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Econwatch
January 29, 2010 10:28 AM

Mortgage Modification: Revamping HAMP

By
Jill Schlesinger
Topics
Financial Decoder

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

The government's loan modification process (Home Affordability Modification Program or "HAMP") is an abject failure in its current form. Complaints abound from underwater homeowners (it's estimated that over 1/4 of homeowners owe more than their home is worth), banks and loan servicers about the documentation; the ability to morph from temporary modifications to permanent ones; and the inequality of first and second mortgage holders.

(AP / file)

Almost every expert agrees that loan forgiveness is the key, but thus far, banks have been reluctant to write down loans because of the balance sheet impact. This "pray and delay" or "extend and pretend" strategy can only work if the economy and house prices recover quickly. Anyone think that's happening?

I also understand from a few in the know that some in the White House detest the idea of write-downs because of the implicit moral hazard. Um, it's a little late to worry about that as millions of foreclosures loom. The process is already forcing many to walk away, so let's figure out how to help both sides.

Unfortunately we didn't get a principal reduction mandate yesterday with the revamped HAMP. Instead, the government introduced new rules on documentation and guidance on converting temporary modifications into permanent ones. The changes seem mostly good, except one strange loop hole thing that my housing and mortgage maven pointed out to me yesterday on page 10 of the directive (the bold part is mine):

Supplemental Directive 09-01 requires servicers to reevaluate a loan using the NPV model if the borrower's documented income differs from the stated income used in the borrower's initial qualifying NPV test. With respect to trial period plans with effective dates prior to June 1, 2010, servicers may elect, in accordance with existing servicing agreements and investor guidelines, to offer the borrower a permanent HAMP modification without performing an additional NPV evaluation based on the borrower's verified income documentation. If the servicer elects not to perform an additional NPV evaluation in this situation, the servicer should enter the trial period values for NPV Date and NPV Value when reporting the official loan set up file to the Treasury system of record.

In other words, you have to perform an updated net present value (NPV) evaluation, except when you don't!

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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.

Add a Comment
by Bofalawsuit April 21, 2010 12:24 AM EDT
WHERE IS MY LOAN MODIFICATION BANK OF AMERICA?

If it walks like a piggy, talks like a piggy, by golly it?s a PIGGY!

BofA and it?s CEO Brian Moynihan reminds me of that song by John Lennon and George Harrison titled "Piggies" I invite you to listen to this song on youtube and see if it appropriately fits.

http://www.youtube.com/watch?v=NTmeHM-Hojg&feature=related

Have you seen the little piggies
Crawling in the dirt
And for all the little piggies
Life is getting worse
Always having dirt to play around in.

Have you seen the bigger piggies
In their starched white shirts
You will find the bigger piggies
Stirring up the dirt
Always have clean shirts to play around in.

In their ties with all their backing
They don't care what goes on around
In their eyes there's something lacking
What they need's a damn good whacking.

Everywhere there's lots of piggies
Living piggy lives
You can see them out for dinner
With their piggy wives
Clutching forks and knives to eat their bacon.

John Wright vs. Bank of America Lawsuit at:
http://news.yahoo.com/s/prweb/20100323/bs_prweb/prweb3766544_1

When I filed my lawsuit against Bank of America, myself and United Law Group thought of the many others out there in the same situation. It was then that we decided to educate the public on what these piggy banks are doing, as well as unite us all together as one voice. Please help me turn this David vs. Goliath modification process, into a Goliath vs. Goliath.

Please stand with me and United Law Group and send an email to Bank of America that states that we will no longer tolerate their potentially illegal, fraudulent, irregular and abusive business methods.

Divided we might have fell America, but united we must stand!

Please send your email directly to Bank of America and include the following:

1. Your name

2. Your complaint concerning your experience with Bank of America.

3. Please end your email ?I support John Wright vs. BofA Lawsuit!?

4. Please send a copy of your email to johns-wright@hotmail.com

5. Please send your email to both BofA link below and the CEO email

BofA Linked Email:
https://www3.bankofamerica.com/contact/?lob=general&contact_returnto=&state=VA

CEO Brian Moynihan:
brian.t.moynihan@bankofamerica.com
Reply to this comment
by OFEELYA March 30, 2010 5:24 PM EDT
The Home Affordable Program is online and people can calculate their Gross income and I did it and I qualify but Nationstar said they don't calculate that way and when I asked the customer service what method they use to calculate gross income, I was told that underwriters know what it is but they didn't know. So this response sent me on a quest to discover how gross income is calculated for the HAMP program. Therefore, I set off on a hunt to find out what guidelines are used by HAMP to calculate a person's gross income. Although Nationstar told me ?that?s the way we do it here? the kind lady at the IRS assured me that it cannot be arbitrary and guidelines should exist?somewhere. The problem was that my check stub reflects 2 amounts. The amount earned?.grossed and the taxable income which is what IRS uses as my gross. First of all I called the HOPE program which was the phone number on the denial letter to contact if I had questions. They could only refer me to counseling in my area. Not a help!

You won't believe what followed on my journey to find out the guidelines of the Home Affordable Mortgage Program - HAMP program. First I called IRS to find out what the true meaning of gross income is and they told me that is considered all your income however in some situation a modified gross income is used to allow for pensions. However, she told me that I would have to check with the "program" to see how they do it.....again the guidelines for the HAMP program. The lady at IRS told me it would have to be a standard and a policy somewhere. New buzz word for today "escalation" that word was said to me by 3 different government agencies within an hour.

When I called that number it prompted me to an option to leave voice messages for about 10 people so I just went down the line until a gentleman picked up the phone. Guess what he said when I asked about the HAMP office....."Oh the emphasis HAMP office that doesn't exist!" I said "you mean there is no office." He said people keep looking for it but it just doesn't exist.....no one knows where it is. He said he has a co-worker that had a phone number of a guy I could call supposedly at HAMP because he had the same experience with another person but his co-worker would be out of the office for 3 weeks. The plot thickened. Then I asked what office in DC was the headquarters for HAMP he told me there is no office per se however it was the Office of Financial Stability that are the overseer and he gave me that phone number.

Ready for the kicker---> When I called the Office of Financial Stability and asked to be connected to the HAMP office I was placed on hold (seemed like forever) and then transferred to the HOPE office again. There is no HAMP Agency however billions of dollars are being funneled into this program. Apparently not to help anyway because it is now layered with customer servicing private industry that are making gazillions and then on down to the local counseling agencies making gazillion dollars and the help that is supposed to be given to the people is non existent.

I waited on the line and this time when I talked to a HOPE person I told them that I just discovered there is no HAMP office and that if this is the level of help we are getting for over $70 billion dollars (counseling) then I think that the public should know and that I'm sure I'm not the only one looking for HAMP! It was a lady who answered the phone and then she scrambles around put me on hold and said she was escalating me up to someone else to talk to. I got this guy named Nick and I same the same thing to him....."So you mean this organization (HAMP) doesn't actually exist? He began spouting about this is a program that President Obama (blaming him) funded to help.....I was like stop it! "Do you mean to tell me there is no HAMP office and HOPE is it and all you do is swim in money to tell John and Jane Q Public to find a counselor in your area?" He said yes. Then I began telling him about my problems and he said "well maybe you need to do what the servicer is telling you to do." I asked him.....sign a loan instrument for $148,000 with the interest rate escalating 2% every year until 2017 and being paid in full in 2041 when I am 90 on a house worth about $57,000.....do you think that a good investment and would you listen to that advice? Then I said well maybe the media would be interested to know about this HAMP program at first he said well you have that right and I confirmed that I had that right and then the guy started coming around. He got my loan number and asked me to call him today at 2 pm. I called and his voice mail says he is a financial management company and HOPE. I adjusted my lunch time because he is in Arizona to meet the time change and after all that?..Nick didn?t answer and I haven?t heard from him even after leaving voice messages and phone numbers??no Nick and no HAMP.


Cleveland, OH
Reply to this comment
by mortgage-workout February 16, 2010 6:41 PM EST
We are trying to create a database Mortgage Workout and Mortgage Modification specialists (service providers) and Mortgage Workout Programs. Please help us gather and review at: <a href="http://www.mortgageworkout.us">http://www.mortgageworkout.us</a>
Reply to this comment
by pbarnhart01 February 7, 2010 12:13 AM EST
Finally, a Florida attorney is collecting information on fraudulent foreclosures and victims! The government obviously is not going to bring these criminals to justice, so we need to do it ourselves. Victims need to go to http://www.fraudforeclosure.com and tell their story!
Reply to this comment
by rsco February 1, 2010 7:21 AM EST
The only thing that is going to turn around this mess is for the banks to modify at the market value not the loan value. To modify an existing loan for loan value is creating a foreclosure in waiting. If the loan is modified at loan value and the owner decides resale in 5 years they will probably have to bring a huge check to the closing. Most people will not be able to do that. Since the government help create this mess then they should give the banks a tax credit to offset the losses incurred for writing down the mortgage.
Reply to this comment
by mimi5952 January 30, 2010 6:45 PM EST
I don't blame the bankers for all these bad loans I blame Congress and the Senate for changing the laws. I don't blame the bankers for not doing these modifications. Why should banks take a bigger lost than just selling the property to a more qualified buyer. Government forced them to do these bad loans.
Reply to this comment
by sjc_1 January 29, 2010 2:07 PM EST
Banks do NOT want to cooperate with mortgage modifications. They lose money right up front and they would rather take their chances with brokers selling the property soon. This is why they sold stock to the government instead of bad loans.
Reply to this comment
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