Homeowners often rejected under Obama's loan plan

Check out the horror stories:

David Smith owns a beautiful home in San Clemente, Calif., the location of the Richard Nixon Presidential Library. Smith purchased his five bedroom home four years ago for $1.3 million.

Today, the real estate Web site Zillow.com estimates the value of Smith's home at $981,000, slightly below the $1 million he still owes on it.

Smith said he went from "making a lot of money to making hardly any" as the national and California economies plunged into deep recession. He's a salesman serving the hard-hit residential and commercial construction sector. On top of his hardship, Smith's mortgage exceeds the limits for the HAMP plan.

In late August, Smith signed and returned paperwork in a prepaid FedEx envelope to Bank of America that said it had received the contract needed to modify the adjustable-rate mortgage he originally took out with the disgraced lender Countrywide Financial, which Bank of America bought last year.

The modification agreement shows that Bank of America agreed to give Smith a 3.375 percent mortgage rate through September 2014, and everything Smith paid between now and through 2019 would count as paying off interest. He'd begin paying principal and interest in October 2019, with the loan maturing in 2037.

The deal favors the lender, but Smith, 55, jumped on it because it kept him in the home.
Armed with what he thought was "a permanent modification," Smith returned a notarized copy of the agreement and made subsequent payments on time.

In return, he got a surprising notice from Bank of America saying that his house would be auctioned off on Dec. 18.

"It looks like they're trying to sell this out from underneath me," Smith said. "My wife cries all the time."

After a Dec. 16 call from McClatchy asking why Bank of America wasn't honoring its own modification, the lender backed off.

"The case has been returned to a workout status and a Home Retention Division associate will be contacting Mr. Smith for further discussions," said Rick Simon, a Bank of America spokesman.

"The scheduled foreclosure sale will be postponed for at least 30 days to allow for review of the account in hope of completing a home retention solution for Mr. Smith."