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Econwatch

December 1, 2009 12:41 PM

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Mortgage Modification: What's HAMP-ering Progress?

By: Jill Schlesinger
Topics: Financial Decoder

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

Why aren't banks playing the mortgage modification game? We've been told that lenders prefer to modify and/or restructure loans, rather than enter into the costly and time consuming foreclosure process. At least that was the thought when the government rolled out the Home Affordable Modification Plan ("HAMP").

Despite paying up to $1,500 for each modification, plus $1,000 a year for up to 3 years for each borrower who remains current, the program is stuck. 650,000 homeowners have been given trial modifications, but only a fraction of those have become permanent. What's HAMPering progress on the program?

(AP Photo/David J. Phillip)

Maybe some banks think that they're going to get bailed out by the eventual recovery of the housing market; the plan requires a vast staff with a high skill level to properly carry it out; it's too cumbersome and loaded with reams of paperwork; and maybe the key issue is that many lenders fear that even those borrowers who restructure loans will ultimately re-default, so why get involved at all?

With nearly a quarter of homeowners under water on their mortgages, the government wants to apply more pressure, including possible financial penalties and the more humorous suggestion, shaming banks into action. Ummm, how well does shaming work in an industry that clearly has none in the first place?

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(CBS)

Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

Jill Schlesinger
>> View all articles
Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
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by justinmccar December 11, 2009 6:16 PM EST: Yes, by not holding banks' feet to the fire, we are encouraging Moral Hazard-- in banking. Some would go so far as to say that the banks calculated the probability that they would be bailed out so assumed risks that would not normally have been assumed in the loans that they wrote, securitized and pawned off on the secondary market.; Reply to this comment

by JAHRAH December 8, 2009 12:36 PM EST

While I agree the process of implementing the Making Home Affordable Programs has been less than stellar, nobody is talking about the stress put on the servicers. With little warning they had to understand new goverment stipulations, work with investors for approval guidelines and hire hundreds of thousands of people to handle the call volume and workflow for HAMP and HARP. Also, the onus is on the borrowers to complete their end of the trial modification period. If they miss a payment or don't send in the proper paperwork, of course they are not going to qualify for a permanament modification. These factors are beyond the control of the servicers.

Reply to this comment


by justinmccar December 9, 2009 12:08 AM EST: Jahrah: Open your eyes a bit more, my friend...Go to sites like Loansafe.org:

Not many folks are knowingly missing 1 out of the 3 reduced payments required to complete loan mods...They are heavily qualified up front and they are, for the most part, aware of what the stakes are...It's just that the banks are "losing documentation" and (IMHO deliberately) being less than clear about details such as when payments and documentation are due.

It serves the banks' purpose to collectively blame problems on these "irresponsible borrowers", but the facts are that in my neighborhood there are thousands of unemployed former mortgage officers that would love to take a job as an in house bank loan mod facilitator and assist with the banks' efforts to ramp up.

The banks are deliberately dragging their feet/obfuscating on these loan mods after having taken billions of tax payer dollars.

They should realize that the whole issue of principle reduction in a loan mod becomes less important as real estate values are supported by (real) loan mods that work out. We are all in this together and, despite the banks' claiming low success levels, this economy won't be in the clear until banks make genuine efforts to keep sincere/capable borrowers in their homes.


by justinmccar December 1, 2009 8:22 PM EST: Gee...It's really funny:

When I was Brokering in CA real estate 3, 4 years ago, the banks weren't loosing much paperwork at all when they were slinging these shaky loans. This was especially true when they were funding the really lucrative Option ARM stated income, zero down loans with big margins. In fact, even though they claimed they were understaffed at months end during the boom years, they always seemed to close the loans to bonus at months end. there was always a bank account exec to tell you just how that shaky loan needed to be submitted to their own underwriters.

"We're understaffed, we keep loosing your paperwork!" Please.; Reply to this comment


by MrsMonEPenny December 1, 2009 8:13 PM EST: I write under the pen name of Mrs. Mon E Penny and I have written countless articles highlighting the abuse of HAMP as just another "bailout" money machine for lenders. Lenders receive money for short sales and cash for key programs from the goverment. Lenders receive DOLLAR FOR DOLLAR for reducing DTI from 38% to 31% from the goverment. Lenders receive $1000 upfront for just doing a "trial modification" of which most never convert to a permanent one. Did you know that lenders, like OneWest Bank, formerly Indymac Bank, have less than a 20% participation rate because they practice "cherry picking" on loan modifications. Did you know the same lenders that are moving at a snail pace on modifications are quickly accelerating "foreclosures" on homeowners who QUALIFY for HAMP and are going through the modification process?

Jill if you are going to do reports, report the truth. HAMP is simply a money machine for lenders to receive additional funds even after the bailout money. If you want honest reporting here are links to my articles.

http://www.associatedcontent.com/article/2445928/us_treasury_department_asleep_as_borrowers.html?cat=3

http://www.associatedcontent.com/article/2402244/are_lenders_cherry_picking_loan_modifications.html?cat=3

http://www.associatedcontent.com/article/2381656/why_obamas_home_affordability_program.html?cat=3; Reply to this comment


by steveherb1 December 1, 2009 1:58 PM EST: After reading this link and discovering my own documents are missing why bother negotiating at all. I don't modify with thieves.

http://borrowerclaims.blogspot.com/2009_08_02_archive.html; Reply to this comment

by midlclass December 1, 2009 1:28 PM EST

Good point Jill how can you shame and industry that has none. It's all about the profit margine. Think about this tidbit. If ive had a mortgage for 5 10 15 years borrowed an home equity or 2 on it and made my monthly payment to the lender little if any of the money i've paid has gone to the principle. so now i'm under water the house is still worth at lest what i borrowed against it. i cant'make my payments due to job lose family or medical issue's. the bank starts forclosure and gets the house back they intern put it back on the market sell it for a (Lose?) which is still more than what you paid for it. so they've collected all those years of interest refinanced it or sold it. and recived there original monies back and then some. I guess if i was a lending institution i really would'nt have lost anything. so to participate in the mortgage restructuring is just a way for the banks to lose money. let's not forget what they have all ready received from the goverment for bail outs that let them keep there salaries and bonuses.

Reply to this comment


by wyodutch December 1, 2009 9:16 PM EST: "... let's not forget what they have all ready received from the goverment for bail outs."
.
That wasn't the government's money pal... that was money that your "representatives" took from your pocket and gave to the Wall Street Thieves Club.
.
Wanna do something about it? Grab a torch and a pitchfork and form up.