Homeowners Struggle as Housing Market Slowly Recovers

When real estate broker Sherri McBroom drove through a Phoenix suburb back in January, it was a tour of despair. There were more than 130 homes for sale in one neighborhood alone.

A real estate sales sign sits outside of a house for sale in Phoenix, Ariz., in this June 2009 file...

A real estate sales sign sits outside of a house for sale in Phoenix, Ariz., in this June 2009 file photo. When real estate broker Sherri McBroom took us on a drive though a Phoenix suburb back in January, it was a tour of despair. There were more than 130 homes for sale in one neighborhood alone. Today the story is completely different.

(Joshua Lott/Reuters)

Today the story is completely different. While nationwide home sales jumped 16.7 percent in the first half of 2009, the turnaround in the same suburb is even more stunning -- 150 homes have been sold since May, thanks to low prices, low interest rates and tax breaks for first-time buyers.

"Prices were so low in the valley, I expected the buyers to come out. I didn't expect there to be a bidding war. I didn't expect there to be 20 offers on every home," McBroom says.

But for many in that neighborhood and around the nation, the rebound in real estate is coming too late, and painful lessons are being learned as the nation struggles to recover.

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Back in January, the Hirschi family owed their bank $150,000 more than their Phoenix home was worth, so they hired Choice National Loan Consulting to help modify their mortgage. "We didn't want to be part of the problem," Hirschi said. "We didn't want to just walk away from our house and contribute to the overall housing crisis."

But after paying a $3,500 up-front fee, they say representatives from Choice National rarely returned their calls, failed to alert them of a pending foreclosure, and made repeated efforts to recruit them as sales associates. They also claim that Choice advised them to skip mortgage payments so the bank would consider their modification request more urgently. The bank repossessed the home in August and Betty Hirschi says "I honestly wish I'd handled it myself."

Failure to respond to a number of outstanding complaints has earned Choice National an "F" from the Arizona Better Business Bureau. When contacted by ABC News, Choice National President Jordan Ruzicka blamed the allegations on prior management and vowed to refund the Hirschi's money. "We are not a foreclosure prevention service in any way, shape or form," Ruzicka said. "We never urge our clients not to make payments."

The Hirschis are just one example of the perils in this new -- and largely unregulated -- mortgage modification boom. It arose after the Obama administration launched a $75 billion "Making Home Affordable Plan," designed to get lenders to reduce monthly payments for struggling homeowners.