Robert Haag had a really bad day not so long ago. He got a piece of mail that let’s just say - he was not expecting.

HAAG: It says the above referenced loan is in default. You have the right to cure this default. To cure this default you must remit $9,989.56 within 30 days of the date of this letter.

That bill is for the difference between lower payments Haag’s bank approved on a trial basis and his regular mortgage amount. Last July, his lender, Aurora Loan Services, gave him provisional approval to pay $1000 less a month while they analyzed his income and expenses. In April, they said he didn’t qualify for a permanent reduction. Now he and his family are preparing to say goodbye to their two-story house in south suburban Manhattan, Illinois.

HAAG: My wife would like to inform you that we don’t feel we’re living beyond our means. All of the furniture you see in this house is either a hand-me-down or was actually garbage-picked.

But his property taxes went up by $700 a month in 2007. Haag’s salary as a railroad mechanic and his wife’s part-time income couldn’t cover their bills. They borrowed from family and did everything they could to stay current on their mortgage. But now Haag says the huge debt they’ve accrued on the trial plan is forcing them to default.

HAAG: If we had been denied upfront in say, June, and our principal balance on this home would still have been $220,000, I feel that we would have been able to sell it outright without having to do a short sale or foreclosure or anything of that nature and been able to walk away with at least our credit.

ALYS COHEN: Homeowners definitely don’t understand that a trial modification could hurt their situation.

Alys Cohen is a staff attorney with the National Consumer Law Center in Washington. She says cases like Haag’s are happening all over the country and that banks don’t explain the nitty gritty of a trial modification.

COHEN: It’s simply forbearance, which means you make the payments at a lower rate and the rest of it gets tacked on. So while people are going in thinking they’re getting help, if they don’t make it to the finish line, they’re actually in a worse off position.

Treasury spokeswoman Meg O’Reilly said in an email this kind of lump-sum bill is legal. But she said as of June 1st, big changes are coming. Instead of rushing people into a trial modification and then figuring out their eligibility, banks will only give trials to people who qualify upfront for a permanent one. Faith Schwartz says that will mean fewer people getting surprise bills. She heads the HOPE NOW Alliance - a group of banks, investors and housing counselors working on foreclosure prevention. Schwartz says the reason banks send these lump-sum bills is cut and dried. The original mortgage contract is still in effect if someone doesn’t get a permanent modification.

SCHWARTZ: Those moneys are still due, that note is still due to that investor. So that’s what happens. It is unfortunate and I think the industry has to do a much better job communicating possibilities if they do fail the government mod test.

Schwartz says banks have other ways of helping homeowners to lower payments. But Robert Haag says Aurora Loan Services told him there’s nothing they can do. He just doesn’t make enough money. An Aurora spokeswoman declined to comment. On a recent day, a guy from Century 21 is pounding a for-sale sign into Haag’s front yard while his daughter and her cousins play outside.

AMBI: hammering sounds
GUY: You’re all set.
MELANIE HAAG: Thank you.

Haag says he’ll probably have to sell the home for less than he owes, further damaging his credit. He learned last month how to calculate for himself whether he earns enough to qualify for a permanent loan modification. He says it took 10 minutes to see that he doesn’t.

HAAG: I don’t understand what took so long for them to do simple calculations and tell me I didn’t qualify. I feel it might have been a tactic to generate as much income for themselves as they could before telling me I didn’t qualify.

Aurora’s not getting any more income from him for for now. He says he plans to pay off family debt first. And the 13-thousand dollars he owes Aurora? He and his wife say they see no way out of that hole.

Homeowners seeking help with their loans can call the following hotlines:

Illinois’ Homeowner Helpline: 866-544-7151 (run by the Illinois Attorney General’s office)

HOPE NOW Alliance: 888-995-HOPE (4673)