Janey Schon first took out a mortgage on her Anacortes, Wash. home in 2006.
Her husband (he's now her ex) and the mortgage broker handled everything. "I still don't know how they managed to swing the deal, as my income was less than $30,000," she said.
"I bought the home with hardly any credit history," she said. "I, being naive, believed everyone when they said in a few years I could easily refinance with a better credit score and history."
The $242,000 mortgage was an interest-only loan, with a fixed rate of 8.75%. Schon currently owes about $233,000. Her home value has dropped to about $200,000, she figures. But looming ahead in September is the end of the interest-only period when she will have to start paying down the balance, too.
That means her monthly payments will balloon from $2,160 to nearly $2,400.
"My monthly income is around $4,000 on a good month, but can be as low as $3,600," she said. Even with both her and her fiancé working 70-plus hour weeks, with three kids it's hard to pay the bills.
Schon sought to modify her mortgage and was denied, mainly because she was underwater and because her income had not fallen by 10% or more since she first bought the home -- a Catch-22: It hadn't dropped because she was working so hard to pay for the mortgage.
The bank's CEO sent her a letter notifying her that no refinancing options were available and the bank couldn't do anything until she was behind on her payments.
"I am trying my hardest to be responsible," she said. "I do not want to teach my kids that it's ok to just walk away from things when life gets difficult."
After CNNMoney contacted Wells Fargo and asked about their policies on cases like Schon's she got some welcome news. The bank decided that, with her strong track record of paying her bills on time and her good credit score of 700-plus, they said they would review their mortgage modification programs and find some way to make one work for her.
A refi at the current low rates could save her $700 a month or more.
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