10/17/2011 03:57 pm ET | Updated Dec 17, 2011

Foreclosure: Does This Family Deserve To Lose Its Home?

ALAMOGORDO, N.M. -- From next to the dead tree in his backyard, Ernie Soto can see the big house where he used to live. It's perched on the side of a mountain overlooking Alamogordo, a town of 36,000 on the eastern edge of New Mexico's Tularosa Basin.

In 2007 Soto moved downhill to a smaller house with his wife and son. They needed fewer rooms since their grown son and daughter had moved out, and Soto wanted to sell the big house and use the proceeds to start a mechanic business. He figured he'd be better off as an entrepreneur in case the economy worsened.

Their downward mobility has continued, thanks to both mistakes and misfortune. "We just couldn't backpedal fast enough," he says.

A guy moved into the bigger house in a rent-to-own situation, Soto says, but the guy died. Then Soto's daughter got sick. He gave up trying to start his business when financing fell through. Then he lost his job. And now he's fighting to keep the smaller house.

He's a conservative Republican, but he thinks he deserves a break, a little leniency, so he can keep his home even though he hasn't made a mortgage payment since 2009.

Soto's congressman, a conservative Republican who's voted to repeal the government's anti-foreclosure programs, has shown sympathy to his constituent by helping him apply for one of those programs.

Soto's struggling against unemployment and foreclosure, the same problems afflicting tens of millions of people across the U.S., problems that pushed more than 2 million into poverty in 2010. Like many who've lost their jobs and homes during the Great Recession, Soto harbors a grievance against the bankers who precipitated the crisis and paid themselves bonuses after taxpayers bailed them out.

While politicians regularly vow to fight for people who face the loss of their homes and jobs "through no fault of their own," reality is rarely that simple. And it's exemplified by the story of Ernie Soto, a hardworking, conservative family man who made questionable financial decisions in hard times, but who never got a bailout.

Soto asks, "Can I have just a tiny taste of the pie?"

* * * * *

Soto bought the smaller property, a one-story single-family home made from red bricks and white stucco, for $146,300 in June 2007. Inside there are three bedrooms, a huge stone fireplace in the living room and a sunken TV den next to the kitchen. Outside there's a spacious back yard with patchy grass.

The bigger house boasts two stories, four bedrooms and a more distinctive Southwestern style. Soto says that when a man moved into the house in 2008 and started paying rent, he expected the man to buy the place. But then the man died at age 57 that November. The man's obituary doesn't say how he died, and relatives did not return phone calls.

Soto says he heard the man had a heart attack and that in hindsight, "I should have made him pay for the property before I bought mine."

Soto found himself on the hook for two mortgages at the same time his daughter was going through a bad divorce and a cervical cancer scare that resulted in $5,000 worth of legal and hospital bills. With the business expenses, it added up to more than he felt he could handle.

"I was faced with a short-term financial tsunami of around $33,000," he says.

He used savings to stay current on both mortgages through the first half of 2009. He tried to convince his lenders that he couldn't keep it up for long when he asked for lower payments. He says they turned him down because he made too much money. And he says a loan he needed for working capital to start his business fell through.

He and his wife, Priscilla, who works as a house and office cleaner, together earned between $80,000 and $90,000 in 2007 and 2008. But he'd already borrowed $350,000 to launch the car repair company and owed $400,000 on the two houses. As business loan payments came due, Soto worried he'd have no money left for his family.

"Everything we pumped in, all the agreements we made with suppliers, leases for equipment, that house, this house, our existing bills," he says. "It was about three quarters of a million dollars almost, and I said, it's too much and now I need to hang to some of that money to help protect our daughter."

Soto says he told his lenders the same thing he told his own family: He feared he wouldn't be able to maintain his income.

"I warned [them] because of the car business, the car business was bad and I told [them] it's just a matter of time. And I told my wife we'd better hang on, I've got a feeling something's gonna happen, I'm gonna lose my job. I see it, I've been in it for so long."

A government-certified housing counselor advised him to consult a lawyer. He filed for bankruptcy protection in June of 2009. By that time he and his wife's average monthly expenses reached $6,338, outstripping their monthly income by $450, according to court documents from the bankruptcy. The Sotos were sinking in debt.

They kept their jobs though and continued trying to negotiate a mortgage modification. The process frustrated Soto: He says his loan changed hands three times, his lenders repeatedly asked him to resubmit the same documents, and he could never speak to the same person twice -- an utterly common set of complaints for a homeowner seeking a mortgage modification.

Not even thousand-dollar incentive payments from the government have been enough to encourage banks to treat homeowners decently when they seek loan mods; the Obama administration's signature foreclosure prevention program has helped fewer than 700,000. More than a million have been bounced out of the program, and the reasons for rejection are often unclear. In early 2009 President Obama said the program would help 3 to 4 million homeowners. Another refinancing initiative was supposed to reach 4 to 5 million. Both programs are failures; the foreclosure crisis rolls on.

A key reason Soto thought he deserved a break, aside from the bank bailouts, was that he owed more than his house was worth, a consequence of the housing bubble inflated and left shriveled by the financial sector. In 2009, Soto's home was worth at least 10 percent less than the amount he'd borrowed to pay for it. If Wall Street already got bailed out, Soto wondered why he should have to keep lining bankers' pockets with bubble-sized monthly payments?

The following December, he quit paying and moved to a nearby trailer park. Instead of sending money to banks, he started sending furious emails to news organizations.

"My modification went no where even with timely payments and mountains of paperwork sent to all of them," he wrote to HuffPost in 2010. "After several months of this I had enough, they can all kiss my @$$! I have always had great credit and paid my obligations on time, but where was everyone else when I need them."

Shame and fear prevent more homeowners from doing what Soto did. While nearly a quarter of all American mortgages are "underwater" like Soto's, one analysis puts the the rate of "strategic default" at just 2.5 or 3.5 percent. Soto's shame had given way to fury. Priscilla says she could sense her husband's anger just from the way he typed. She mimicked his hands going up and down on the keyboard with loud clickety-clack noises.

"I was mad. I was mad at the bankers, I was mad at the mortgage companies and everything," Soto says. "We couldn't stand for no more pain, no more humiliation, so we just discreetly got our things, moved out -- the neighbors were like, 'What’s going on?' I've always been a good citizen, paid my bills. All I could say was just fuck everybody."

Soto lost his job at the dealership in April of 2010. He spent a couple months unemployed before finding another service manager gig at a dealership in Hobbs, nearly 200 miles away. At first, the company paid for his gas and motel stays, but he says those perks vanished when the place offered him a full time gig. The expenses, combined with the inconvenience of working so far from his distressed family, led him to quit.

* * * * *

Things got better this year. In April, Soto landed a job at a rent-to-own furniture store in El Paso. The drive from Alamogordo took longer than an hour, but Soto scored a new placement near his home after several weeks of training.

The job had a tremendous downside: Soto had to take people's stuff away when they failed to make payments. He recalls visiting a rundown trailer in El Paso during the springtime. The trailer looked so bad, Soto says he thought nobody could live inside.

"We got up there and knocked on the door and here comes out the guy and his daughter, a little cute two- or three-year-old girl, was holding a doll, and I'm thinking, 'Oh my God.' Here we are taking their furniture and washer and dryer. I walked in and the floor wasn't really a floor. I think they had a dining table. I don’t know if they even had a TV. It was a pretty sad sight."

And it was a lesson for the man's poor daughter: "The little girl's asking the daddy, why are they here? He goes, 'This is what happens when you don't pay the bill.' "

Soto knows well the indignity of having stuff repossessed. It happened to him in 2009 when the company that lent them $24,000 for a pickup truck in 2005 asked the bankruptcy court to let them take it back, which the court said would be fine. The repo guy found Soto in the parking lot of Alamogordo's Ark Animal Hospital.

Soto had gone there to put down Petey, his cancer-stricken pit bull. Petey was already giving Soto a hard time about going into the unfamiliar building, stiffening up as if he knew something bad would happen. "I never saw him act that way," Soto says. The repo guy made it all harder. Soto says he asked the man if he'd let him keep the truck a little longer. The guy got on the phone with a supervisor, hoping to get out of the gruesome task, but the higher-up insisted the vehicle be taken.

Soto says Priscilla showed up, the repo guy took the truck, and then they went inside and Petey died in Priscilla's arms before they both went back to work. Soto says the episode was a low point that contributed to his later decision to deliberately default on his mortgage.

Despite the humiliation of repossession, Soto has no beef with rent-to-own. "Not everybody has a lot of money these days to go out and plunk down money for furniture. So I thought it was a really neat way for people to be able to obtain furniture with the option of buying."

So things were going well this year. And then Soto heard about a temporary federal program that helped struggling homeowners catch up on their mortgages with a forgivable loan that also subsidized monthly payments. He had to live in his house to be eligible, and the banks hadn't bothered to seize his since he abandoned it at the end of 2009.

"Okay, I'll move my ass back in there," he says he told himself. He packed up his family and moved out of the trailer and back into the smaller of the two houses halfway through July. He only had a couple weeks to gather all the documents he needed to apply for the program, which was called the Emergency Homeowers' Loan Program (the Obama administration later extended the deadline).

HuffPost had included Soto in a story about homeowners who'd walked away from their mortgages in February. When he walked back to his mortgage five months later, HuffPost covered that event as well. The second story caught the attention of staffers for Rep. Steve Pearce, the Republican who represents Soto's District (and for whom Soto voted in 2010). The staffers got in touch with their constituent with the help of a HuffPost reporter and launched an effort to help Soto apply for EHLP.

Delinquent borrowers willing and able to pay their mortgages, but whose income had fallen by at least 15 percent, were eligible for the program, which had been created with $1 billion from the Dodd-Frank Wall Street reform bill passed in 2010.

Pearce's staffers may have had an impact on Soto's case: On Aug. 2, the Department of Housing and Urban Development sent Soto a letter informing him he'd been selected in a random lottery for preliminary approval for the Emergency Homeowners' Loan Program. The letter prompted Soto to send a packet of documents to complete a full application.

Soto brought the letter to a meet-and-greet with Pearce at a mall in Alamogordo on Aug. 9, where the congressman posed with the Soto family for a photo that the congressman put on Facebook that day.

Pearce signed Soto's HUD envelope: "Ernie, God Bless."

"He's a great guy," Soto says.

At the same time he applied for government help, Soto renewed his efforts to get a loan modification with Ocwen, the company servicing his mortgage. On Aug. 4, Ocwen sent a proposal. It said Soto could make monthly payments of $893.38; he'd previously paid more than $1,200 a month. (Though Soto says that when he called Ocwen, he was told his actual monthly payment would be higher by a couple hundred dollars.)

The modification would jack his principal amount from $146,000 to nearly $168,000 -- meaning Soto's mortgage would be even deeper underwater than before. Otero county records indicate his property is worth $142,000. A real estate agent told Soto in September he should list it for $119,000 if he wanted to interest potential buyers.

* * * * *

Soto had no heat or electricity when he returned to the house this summer. He says he paid $1,100 to get power, but a plumber told him reconnecting the gas would cost a lot more. That's why Soto's tap runs cold and he uses the sun to warm jugs of water in his yard. If the coming winter gets as cold as it did in February, when temperatures fell below freezing, Soto will have to rely on space heaters and his ridiculously large fireplace.

That is, he'll have to rely on those things if he stays in the home. He'd have more money to fix the gas if the furniture company employing him hadn't closed its Alamogordo store in September. Soto waited weeks to tell his lenders and his congressman's helpful staff that he'd lost his job again.

Like most of New Mexico, Alamogordo is a place of low unemployment and low incomes. Soto is trying to find another auto repair gig. He says he's not desperate enough to start flipping burgers, but he's not too proud to scrub toilets, either. He's been helping Priscilla clean homes and offices.

Soto says a Pearce staffer offered to help him find a job. He figures he'll have to leave his home. He doesn't relish the prospect of throwing money at an underwater mortgage anyway, and he doesn't think he'll get final approval for EHLP now that he's unemployed. Borrowers who can't make payments do not qualify.

"The agencies are looking very carefully. They don't know that he qualifies," Pearce says. As for Soto, "He's trying to make decisions what he wants to do. ...There are jobs all over the district. Some areas are down to 3 percent unemployment. He may have to pick up and move."

For its part, the emergency loan program -- like the administration's other housing efforts -- has fallen far short of its goals, with the government spending less than half the program's $1 billion allocation and reaching a third of the 30,000 people it said it would help.

If Pearce had had his way, the program would never have existed in the first place. Pearce joined House Republicans in voting to repeal the EHLP in March.

"Many of these programs haven't been working properly," Pearce says. "They're not really doing what they’re supposed to. They cost money. And so what we're trying to figure out is how to see that the people who need help get it but the funds are not used just to feed the bureaucracy or used fraudulently."

Pearce has talked about the problems of homeowner help programs in a different way on the House floor.

"I had a friend in the office today who talked about his situation with a house in Tucson where he got in at a higher price than it should have been," he said in March. "He was willing to settle for a lesser amount. He was willing to pay. But because the bank could go to the government and make up the difference, they did not have to negotiate with this individual homeowner. Instead, this program causes lenders to say, the taxpayer will make us whole and we are not going to take our losses."

Through a spokeswoman, Pearce calls constituent service his top priority. "When a constituent reaches out to my office for help, we will go through government programs to get them help, if necessary," Pearce says. "At that point, it is not a policy question, and it is not legislation based; instead, our offices work through the most efficient mediums available to ensure that individual cases do not slip through the cracks. As the Representative for New Mexico's Second Congressional District, this is my job, and it is an honor to serve constituents in this manner."

Like her husband, Priscilla Soto is not optimistic they'll get to stay in their current home. "I'm scared," she says. "I don't know where we're going to end up or what we're going to do."

One night in October, the three of us scamper up to the bigger house, which finally went for sale on courthouse steps in September, according to a court document Soto received. Soto and his wife cupped their hands around their faces to peer into the windows. We could hear coyotes howling down the mountain, somewhere between us and the twinkling lights of the city.

"This is the main room here," Soto says. "The fireplace ... Stairs up to our bedroom ... The kitchen's over here." He sighed loudly.

There was nothing inside, but Priscilla remembered the big Christmas tree that you could see from the front door, which opened to an upper floor overlooking the living room below.


Arthur Delaney is the author of "A People's History of the Great Recession," HuffPost's first e-book.