HERNDON, Va. -- Michael David Kerns doesn't fit the expected profile of an American in a mortgage jam, but as the housing crisis in America filters down to middle class homeowners, that profile will undoubtedly change. Kerns is a scientist at the National Institute on Aging at the National Institutes of Health in Bethesda, Maryland. He has a PhD and three graduate degrees and the student loans to prove it. So when Kerns applied for a mortgage to buy a townhome at NIH FCU he said he told the mortgage representative he couldn't afford more than $1,500 per month.

The "Caveat Emptor" experience he related goes to the heart of understanding how even a highly-educated professional can be laid low by the complex nature of a mortgage transaction, and the difficulty of redoing terms once a buyer feels overwhelmed by the costs. "I trusted the credit union to give me good advice," he said. "I thought they'd act in my best interest, that's why I went to them."

Kerns received a hybrid mortgage with a 3-year ARM with a cost of $1,298 per month and made a downpayment of 5% by drawing down his Thrift Savings Plan and moved into his $255,000 home with his two rescued Springer Spaniels in July 2006. He was surprised to learn a month later that he also had a home equity loan and was required to make two separate payments that came to $1,735. He said he originally asked about an FHA loan for first time homebuyers with subsidized private mortgage insurance but was counseled that the NIH mortgage was "better" for him.

For several months Kerns said he made both payments by using some cash leftover from his initial draw down, but it was gone fast. Then, he was involved in a car accident that totaled his car. Because he needed to drive in order to get to work, he got a small car loan from NIH and drew down the remainder of his savings plan to cover the costs, approximately $5,000.

It got worse when Kerns found he's bought a "lemon." Virginia's "lemon" law places all burden on the consumer to litigate, so he ended up selling the car at a loss of $3,500 and has to pay two car loans now after financing the second one at NIH.

Now, Kerns said his back was close to the wall. He started doing what many other in-debt Americans do: he began to get cash from revolving credit cards in order to pay his monthly bills. By January of 2006, his credit debt was over $6,000. He worried, he fretted. He developed a gastric ulcer. He unloaded to a friend one afternoon, feeling a tad sorry for his situation and she advised going to the credit union for help.

Kerns contacted Cynthia Thompson at NIH in April 2007 to ask about the possibility of restructuring his mortgage. He said that she would take up his predicament with others at the CU and swore him to secrecy. Four weeks went by, he said, without a word. Kerns next stop was at Help for Homeowners and a counselor there sent him to Consumer Credit Counseling Services. CCCS took his financial information, pulled a credit report and got back to him with an analysis and suggestions. Go to the credit union, they advised, and ask for a Short Sale of the house. Kerns housing costs were too high to be sustained, they said. A second choice was to execute a Deed-in-Lieu.

He called Thompson again and his call was returned by Curt Essig. After a discussion, Kerns was asked to write a "hardship" letter and he did so the following day. Three more weeks passed before Kerns said he got through once again to Essig, who told him, "There is nothing that NIH FCU can do for you, Dr. Kerns." Now, Kerns said he picked up more than a hint of dismissiveness from Essig. "He seemed to suggest I was not being truthful."

Kerns said his lifestyle and expenses are modest and haven't changed from before he developed these problems. He dropped his TSA contribution to zero and increased his tax exemptions, which will cause him to owe more tax come April. He said he repeatedly requested a meeting with someone at NIH to try to work something out. He even wrote a letter to NIH FCU CEO Lindsay Alexander, which he says was never answered. He wrote a complaint to the NCUA as well.

On August 29 Kerns got a package from an attorney representing NIH FCU with an offer that reduced his payment by $100, and a waiver of his right to declare bankruptcy and seek a jury trial and payment of all legal expenses. He had a deadline to accept it by Sept. 7 (less than a week later).

"What happened to the community focus?" he asks now. "Where's the commitment to serve members, especially when they come to the credit union asking for help when they realize they need that help?"

Mark Forsyth, VP of lending at NIH FCU told Credit Union Times, "I'm disappointed to hear he feels the way he does. We think of Dr. Kerns as a valued member, he's an eminent scientist. At NIH FCU, we have a range of mortgage products from which to choose, all of which are standard. We don't do the secondary underwriting that's gotten so many others into trouble. And we keep all our loans in portfolio."

Forsyth said that since Kerns contacted the CU that all efforts have been made to reach an accommodation "and we take great pains to educate members on all the decisions they make on their financial well-being. I have his best interests in mind. It's obvious that he feels we're not trying hard enough. But we deal with folks who run into financial problems and we always try to reach an amicable settlement and a solution that's best for both parties--the member and the credit union." Citing privacy constraints, Forsyth declined to discuss financial specifics but finally said, "I'm still hopeful we'll find a solution."

Kerns has subsequently received another counter offer from the CU's attorney and the solution hasn't been reached yet. "I don't think they've dealt with me in good faith at all," he said.

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