into the process.

"When everybody was in trouble, they were calling me back," says Matematico.

Upon examining contracts between United Home Relief and two customers, it seems the company didn't promise much more than a refund if its efforts failed. However, charging upfront fees for mortgage modifications is illegal in New York state, according to Attorney General Andrew Cuomo's office. Cuomo has investigated and prosecuted hundreds of cases whose details appear similar to that of United Home Relief.

"Companies that charge homeowners upfront fees for loan modification services, put homeowners into contracts that don't disclose cancellation rights, or lure consumers with misleading claims violate not only our trust but the law," New York Attorney General Andrew Cuomo, a Democratic candidate for governor of New York, said in a statement last June.

The New York AG hasn't taken any action against McInerney nor have an assortment of federal agencies, despite evidence that McInerney may have operated in up to four states outside of New York. Authorities in Suffolk County, where United Home Relief was based, investigated one claim against McInerney in 2009, but it was resolved without criminal charges being pursued.

"The complainant was unsuccessful in getting a loan modification," says Robert Clifford, a spokesman for the Suffolk County District Attorney's office. " McInerney surrendered her case documents to this office and we returned them to her. The case was closed as non-criminal."

A spokesman for the central clearinghouse of mortgage-fraud cases, the Department of Housing and Urban Development, explains that the agency recently moved from pursuing large corporate entities to pursuing individual suspects. Its lack of disclosure about investigations is tactical in nature.

"We don't want it getting back to the bad guy that we're looking for him," says spokesman Michael Zerega.

McInerney eventually responded to several queries made by TheStreet. He characterized himself as a victim in a series of email messages, but deflected attempts to set up a phone interview and did not answer a list of detailed questions.

"I'm no longer in business because of a failure of customers to pay," McInerney wrote. "We worked on these files got nothing more then stet a deposit in most cases of 200-300 and once the file was modified we never heard from the client."

McInerney says that after a meeting with the Suffolk County district attorney's office, "I was cleared once he saw all the files, invoices, bounced checks, etc."

The problem for actual victims -- the little guys on Main Street -- is that they're simply too small.

For instance, the New York attorney general's office says it's "committed to aggressively enforcing the law against foreclosure rescue companies that take unfair advantage of homeowners." It has investigated dozens of companies, with multimillion dollar settlements against some large firms, which forced them to reimburse customers' fees. Cuomo's office has sent "cease and desist" notices to over 200 other companies, pursued investigations into 20 of them and subpoenaed at least 14.

It say it has has shut down several operations, frozen millions of dollars' worth of assets, entered settlements with other large firms in which they must refund clients' fees and received a default judgment against Infinity Mitigation Services for $8.8 million.

But with fees in the $500-to-$5,000 range, it's difficult for one customer's complaint to warrant much attention.

Stephen Kodak, a spokesman for the Federal Bureau of Investigation, indicates that it's not clear where a homeowner should go to report incidents in the first place. He points out that many agencies -- including the Postal Service -- take action against mortgage fraud. The level of investigation and prosecution "all depends on the threshold of money lost," he says.

The Obama administration has directed over $200 billion at lowering mortgage rates for borrowers like Lundgren. It's been a great success on one level: Freddie Mac (FMCC.OB) recently reported that traditional, 30-year fixed mortgages touched a new low of 4.44%. But the cheap rates do little for Lundgren, who's watching them tick downward while paying 6.75%.

Meanwhile, she received an unexpected notice from the water company, which says she owes $12,000 in overdue payments. Apparently, the debt had been piling up for years because Lundgren didn't notice that the water bill was no longer consolidated into her mortgage payment, as it had been previously. Her husband, who just turned 65, was injured last year -- leaving one breadwinner instead of two to pay down household debt.

(FMCC.OB) An unassuming mother of two grown children, Lundgren has lived in her Astoria neighborhood nearly all her life. She doesn't plan to give up her modest two-family home with pink shingles, but it's getting harder and harder to maintain.

(FMCC.OB) "There are a lot of people worse than me -- I thank God every day I can work," Lundgren says. "But it's not easy. My husband can't work, and then you get tired because so many other things happen in your life."

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