On the House: Snag turns dream into nightmare

Marcy and Charles Rogovin of West Conshohocken stand on the second floor of their renovated home. The elevator they installed is the opening behind them next to the bathroom.
Marcy and Charles Rogovin of West Conshohocken stand on the second floor of their renovated home. The elevator they installed is the opening behind them next to the bathroom.
Posted: February 28, 2010

It could have been a textbook transaction: A house is purchased. Over time, it increases in value enough to exceed the $279,000 balance on the mortgage. The first offer to buy the property covers the loan, the real estate commission, and closing costs.

Instead, after more than two years wrangling with the lender about a prepayment penalty - a dispute over $7,000 that resulted in 10 offers to buy going nowhere - the homeowner throws in the towel and deeds the house to the bank in lieu of foreclosure.

This is what happened to Kay Henson. In early 2007, amid a divorce, she decided she couldn't afford the $2,000 monthly payment on the house she and her now-former husband had bought in Townsend, Del., in 2003. The only recourse was selling it.

They had purchased the house for $170,000 from a family friend, she said, and for less than it was worth. They refinanced to bankroll a business her husband launched when they moved from New Jersey, and to pay for an addition.

The house wasn't a complete bargain. The family room was sinking into the ground and had severe termite damage. The entire floor had to be replaced. "We had to jack that side of the house up and replace the sills that the house was sitting on," she said. "Most of them had been eaten away."

Fast-forward to 2007. When Henson called the lender, JPMorgan Chase & Co., asking for the payoff amount, she said she was told $279,000. Immediately after the house went on the market, her real estate agent had a buyer willing to pay $325,000 because, thanks to all the improvements, the home's value had increased.

That sum would cover everything, including getting Henson and her two daughters moved back to New Jersey, without a penny to spare.

On the day of closing in June 2007, her agent told her that Chase now was saying there was a prepayment penalty of $7,000, boosting the payoff to $286,000. It could have been any amount, Henson couldn't afford it, and the sale was canceled. "I was in shock," she said. "I had nothing left, there was nothing I could do."

Over the next 30 months, Henson tried to get Chase, first on her real estate agent's advice, to negotiate a deal. No dice. She couldn't afford the $2,000 monthly mortgage payment, so she stopped making it. Meantime, she had 10 more offers to buy the house.

If what happened next sounds familiar, that's because it follows a pattern readers tell me about 10 times a day. I write about it here regularly.

"At one point, I tried selling it on my own so that I could avoid the Realtor fees," she said. "I called customer service over and over again, trying to get help, bounced around to different departments asking me to fax different paperwork to them." She would fax, but had to keep calling for information.

"After several voice mails to my agent, I demanded to talk to a supervisor," Henson said. "I was told that the woman who was supposed to be helping me was fired from the company, and that a new agent would be looking at my case."

The process started again. She lost the sale, and every contract thereafter, for the same reasons.

Finally, she spoke to someone at Chase who told Henson that her new agent, Damien, would call her at day's end.

He did, and Henson was "excited." She had a new offer on the house and spent the next few months faxing documents to Damien.

Then nothing. In August, another Chase rep told Henson that Damien had been transferred and no one knew the name of her new agent.

She had had enough.

"I told them that day to go ahead and foreclose on my house," Henson said. "I couldn't keep worrying anymore. I did all that I could."

Yes, Henson should have known about the prepayment penalty and asked whether the payoff figure included it. But Chase's performance won't win it an Academy Award, either.

The lender did sell the house, finally. For $189,000.


Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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