Mortgage defaults rise but homeowners stay put

"If they can work something out with a borrower, they are going to try to work it out because they don't want to recognize these losses," said Steve Hable, a loan modification administrator who works for San Diego attorney and AM radio show host Jeff Isaac. Isaac has been holding seminars encouraging people to hire attorneys like himself to help them through the loan modification process. He said that when he meets with struggling borrowers, he finds that getting the bank's attention has been one of their biggest problems.

"There is so much confusion out there," Isaac said. "And people end up making really bad decisions, like borrowing against their 401(k) to make their house payments. You do that and you are destined for real misery down the road."

The demand for modifications has become so pressing that Bank of America, which services more home loans than any other company, said last week that it had 6,400 employees working on mortgage restructurings.

Neagle and her husband were close to paying off their home loan in the early 1990s when they decided to refinance and take out some equity to help pay for their son to study aerospace engineering at Cal Poly Pomona.

He earned his bachelor's degree in 1999, but the Neagles ended up with about $600,000 in debt and, as the housing market started to crash, a home that was worth only a little over $400,000.

They tried to talk with their loan servicer, American Servicing Co., which is part of Wells Fargo, about a modification but were rebuffed, said Neagle, who works for Wells Fargo as a collateral specialist in Irvine.

"I guess it's good that it didn't matter where I worked," she said. "It means they treat everyone the same."

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william.heisel@latimes.com