With homeowners across the nation struggling as the subprime mortgage mess grew, the Obama administration pressed mortgage lenders to allow borrowers to modify their loans, in order to help them keep up payments and prevent their homes from ending up foreclosed and on the auction block.
President Obama said he hoped the Home Affordable Modification Program (HAMP) would aid borrowers and lenders in rewriting 75 percent of failing or threatened mortgages.
So far, reports McClatchy Newspapers, more than 759,000 trial loan modifications have been initiated, but just over 31,000 — four percent — have been converted to permanent new loans.
McClatchy's Kevin G. Hall also writes that lenders who participate in HAMP haven't provided the government with information about who is rejected or why.
What is worse is the fine print: Homeowners who sign up for the program (which lowers monthly mortgage payments for three months while lenders decide on making permanent rate adjustments) waive important notification rights — which allows banks to initiate auction proceedings without any warning.
Hall writes of Evangelina Flores of Fontana, Calif., who completed a three-month trial modification, making her agreed-upon monthly payments, before her mortgage company told her her loan would be replaced with a fixed-rate mortgage. She wired her payment.
But the next day, there was a knock on her door: it was representatives of her house's new owners, a recently-created company named Shark Investments, serving her with an eviction notice. They told her she had to be out within three days.
Shark Investments bought her home for $78,000 (about three-quarters of its current fair-market value) at an auction Flores didn't even know about.
"They arrived real demanding, saying that they were the owners," recalled Flores, 58, a self-employed child care worker. "I have high blood pressure, and I felt awful."
The eviction notice was obtained free from a Web site, fastevictionservice.com, run by attorney John Bouzane. While his office claimed not to be involved in Flores' eviction, when asked why their office provides signed documents for free on the Internet, a woman who did not identify herself said, "We hope to get the eviction business."
"I had my dream, but now I feel awful," said Flores, who remains in the house while her lawyers fight her eviction. "I still can't believe it."
For more on the distress being heaped upon distressed homeowners in HAMP, read the full McClatchy article.