Foreclosure commonly represents the end of a struggle. A borrower can't pay a mortgage, loses a home and moves on.
But Karen Mena, a 38-year-old county worker, never gave up. Mena fought even after her San Bernardino home, Calif., was no longer hers. And she won the three-bedroom house back -- at least for now.
The ordeal isn't over yet. The eviction was stopped and Bank of America canceled the foreclosure because of the possibility that the loan would be modified to make it more affordable.
But Mena continues to negotiate with the bank over loan terms. She could still lose the house where she built a life and raised two sons.
"I have had the home since I was 21," she said. "It is my primary residence. My son goes to school in the neighborhood and has an after-school program nearby."
Even getting as far as she has is notable, experts said, because it is difficult to get a foreclosure rescinded. That is particularly the case in states such as California, where the foreclosure process is streamlined and largely unfolds outside of court.
Some consumer attorneys say foreclosure reversals like Mena's could become more common as they learn to better exploit foreclosure errors.
"We are making some headway, even in California, though it has been slow," said Walter Hackett, an attorney who represents homeowners in California's Inland Empire. "As attorneys become more savvy about the realities of mortgage lending, they are starting to file more meaningful lawsuits."
In 1996, when Mena and her husband bought their house, the region's last real estate bust was just beginning to recede.
"It was good," Mena said. "You could still afford to buy a huse, there was work and I was young."
Her husband, who declined to be interviewed for this article, worked as a licensed contractor, slathering buckets of paint on walls for homeowners looking to spruce up their properties. Mena worked for Riverside County managing the medical cases of handicapped children.
In 2002, they brought a second son home to the tree-lined street not far from the San Bernardino National Forest
As home values surged and the region's real estate bubble inflated, the family's starter home became a source of income as well as an investment tool.
The pair refinanced their property several times to pay off vehicles, consolidate bills and complete home repairs and upgrades, Mena said. They also used some of that money to launch a contracting company. The last time the home was refinanced, the mortgage remained in her name alone.
"You kind of take a gamble, like, 'Hey let's just do this, let's be self-employed, let's have our own business,'" Mena said. "Then all of a sudden it came to a screeching halt."
The van, spray guns and other newly purchased tools sat idle as construction work in Southern California dried up. By 2008 the two-income household was relying on one income, and the couple was forced to draw on a line of credit to pay the mortgage.
When that final means of survival was tapped out in August 2008, Mena pleaded her case to Bank of America. The bank put Mena on a temporary payment plan that allowed her to pay half of her mortgage note.
In early 2009, Mena missed a mortgage payment, breaching the terms of her agreement with Bank of America.
The bank told her she could no longer make partial payments, according to letters of financial hardship she wrote.
"We were still hoping it would work itself out, not only as a family, individually, but as a country, that this will fix itself, and then it didn't," Mena said. "Nothing was working."
President Barack Obama, who took office in January 2009, unveiled plans that spring to help as many as 4 million borrowers such as Mena through its foreclosure assistance plan, the Home Affordable Modification Program.
The program has fallen well short of its goals, and last year the Republican-controlled House of Representatives voted to end it, arguing that the program is a waste of money and gives homeowners false hope. The measure didn't go beyond the House, but the Obama administration has taken steps to improve the performance of banks participating in the program. Last year it withheld financial incentives from some of them, including Bank of America.
Mena submitted her first application through the Home Affordable Modification Program in June 2009 and then again the next month after she was told her paperwork was never received. A frustrating process ensued: She would fax financial documents to the bank and wait for weeks or months for word back, only to be told to send the information again because the papers were incomplete, missing or outdated.
In August 2010, the bank began formal foreclosure proceedings against Mena. She reapplied for a loan modification.
She was caught in the gears of the bank's dual-track process, where a lender continues to foreclose on a home even as it works with a borrower on modifying the home's mortgage.
"I couldn't tell you the amount of times I talked to Bank of America and they told me, 'We are not going to foreclose on you,'" Mena said. " 'Don't worry about the notices, don't worry.'"
The bank agreed to postpone the auction, and Mena faxed in two more pieces of paperwork. She waited, and received a letter dated Dec. 14, 2010, telling her that "within 30 days, you will hear from us about your eligibility for a loan modification."
With that letter, at least according to the guidelines of Obama's program, no foreclosure can occur until a decision on the loan modification is made. Fannie Mae, the government-owned investor behind Bank of America's loan, sets its own guidelines for such modifications. The foreclosure moved forward, Mena's home went to auction and the property went to Fannie Mae.
A Coldwell Banker agent carrying a Fannie Mae form letter appeared on Mena's front step two days after Christmas and informed Mena that her home was no longer hers.
"Fannie Mae has engaged a real estate agent to manage this property, and as an occupant of this property, to make you aware of some options that may be available," the letter read.
The options were to rent the home or receive a cash payment to leave voluntarily -- "cash for keys," in industry parlance. But those choices did not still well with Mena, who believed she had a right to stay. She refused to take any cash and declined any rental agreements, but her stand was beginning to take a toll.
In the new year, a letter from Bank of America arrived and changed everything.
"We are pleased to tell you that you are approved to enter into a trial period plan under the Home Affordable Modification Program," it read. Mena had been accepted into the program that she had spent more than 18 months pursuing.
She faced a choice: Start making the trial payments or save her money in case she was evicted. Mena decided to begin making the payments, telling herself, "Let's see what happens. This validates everything I have been trying to do."
Still, Fannie Mae pressed on, taking Mena to court to get her out of the house. Mena replied with her own lawsuit.
The lawsuit makes a series of arguments accusing Bank of America and Fannie Mae of deception as well as questioning their authority to foreclose. A key contention is that she was accepted into a trial loan modification program even after she was foreclosed on.
But before that lawsuit could be resolved, Fannie Mae won the eviction case. She appealed and lost. The next day, a Bank of America attorney, new to the case, called Mena.
The eviction never happened and Bank of America repurchased the loan from Fannie Mae, but the negotiations with the bank stretched on. Mena is not sure when the matter will be settled. Her case remains open, but for now she is still at home.
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