After her husband, Larry Wilson, was laid off from a local radio broadcasting company 14 months ago, Bend resident Keri Wilson knew things were going to get tough.

She had no idea how much.

In June, with Larry Wilson unable to find work and the couple having depleted roughly $47,000 in savings and retirement funds to keep up with expenses, a $2,400 monthly house payment as well as a second mortgage — which Keri Wilson took out to remodel her gift shop business in Sisters — the couple were staring at a fate they once thought unimaginable: foreclosure.

They were at risk of losing the four-bedroom east-Bend home they and their two boys, 14-year-old Bobby and 11-year-old Devin, had called home since 2003. But, they were told, the home they bought for $169,000 would only be worth $220,000 if they sold it, and they owed a total of $304,000 against it.

“It all came to a head and we had to start making decisions — feed the family, pay the electric bill or make our mortgage payments,” Wilson said. “It’s not a position anyone wants to be in.”

They chose to stop paying their mortgages. Last month, they were sent a foreclosure notice stating their home would be auctioned in March.

But the story takes an unexpected turn, a combination of making the right choices when faced with foreclosure, and lenders and government that are getting more aggressive in heading off the nation’s still-unfolding mortgage crisis.

Now, if the Wilsons can raise $4,400 by Dec. 17, they stand a good chance of keeping their home.

Keri Wilson said the holder of their second mortgage, Minneapolis-based Homecomings Financial, has agreed to forgive the Wilsons’ roughly $54,000 lien in exchange for the $4,400.

This, in turn, has encouraged U.S. Bank, which holds the couple’s primary mortgage note, to offer new lending terms to the couple should they close their second mortgage. This includes potentially extending the term on their 30-year, fixed-rate loan to 40 years, lowering the interest rate and deferring a portion of their mortgage payment for five years.

U.S. Bancorp, also based in Minneapolis, confirmed it is working with the Wilsons. Homecomings also confirmed the Wilsons were customers but wouldn’t disclose financial details.

“We have a program in place to try to help customers that have trouble with loans,” said U.S. Bancorp Senior Vice President Steve Dale. “The first thing borrowers should do, because of their job situation or change in income, is contact their banks as soon as they possibly can. That’s the first thing you should do because most banks will work with you.”

Indeed, Keri Wilson said it became her monthly chore to call her two lenders and update them on the family’s financial situation.

“I only knew if someone owed me money and they ignored me, I would be p—–, but if they told me, I would be more understanding, so ignorance is not always bliss,” she said. “I figured ignoring them would make it worse.”

Corky Senecal, the director of housing and emergency services for NeighborImpact, a Redmond-based nonprofit that coordinates social services in Central Oregon, said Wilson handled the situation correctly. NeighborImpact also is Central Oregon’s Approved Housing Counseling Agency per the U.S. Department of Housing and Urban Development.

“As soon as you know you can’t (make your mortgage payment), call and say, ‘This is where I am,’” Senecal said. “So kudos to the family for doing the right thing and, obviously, kudos to the lenders and the bank.”

Government reacts

Senecal said her organization is fielding roughly 25 foreclosure counseling requests per week, which also is notable in that only homeowners at risk of losing their primary residence to foreclosure are eligible for the agency’s counseling services.

Nationwide, the federal government is stepping up its efforts to tamp down foreclosure activity. A new monthly Foreclosure Prevention Report issued Tuesday by the Federal Housing Finance Agency said the average number of mortgages held by Fannie Mae and Freddie Mac that have been modified through August 2008 increased by nearly 72 percent compared with the same time frame a year ago.

However, the 4,042 loans modified in August 2008 represent only 0.014 percent of the total outstanding loans held by the two government-sponsored enterprises.

Still, Senecal said the wheels of finance are starting to move.

“We’re beginning to see the media is working to the advantage of the homeowner, because (they) are putting the pressure on,” Senecal said. “Even though when these new programs hit the press, oftentimes the lenders aren’t up to speed, but we’re beginning to see a turnaround because … it’s difficult for them to get all of their wheels oiled to be as responsive as they want to be. But because of the media and counseling organizations like ours and an informed public, the programs that the government officials envisioned are finally getting to Main Street.”

Keri Wilson said she was not aware of any specific federal program that helped her family other than her interaction with NeighborImpact, which she called wonderful. Additionally, U.S. Bancorp’s Dale said the bank was acting on its own accord and not in response to any government program.

The government has introduced several programs to help homeowners threatened with foreclosure, including Fannie Mae’s HomeSaver Advance program. Introduced in the first quarter of 2008, it allows qualified borrowers an unsecured loan up to the amount of the delinquent payments to bring the mortgage account current, according to the FHFA.

In August, 7,914 mortgages were brought current through the program, according to the FHFA.

In addition, the Federal Housing Authority’s Hope for Homeowners program enables qualified individuals to refinance costly adjustable-rate mortgages into fixed-rate government-backed mortgages. Through October 2008, the FHA has helped 400,000 families refinance their mortgages since September 2007, according to the agency.

Hope and family

The Wilsons are not out of the woods yet. Larry Wilson still hasn’t found a job, although a handyman position at a local property management company might soon be his. Keri Wilson said that with a 25-year career in radio, her husband is either deemed overqualified by prospective employers or is viewed skeptically as someone who will quickly return to the profession given the opportunity.

Trouble is, Keri Wilson said local radio stations aren’t hiring.

The couple had hoped he would find a job in radio sooner, but Larry Wilson said he was hindered by a yearlong noncompete clause in his contract with his former employer.

Her business in Sisters, Hucklebeary’s, is not profitable, she said. It’s been for sale for 18 months, but no one wants to buy a tourism-dependent business in this economy, she said.

In December, they will close it and Keri Wilson will take a job at T-Mobile. This is a big deal, she said, because many of the government programs she explored require homeowners to have jobs. A money-losing business is not considered a job, she said.

Wilson said she and her husband considered leaving the area to find work — including moving in with her parents in Wyoming so her father could get Larry Wilson work in a coal mine — but struggled with pulling up the roots they set down in the area. Larry Wilson is currently considering a yearlong job in Alaska, she said.

“We’re willing to do that,” she said. “I hate separating my family, but it’s not like we have much option at this point.”

Their 14-year-old, Bobby, has taken a job pumping gas, and the family has been without health insurance since summer. Since then, Bobby broke his foot and Keri Wilson injured her wrist, though she won’t go to the doctor because she can’t afford it.

The worst part of their predicament, she said, was explaining it to their two sons. Keri Wilson said her oldest had his bags packed, worried authorities would come in the middle of the night to take back the family home.

Fighting tears, Keri Wilson said, “Parents really need to make sure kids understand what the family is going through, they have to sit down with their kids and explain the process, because kids’ imaginations are worse than the truth.”

Despite the family’s losses, Keri Wilson remains upbeat and tries not to dwell on the past. Things are looking up, she said, and it’s made her family stronger.

“My mom taught me to be responsible,” she said. “Even though I thought I was doing the right thing, I couldn’t blame anybody. For a long time, I blamed myself.

“Did I ever dream Larry would be out of work for a year and two months? No, so in my heart, I’d say this was a circumstance beyond my control. You can’t blame yourself, you can’t be angry, because it only produces bitterness, and I can’t be bitter because I have two beautiful boys, a husband I love more than ever after more than 20 years of marriage, and I have to show my boys anger and bitterness don’t work. Hope and love and family do.”