Families face ruin dealing with Chinese drywall

Seven months after Jason and Lisa Dunaway discovered their new Courtland home was built with dozens of sheets of Chinese-made drywall, the couple is meeting with lawyers and filling out bankruptcy documents.

Homeowners in 27 states now complain that the drywall emits a corrosive gas that damages household electrical systems and causes respiratory problems.

For the Dunaways, their dream home has become a financial nightmare. Since building the home in 2007, the couple drained their savings to replace corroded air conditioning coils, broken televisions and computers. They fled the home in May, unable to shake bouts of sickness. Now, after not paying the mortgage for months, the couple worry they face foreclosure.

The federal Consumer Product Safety Commission is investigating air-quality issues related to the drywall and plans to release some of its findings today and additional reports in the coming weeks. Several local homeowners also have sued the companies that manufactured and imported the drywall.

In the meantime, dozens of families across Hampton Roads face a dilemma similar to the Dunaways’: Continue to live in a home that could be making them sick, or move out and stack a rent payment on top of the mortgage bill.

Local lawmakers are calling on banks and mortgage lenders to help homeowners while the federal investigation is completed. U.S. Sen. Mark Warner, D-Va., sent a letter last week to the Virginia Mortgage Lenders Association urging its members to temporarily suspend collection of mortgage payments or at least to delay foreclosure proceedings on homes constructed with the tainted drywall until the product safety commission finishes its investigation.

“To foreclose on homes that are uninhabitable, with an unknown range of defects, would only aggravate homeowners’ problems and place you in control of an unsellable property,” Warner wrote.

U.S. Rep. Glenn Nye, D-Va., also introduced a resolution in Congress calling on lenders to offer the homeowners a temporary forbearance on their payments.

But other than strongly worded letters and resolutions, there’s little more that lawmakers can do at this point, Warner told families on Oct. 12.

“To get something passed in Congress in the short, short-term is going to be really hard,” Warner said after touring homes that were built with the drywall in Virginia Beach and Chesapeake.

Last week, Warner sent a letter on behalf of individual homeowners to 15 different lenders and mortgage holders, urging them to offer help. The senator gave the institutions two weeks to respond. As of Wednesday, five of the lenders had responded that they planned to help, said Kevin Hall, a spokesman for Warner.

For the banks, the requests for relief come at time when they already are inundated with skyrocketing foreclosures and delinquent loans.

RealtyTrac, an online foreclosure-monitoring service, reported Wednesday that the number of properties with a foreclosure filing nationwide during the second quarter of this year was up 23 percent from a year earlier. In Hampton Roads, the number of properties was up more than 35 percent, RealtyTrac said.

Jeffrey Dunn, who earlier this year learned his condo at Norfolk’s Harbor Walk community was built with Chinese-made drywall, said his lender, BB&T Corp., agreed in August to a three-month forbearance. He said the bank planned to review his loan again in November.

“If they don’t extend the forbearance, I’ll have to borrow money from family,” Dunn said. “At this point my savings is gone.”

Only a handful of BB&T customers report having the tainted drywall, said spokeswoman A.C. McGraw.

“We try to work out some sort of forbearance on a case-by-case basis, to make sure there’s time to get the problem fixed,” she said. “It’s to both parties’ benefit.”

JPMorgan Chase & Co. typically tries to help homeowners whose properties are impacted by environmental issues, said Tom Kelly, a spokesman for the New York-based bank.

“We will work with the borrower just to give them some reduction in their monthly payment or even no monthly payment for a specified time period while they work on resolving the issue,” he said. “We’re obviously just the lender. Whatever liability there is with the issue of the wallboard obviously does not rest with us.”

Homeowners with loans backed by Freddie Mac can ask their mortgage servicer for a three-month forbearance in the event their homes were built with the drywall, said Brad German, a spokesman for the government-backed enterprise. Those homeowners can negotiate a forbearance for up to a year, after which a payment plan can be developed to recapture those missed payments, he said.

“When an environmental defect is discovered or disclosed on a property on which we hold a mortgage, the servicer is required to work with the borrower,” German said. “This could include offering forbearance to the borrower in order to give them time to assess the situation and come up with a remediation plan as necessary.”

So far, Chinese-made drywall has been reported in fewer than 10 Freddie Mac loans, he said.

After the Dunaways moved out of the Courtland home in May, they sent their two children, Ally, 8, and Ashton, 5, to stay with their grandparents in West Virginia for the summer. Jason and Lisa slept on friends’ couches for weeks, but they eventually rented another home in Courtland.

The couple thought their mortgage lender, Citizens National Bank, based in Windsor, had agreed to put their loan on hold temporarily while federal agencies investigated the problem drywall.

“The bank told us they put the house in a nonaccrual state,” Lisa Dunaway said. “They told us not to send payments. It was our understanding that it wasn’t going to impact our credit.”

They recently learned that Citizens National had notified the major credit bureaus that the couple was four months behind on the mortgage. The bank also sent a vice president to inspect the property.

L.J. “Buzz” Upton III, a Citizens Bank vice president, declined to comment.

In recent weeks, the couple met with a bankruptcy attorney and plan to file in November. The Dunaways plan to propose giving up a condo they own in Suffolk as they try to keep their home despite the Chinese-made drywall. They hope one day to restore it.

“We don’t want to lose our house,” Lisa said. “This has already destroyed our credit. We had no other choice.”

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com