Julio Angulo was evicted from his Virginia home last December. (American News Project)

It was last December when Julio Angulo ignored the bitter cold and sat on a rusted patio chair in the front yard of his foreclosed home in suburban Manassas, Va. He sighed, resting his hand on his knee. He stared despondently at the sky. His lender had foreclosed on his house in July. He had just been evicted.

[Economy1]Angulo, then 55 years old, had nowhere to go. His wife and two children already had returned to El Salvador. He had refused during the summer to accept a cash-for-keys transaction, in which he could turn the house over to the lender in exchange for a cash payment. Instead, he remained, alone, in the three bedroom townhouse, in a modest working-class neighborhood called Georgetown South, until a Prince William County Sheriff’s Deputy knocked on the door on Dec. 1, 2008 for the foreclosure eviction.

A house painter, Angulo couldn’t afford the market rents of $1,500 a month for apartments elsewhere in the neighborhood. Most of Prince William County’s shelters also were full that day.

A year later, Angulo is gone. A legal resident of the United States, he joined his family in his native El Salvador, to let a knee injury heal, and to recover from his lost dream of owning a home. With nowhere to go immediately after the eviction, he luckily ran into a neighbor that night who offered to rent him a room for two weeks. He went to a public health clinic, to see a doctor about the arthritis in his injured knee. Then he left for El Salvador.

The house he paid $280,000 for in July of 2005 sold for $69,900 on March 16, 2009, according to local real estate agent Keith Elliott Jr. Real estate investors bought it.

And a year later, the hopes of those who thought the government could come up with a plan to stop foreclosures and help keep people like Angulo in their houses seem in tatters as well.  The Obama administration’s signature effort remains its $75 billion Making Home Affordable program, which was set up to aid as many as 4 million homeowners. But Making Home Affordable has in most ways been a crushing disappointment, housing advocates say.

At the beginning of this year lenders on their own were doing far more permanent loan modifications than the government has been able to accomplish since rolling out its program in April, noted Diane Thompson, an attorney with the National Consumer Law Center. Private lenders were completing 120,000 permanent loan modifications per month during the first quarter of this year. Under the Obama administration’s initiative, some 650,000 homeowners have entered into trial loan modifications, but only about 10,000 permanent loan modifications had been completed by the end of October, a Congressional oversight panel reported on Wednesday. Treasury Department figures released Thursday showed that only 31,382 permanent loan modifications had been completed under the government program as of Nov. 30.

Making Home Affordable’s loan modification effort is known as HAMP, or the Home Affordable Modification Program. The small number of permanent loan modifications so far is due in part to a new program getting established, and to the fact that borrowers in the government program have to complete three-month temporary trial loan modifications first, in order to qualify for permanent ones. Getting the permanent trial modification isn’t automatic — trial program borrowers must submit paperwork documenting their incomes to convert to permanent loan modifications, and they must make three months of payments under their trial agreements.

Treasury expects some 375,000 trial modifications to be finished by the end of this year, but it’s not clear how many will become permanent. Updated numbers are expected this week. But none of this fully explains the glaring lack of progress so far, Thompson said.

“We’re more than nine months into the program, and trial modifications account for only about 11 percent of all the seriously delinquent loans, and permanent modifications aren’t even on the radar screen,” Thompson said. “The HAMP servicer participation agreements do not provide for any penalties, other than termination from the program, for the failure to make modifications.  Until those agreements are revised, the administration has little recourse other than public shame to compel servicers to make loan modifications. Meanwhile, the number of homes seriously delinquent and in foreclosure continues to rise every quarter.”

This is hardly what Thompson expected, just a year ago.

“It’s been very distressing,” she said.

In testimony submitted to the House Financial Services Committee on Tuesday, officials from JP Morgan Chase reported that of every 100 homeowners who sought to have their loans reworked under the government’s program, just 15 have or will end up with, a permanent loan modification.

Thompson and others who follow loan modifications said they were aware from the beginning that the government program couldn’t prevent all foreclosures, especially as job losses mounted and even prime borrowers fell behind on their payments. Experts also knew there would be some slowdown under the administration’s new program, as servicers worked to convert temporary loan modifications into permanent ones.

Servicers and borrowers are pointing the finger at each other over the lack of more permanent loan modifications. Servicers contend borrowers aren’t coming up with the necessary paperwork, such as documenting their incomes, that is required for permanent loan modifications. But housing counselors say just the opposite — that borrowers supply servicers with pay stubs and other paperwork, only to have their servicers lose them, or sit on them so long they aren’t current.

Thompson said there are even bigger problems with the program that leave her feeling very differently about the effort today, compared to her optimism when it was first announced.

“I don’t yet see any of the work on HAMP by the administration addressing the core problems in the program–a lack of accountability and transparency–so I am not optimistic, although I do believe that some of the incremental changes to the program are helpful and may help tens of thousands of people,” she said. “The problem is that we need to help millions, not tens of thousands.”

Alan White, a Valparaiso University law professor who studies loan modifications, was even more blunt:

“If we don’t see more permanent mods soon,” he said, “it will look like the HAMP program is a failure. We’ve seen a net reduction in permanent loan modifications. That’s not good.”

The failure to get more permanent loan modifications done “should be considered a breach of contract” by servicers and lenders that have accepted taxpayer bailout money and are eligible for financial incentives from the government for reworking loans, White said.

He and others never expected things to end up like this. In November 2008, mortgage giants Fannie Mae and Freddie Mac announced a foreclosure moratorium for the holidays, beginning in Thanksgiving, to allow the government to work out the details of streamlined loan modification efforts. Hopes were high that many borrowers would stay in their homes.

In Angulo’s case, the help was too late. He was evicted regardless, because the policy applied only to new foreclosures, not those already in the pipeline.
Fannie Mae announced last month a new policy to allow qualified owners facing foreclosure to rent back their homes for as long as a year. But Angulo most likely would not have qualified for that help, either, had it been available a year ago, since he couldn’t afford market rents in the area, a requirement of the program.

Angulo had covered his mortgage by renting out some of the bedrooms. In the spring of 2008, his renters left and the monthly payment on his adjustable rate mortgage also jumped from $1,400 to $2,600. As a house painter, he earned $500 a week.

Angulo said at the time that he tried to contact his lender, Aurora Loan Services, a subsidiary of Lehman Bros. that specialized in Alt-A and interest-only loans. But the servicer wouldn’t help him, he said.

Since his eviction, his old neighborhood isn’t the only location were housing values have fallen. In November, Zillow, an online real estate service, reported that year over year housing values nationwide had declined for the 11th consecutive quarter.

In Georgetown South, since last December, the highest priced home that has been sold went for $120,000, and it most likely resulted from an investor flip, Elliott said. In Prince William County overall, the first-time homebuyer tax credit helped boost sales of bank-owned foreclosed properties – but that doesn’t mean the local housing market has recovered, he said.

“Banks are probably planning on trickling out these additional foreclosures slowly while the market continues to improve,” he said. “How big is the shadow market? Honestly, I think it’s anybody’s guess. The banks could be sitting on a whole bunch just waiting to trickle them out a few at a time.”

As neighborhoods like Georgetown South continue to absorb the effects of a collapsed housing market, NCLC’s Thompson noted that growing foreclosures are spreading damage throughout the economy, hurting neighborhood property values, and cutting into state and local tax revenues.

That’s why Julio Angulo’s story is much more than just the eviction of another former homeowner on a cold December day, a year ago.

“This isn’t just about homeowners who need help,” Thompson said. “Unless officials take forceful action on foreclosures, things will only get worse. I never thought, at this point, that foreclosures still would not be effectively addressed by the administration. If we don’t get foreclosures under control, and soon, they’re going to drag down the whole economy.”

Angulo, for his part, promised to call if he ever could make his way back to Virginia, to try again to find work, and to buy another home.

He hasn’t been heard from since he left.

This article was to include new Treasury Department loan modification figures released Thursday.

Read Mary Kane’s December 2008 article about Julio Angulo’s eviction here.

Think about that for a minute. Angulo bought the townhouse, in a working class subdivision in suburban Virginia, for $280,000 in 2005.

Now it’s being offered for a fraction of what Angulo paid for it. He’s out of a home he desperately wanted to stay in. Investors in his loan didn’t exactly come out ahead. No one knows yet how long the home will sit vacant before someone buys it, if anyone ever does. Neighbors who have been paying their mortgages will find their property values taking another hit from this.

Here’s what I can’t figure out: Who really won here? Who benefited from all this?

You could argue Angulo got to live for three years in a house he apparently couldn’t really afford, but that doesn’t take into account the fact that he hoped to stay in it for the long term. Or that he ended up having to go through foreclosure and eviction. He’s back in El Salvador, with a ruined credit rating. The lender, Aurora Loan Services, surely didn’t make much money on this deal – although the firm probably picked up fees for foreclosing and other services, so don’t pull out your hankies just yet.

This is a loan that probably never should have been made to someone who probably didn’t understand what he was getting into. Multiply it by hundreds of thousands of deals just like it and you can understand why we’re in the mess we are right now. What strikes me is that in the end, no one benefited. No one’s better off for what happened – not the former homeowner, the lender, or the neighborhood. Nor are taxpayers who are picking up the tab to clean up messes like this.

What happened, in the end, can’t be summed up with a tidy moral lesson, the hugging and learning moments of television sitcoms. There’s just a sense of purposelessness, of wasted time, wasted emotions, and a churning of money that didn’t create anything of value, although some lenders and Wall Street investors made big profits, for a time. There’s nothing more that comes of this than a glimpse into the way the American Dream of homeownership got twisted and turned upside down in recent years, leaving behind an empty townhouse at a fire-sale price, and a former homeowner broken and gone.

This is supposed to be the season for a break in home foreclosures, a pause in evictions over the holidays.

But it’s not working out that way for everyone. And certainly not for Julio Angulo of suburban Virginia, another victim of a foreclosure machine that seems to be almost unstoppable.

To great fanfare, mortgage giants Fannie Mae and Freddie Mac announced last month they would temporarily halt foreclosures and evictions from Thanksgiving to Jan. 9. One analyst called the move “a giant timeout” to help people stay in their homes while they try to get their loans modified. The decision also avoids the spectacle of two government-controlled finance companies throwing families out on the street at Christmas time.

Illustration by: Matt Mahurin

Days before, Fannie Mae and Freddie Mac unveiled a major rescue plan to streamline modifications of loans to make them more affordable for potentially hundreds of thousands of borrowers. Banks including JPMorgan Chase and Bank of America also suspended foreclosures while trying to restructure troubled homeowner loans.

And Monday, Treasury Secretary Henry Paulson said for the first time that he would consider using money from the $700-billion Troubled Asset Relief Program to help avoid foreclosures.

But nothing seems to shut down the foreclosure machine — at least so far.

Fannie’s and Freddie’s holiday program, for example, applies only to new foreclosures, not those already in the pipeline, which is full. Some 765,558 properties received default notices, or were foreclosed on, during the third quarter, a new record, RealtyTrac figures show. And while the two mortgage giants together own or guarantee $5 trillion of the nation’s mortgages, they don’t hold most of the riskiest subprime loans at the heart of the housing crisis. That means their suspension program is likely to affect only a small percentage of homeowners facing foreclosure.

So on a chilly Monday morning in December, at a complex of several hundred modestly priced townhomes in a working-class area of the city of Manassas in suburban Virginia, it was business as usual. Another foreclosed house. An eviction, yet again. One more former homeowner, saying goodbye.

At 8:40, realtor Keith Elliott Jr. was shuffling through paperwork in his car parked outside a three-level brick townhouse with maroon shutters that was scheduled for a lockout eviction. The owner apparently had refused to leave the premises despite getting a foreclosure notice.

Elliott represents the mortgage company, Aurora Loan Services, and has the job of securing the property after the eviction. He explained that Julio Angulo bought the townhouse in 2005 for $280,000, a price that reflected the peak of the housing boom. The property now is assessed at $225,300.

On July 8, Aurora foreclosed on the house. Shortly after that, Elliot visited the property and made Angulo a $1,500 “cash for keys” offer if he left the property within two weeks, and it was in good condition. Angulo spurned the offer, Elliott said.

During his visit, Elliot said he noticed that the three bedrooms upstairs had key locks, a sign the owner was renting them out.

On this December morning, Elliott was waiting for a contractor from a property management company to show up to change the locks. He was in a somber mood.

“This is one aspect of my job,” Elliott said, “that really does suck.”

At 9:17, Fernando Alves, the locksmith for Safeguard Properties pulled up in his truck. He greeted Elliott, then waited for the sheriff.

Prince William County Sheriff’s Deputy J.M. Zampino arrived some 20 minutes later. He bounded out of his car and walked to the front door of the townhouse. Five sharp knocks followed. “Sheriff’s office,” he bellowed. “Hello?”

Zampino noticed keys hanging from the door knocker. “Looks like someone left some keys for us,” he said.

He unlocked the door and pushed it open.

Standing in from of him was Angulo, 55, wearing blue jeans, a jacket and a baseball cap with an inscription that read “60th Annual Greater Manassas Christmas Parade.”

“How are you doing, sir?” Zampino asked. He explained he was a deputy sheriff.

“I’m waiting for a friend of mine to help me move,” Angulo replied in a soft voice. “Can I have time? How long can I stay here?”

Zampino stepped inside and began to look around, with Angulo following him. The two continued talking. Zampino turned toward the door and announced to Elliot and Alves the locksmith that only Angulo was inside the house. Angulo slowly trailed Zampino as he headed upstairs. “I broke my knee,” he told him.

“You broke your knee? Oh boy,” Zampino replied, sympathetically.

With Zampino and Angulo inside, Alves drilled away to remove the front-door lock and replace it with a new deadlock. He was done in a flash — by 9:42.

Despite the loud drilling noise and the presence of a sherriff’s car outside, neighbors hardly gave the townhouse a second look as they walked by. About half of the 67 properties listed for sale in the complex, called Georgetown South, are foreclosures, Elliott said. Vacant properties with foreclosure signs in front of them sit adjacent to homes with lawns brightly decorated for Christmas.

At 9:44, 10 minutes after arriving, Zampino finished his inspection of the house and stepped outside.

Zampino’s job has taken its toll on some law-enforcement officers. In Cook County, Ill., the sheriff recently refused to evict renters from foreclosed homes in a Chicago neighborhood, citing the need for more legal notice. In Philadelphia, the sheriff suspended foreclosure evictions to allow homeowners and mortgage servicers to work out alternatives.

Zampino said he couldn’t speak for the sheriff in Prince William, but he expected evictions to continue.

“We’re not going to hang up the process in any way,” he said. “We’re just here to do our job. We just keep the peace.”

Two years ago, Zampino did two foreclosure evictions. This year, he’s done “in excess of 100.”

The most difficult cases are ones like Angulo’s, where the former owner remains in the house. “You run into obstacles from time to time,” Zampino explained. “Angry folks … handicapped people with no place to go.”

Asked how Angulo was doing, Zampino paused, then said, “Um … you know.”

Zampino headed back into the house to find Angulo. He told him that the lockout was complete, that all the locks on the doors had been changed and that he had 24 hours to get everything out of the house, or it would be hauled away.

The eviction was officially over, less than a half hour after it began. But Angulo still was allowed to wait a few more hours for his friend to help him move.

Angulo leaned against the wall of the townhouse’s front hallway, still strewn with construction debris, including 2x4s and empty buckets. He constantly worked on the house, he said, trying to fix it up. He spoke quietly in halting English, stopping frequently to keep his emotions in check.

“I tried to talk with the bank, but they wouldn’t help me,” he said. “I got an attorney but he didn’t do anything. I paid him $1,500, but he didn’t do anything.”

He said his troubles began last spring, when he told his renters they had to leave because “they didn’t have their papers.” Both Manassas and Prince William County have law enforcement and zoning efforts that target illegal immigrants.

At the same time, Angulo’s monthly mortgage payment on an adjustable-rate loan jumped from $1,400 a month to $2,600. He earns about $500 a week as a housepainter.

“I didn’t know what happened,” he said. “I got charged. I can’t pay that.”

Aurora Loan Services, which was foreclosing on Angulo’s house, is a subsidiary of the failed Lehman Bros. It specialized in Alt-A loans, which required no documentation or downpayment. The firm still services Alt-A loans.

A month ago, knowing that foreclosure and eviction were coming, Angulo sent his wife and two children, a son, 18, and a daughter, 12, back to their native El Salvador.

Does he have someplace to stay tonight?

He shakes his head.

No.

Does he have someone to help him find a place?

No.

“It’s very hard,” Angulo said. He started to say something else, but couldn’t.

Angulo said he looked for an apartment to rent, but $1,500 a month was too much for him. He hasn’t worked in the past few days because of his knee. He owns a truck, a 1986 Nissan, that doesn’t run very well.

He turned down the cash-for-keys offer, he said, because “I wanted to keep the house.” It was a mess when he bought it, and he put a lot of work into it.

At 10:06, as church bells began ringing throughout the neighborhood, Angulo stepped out into the front yard of his former townhouse, listening to Elliott gently repeat the lockout rules and the need for Angulo to get his belongings out of the dwelling. “I’m sorry for your troubles,” Elliott told him.

Angulo said he was still waiting for his friend with the truck.

At 10:14, Angulo sat down, in the cold, on a rusted patio chair next to a small round table in the townhouse’s tiny front yard. He looked down at his hands. He lifted his head, stared into nowhere, rested his hand on his knee, sighed. He put his head down again.

Zampino, who had gone to his car, returned with some brochures for homeless shelters and social service agencies and gave them to Angulo.

“Sir,” he said, “are you going to be OK?”

Angulo said nothing. He took the brochures.

The church bells still were ringing.

Angulo shivered slightly and glanced at the brochures. Zampino and Elliott went to their cars.

As they drove away, Angulo stayed in his chair, holding the brochures and sometimes glancing up at the sky. Just sitting, outside a house that once was his home.