What's the remedy? In the best of all possible worlds, Congress would be seriously looking at legislation to fix some of these problems. It could change the bankruptcy law, which currently makes a first mortgage the only kind of loan that bankruptcy judges are barred from shrinking. (The House approved that change in 2009, but the Senate balked.) It could require banks to offer loan modifications before foreclosure, limit foreclosure fees and push states to expand mediation programs. These are all proposals made by Sen. Jack Reed (D-R.I.) in a bill he introduced in September.
But in the current deadlocked Congress, even measures as voter-friendly as protecting distressed homeowners against foreclosure abuses appear beyond our legislators' ability.
Instead, the best hope for better foreclosure practices may lie with the 50 state attorneys general, who jumped on the scandal over "robo-signing" and are using their leverage over mortgage servicers in state courts to negotiate a broader set of reforms.
"It started as a mess, the robo-signing," said Iowa Atty. Gen. Tom Miller, who's leading the effort. "We want to figure out a way that it leaves the whole situation much better than when the mess started."
That would come as welcome news to Sandoval. In September, after more than a year of negotiations, he turned down an offer from Bank of America that would have turned his $2,400-a-month mortgage into an interest-only loan for five years — but then increased his payment to about $3,000 a month after that. "My only source of income is disability, and that's not going up," he said. "The good thing is that I'm cheap. I don't spend money on much of anything besides the mortgage and property tax." He's still making his payments, in part by renting a room to his father – and still hoping for a better deal.