Tag Archives: tarp

Foreclosure Modifications, Killed by the Cure

Bailout OversightNew York City When the Inspector General of the Treasury Department starts agreeing with me that the Treasury Department and the banks are totally messing up the HAMP – Housing Modification Program – you just know it must be terrible!  And it is…according to a recent report in the Wall Street Journal by Jessica Silver-Greenberg:

The program “has undoubtedly put people into foreclosure,” says Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, which funds HAMP. “It’s a parade of documentation horrors.”

In a report to Congress on Oct. 26, Mr. Barofsky concluded that some borrowers seeking loan modifications through HAMP might wind up “worse off than before they participated.” Back payments, penalties and late fees triggered when homeowners are rejected for a permanent fix can push some borrowers over the edge, he said.

The medicine kills them when it turns out, as Arizona Advocates and Actions (www.advocatesandactions.org) has documented repeatedly, there are pre-approved or given verbal instructions to modify payments and then through repeated paperwork snafus, the banks renege and leave the borrower stuck very far out on the limb.  They do not hesitate to dog pile the borrower then with add-on fees, late payments, and all manner of predatory charges because the borrower was following their instructions. Yet the program requires that the borrower has to successfully make 3 payments on the modified terms, so in no time the borrower is stuck like chuck.

But of course there’s no accountability at the top or the bottom.

“The Treasury Department doesn’t record how frequently errors occur with documentation on home loans submitted to more than 2,500 financial institutions and servicers empowered by the U.S. government to grant and reject HAMP requests. An outside review of borrowers denied permanent modifications disagreed with the servicer’s decision in 4.8% of the loans during the fiscal quarter ended in August.”

Our experience is that an error rate of 5% is way, way too kind to the financial predators at the table here.  But even noting that 1.4 million people have been tossed out of the program thus far (against the Obama Administration’s original goal of 3 million modifications), a 5% error rate would be 60,000 homeowners.  That number of mistakes along would decimate home communities in many states around the country.  Put the error rate more reasonably at 10 to 20% and we are dealing with 120,000 to 240,000 homeowners that could have saved their houses, but instead have been wrongly excluded and bounced to the street.

It is unbelievable that this can’t be fixed!

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Bank Conflicts of Interest on Foreclosures and Modifications

Arizona Advocates and Action

Arizona Advocates and Action

New Orleans My god, pinch me!  Unbelievably the august New York Times in its editorial today has bellied up to the right side of the bar in pointing out the obvious and long noted (including by me!) conflicts of interests enjoyed by banks in the foreclosure game where they often pretend to be chicken, but are usually fox.  The Times being the Times can’t quite get it all right.  They put the horns on the Federal Reserve as a sleep-at-the-switch regulator of this mischief and mess, when the Treasury Department and the Administration both deserve at least equal billing of this horror movie showing at homes all around the country.

But let’s not quibble and count our small blessings when they come:

That is a big reason that the Obama administration’s antiforeclosure effort, with its voluntary participation by banks, has fallen so short.

Here is the background. The big banks — Bank of America, JPMorgan Chase, Citibank, Wells Fargo — service most of the nation’s home mortgages for investors who own the loans. They are paid a fee by the investors and also make money from fees on delinquent loans.

Servicers are obligated to manage the loans in the best interest of the investors. That means modifying a troubled loan, if reduced payments would bring in more money over time than a foreclosure. Or foreclosing if a borrower cannot make the payments on a modified loan.

If only it worked that way in practice.

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