Speech By Asst. Treasury Sec. Barr on President’s Plan to Strengthen Housing Sector… with commentary by Mandelman

Michael Barr is undoubtedly a very smart guy.  On May 21, 2009, he was confirmed by the United States Senate to serve as the Treasury Department’s Assistant Secretary for Financial Institutions, which means he’s the guy responsible for developing policy on legislative and regulatory issues that affect financial institutions.  To be honest, I expected to find out that he had spent the last eight years at Goldman Sachs, but I was wrong.

Barr’s predominantly an academic.  He taught at the University of Michigan Law School, was a Senior Fellow at the Center for American Progress and at the Brookings Institute, and it looks like he’s co-written a couple of books with titles that aren’t likely to be picked for their movie rights, if you know what I mean.

He was also Treasury Secretary Robert Rubin’s Special Assistant, Deputy Assistant Secretary of the Treasury, Special Advisor to President Clinton, Special Advisor at the State Department, Law Clerk to Justice Souter… this is one special guy, yes he is.  He got his law degree at Yale, but I won’t hold that against him, because he was also a Rhode Scholar, and that always sounds so cool.

He’s smart, okay, I get it.  So, what’s happened to Michael?  Here are a few excerpts from a speech he gave in late August.

Today, I want to outline the steps that Treasury and the Administration have taken to strengthen the housing sector, help millions of homeowners and lay the foundation for economic recovery and financial stability.

Go on… apparently these guys think they’ve taken steps.  Let’s give them a chance.

HAMP’s pay-for-success structure aligns the interests of servicers, investors and borrowers in ways that encourage loan modifications that will be both affordable for borrowers over the long term and cost-effective for taxpayers.

Wait… maybe he’s talking about a different HAMP.  Maybe there’s more than one HAMP.  Maybe we’ve only seen the HAMP that doesn’t work and that lenders and servicers lie about regularly and use to abuse borrowers.  Could that be it?  Because the HAMP I’ve been reading about certainly doesn’t align any interests, or am I missing something.  Hang on… I have to go look up the word “align”… be right back…

This Administration has acted quickly and aggressively to confront the economic challenges facing our economy and our housing market.

Come on, Michael.  I know you just threw up in your mouth a little when you delivered that line.  I’m not saying you had any choice in the matter.  I probably would have said the same thing were I in your very erudite Alden lace-ups.  You know as well as I do that, while the Administration has pumped enough cash into the banking system to keep Iceland going for 1,000 years, it would be an exaggeration to say that you guys have confronted anything.  How about you went in quietly through the back door and brought the government’s bottomless checkbook.  And as to housing… well… ‘nuf said.

Within weeks of assuming office, President Obama worked with Congress to enact the largest economic recovery plan since World War II.


That makes total sense, since we’re currently eating the biggest crap sandwich we’ve been forced to eat since the 1930s.

Within a month of taking office, on February 18, we announced the Making Home Affordable (MHA) Program, a critical element of Treasury’s Financial Stability Plan.  This program was broadly designed to stabilize the U.S. housing market and offer assistance to millions of homeowners by reducing mortgage payments and preventing avoidable foreclosures.

It was broadly designed to do that, huh?  Well, thank God it wasn’t designed to “stabilize the U.S. housing market and offer assistance to millions of homeowners, blah, blah, blah.”  It was “broadly designed”.  Because if it had been designed to do that, I would have to say that whomever you guys brought in to do the designing was drunk and you should probably send him back to the Yugo factory where you undoubtedly found him.  But, since you said “broadly designed,” and because I have no idea what that means… I’m going to go with it, because you know… you’re a really smart guy.

A key part of the broad housing plan is the Home Affordable Modification Plan – a comprehensive $75 billion program to lower monthly mortgage payments for at risk borrowers, providing modifications on a scale never previously attempted.

See, I’m thinking that we haven’t seen the plan you’re talking about.  We’ve only seen the plan that the President talked about on television last February.  Where’s the FAQs on the “Broad Housing Plan”?  There must be a Website, right?  Should I check: www.governmentbroadhousingplan.com?

There are clear signs that the incentives offered under the Home Affordable Modification Program are having a substantial effect.  Over forty-five servicers have signed up for the Home Affordable Modification Program, including the five largest.  Between loans covered by these servicers and loans owned or guaranteed by the GSEs, more than 85% of loans in the country are now covered by the program.  These participating servicers have extended offers on over 570,000 trial modifications.  Over 360,000 trial modifications are already underway.

Okay, now here’s the plan I know something about.  Covering the loans is good, don’t get me wrong, but I’m worried that you guys may be putting too much emphasis on what it covers and not enough on what it actually modifies.  And if by “extended offers,” you mean they’ve mailed some letters, well… okay, if that’s what were calling it now, then fine.

I might have said they’ve sent out over 570,000 direct mail packages, but you know a lot more than I do about what stuff should be called, so I’ll go with your terminology.  Oh, and one more thing, you do realize that a lot of those trial modifications end up getting foreclosed on, right?  And that there are going to be 3.6 million foreclosures this calendar year, give or take?  I’m sure you’re quite aware, I just thought I’d mention… I’m sorry… go on with your speech…

The HAMP program establishes detailed guidelines for the industry to use in making loan modifications with the goal of encouraging the mortgage industry to adopt a sustainably affordable standard, both within and outside of the HAMP program.

In the past, a lack of agreed-upon guidelines has limited the number of loan modifications that are completed, even in instances where modifications would have been beneficial to all involved.  HAMP should help increase the number of modifications industry-wide by providing standardized modification guidance to servicers and lenders. 

That will be good for borrowers, good for lenders, good for mortgage lending standards and good for improved stability of our overall financial system.


Um… Michael.  We can talk about this later, but I don’t think this part is working.  And see… I’m not at all sure that it was “a lack of agreed-upon guidelines that limited the number of loan modifications” that were completed in the past.  I’m pretty sure that that the financial institutions that you regulate and develop policy for are pulling your leg there, Mike… can I call you Mike, or is it Michael.  Mr. Assistant Secretary?  Oh, okay, no problem…

See, those financial institutions don’t give a damn about guidelines, agreed-upon or otherwise.  They lie all the time, Mikey… I mean Mr. Assistant Secretary.  And I wouldn’t even mention it, but for future reference, there’s actually no such word as “sustainably,” so maybe make sure you’ve got the box checked on your spell checker that says “Correct As You Type”.  I’m sure you probably knew that.  Just trying to be helpful, Mr. Assistant Secretary.

Under HAMP’s loan modification guidelines, mortgage servicers are prevented from “cherry-picking” which loans to modify in a manner that might deny assistance to borrowers at greatest risk of foreclosure.  Participating servicers are required to service all loans in their portfolio according to HAMP guidelines, unless explicitly prohibited by pooling and servicing agreements, and further must make reasonable efforts to obtain waivers of any limits on participation. 

Participating servicers are also required to evaluate every eligible loan using a standard net present value (NPV) test.  The NPV test compares the net present value of cash flows with modification and without modification.  If the test is positive, the servicer must modify the loan.  



Well… now don’t shoot the messenger here, sir, but like none of this is happening, sir… none of it… ever… not happening.  Maybe you’re talking about the “Broad Housing Plan” again.  No?  Well, then for sure… something is amiss because this stuff is not going on anywhere.  I think those financial institutions are perhaps pulling your leg again, sir.  They’re quite the jokesters, you know.  Real cut-ups.

And while we’re on this point… the whole NPV thing.  You know… the one that’s supposed to be transparent and disclosed all the time… yeah, well it’s never either… transparent or disclosed.  And as I understand it, there are quite a few people that have contacted Treasury to ask why that might be, sir.  And Treasury has told them they’re not telling… that’s right, sir.

Oh, and one more thing… it might be best to cut back on your use of words like “must” and “required” when you’re talking about lenders and servicers.  You see, sir… they obviously don’t like it when you use those words and I’m afraid they’re taking it out on the borrowers.  When you say “must” I’m convinced that they never do it just to have some fun at your expense.

At this early date, HAMP has already been more successful than any previous similar program in modifying mortgages for at risk borrowers to sustainably affordable levels, and helping to avoid preventable foreclosures.  


Now, I might have gone with a different point here, Mr. Ass Sec.  Is it okay to abbreviate your title like that, sir.  It’s just that it’s so long.  Anyway, you see the last program was called Hope-for-Homeowners, and it was President Bush’s baby, and well… you see sir, it had a budget of $320 billion, but for whatever reason, it had only modified, um… let’s see… minus four, carry the three… 1 mortgage after like six months.  That’s right, sir, one mortgage.

Of course, the good news was that President Obama was able to use that same money as the foundation of his plan, but the thing is… I’d consider avoiding any comparisons, especially those where you say that yours is more successful than any past plan, well… because it’s funny, that’s why.  And you don’t look like the kind of guy that wants laughs during your speeches.  And you keep using that non word “sustainably”.

We are asking that all servicers move rapidly to expand servicing capacity and improve the execution quality of loan modifications.  This will require that servicers add more staff than previously planned, expand call center capacities, provide a process for borrowers to escalate servicer performance and decisions, bolster training of representatives, enhance on-line offerings, and send additional mailings to potentially eligible borrowers.


Just thinking out loud here, but perhaps the whole “asking” thing isn’t working out the way you guys obviously had hoped it would.  It’s not your fault, sir.  I’m sure you would have been much more responsive were you in their shoes, but M.B… maybe instead of “asking,” perhaps next time try “asking nicely,” or maybe even “asking politely”.  Try something new, that’s all I’m saying.  And as far as a “process for borrowers to escalate servicer performance,” you see… I’m not sure anyone has the foggiest idea what you’re talking about, sir.

And one more quicklittle thing… if I were you, I’d lay off the “enhanced on-line offerings” and the sending of the “additional mailings to potentially eligible borrowers”.  It’s the whole laughing thing again, sir… probably best to just skip that part next time.

We have made significant progress in reaching implementation objectives outlined during our July 28 meeting. 

We are establishing denial codes that will require servicers to report the reason for modification denials, both to Treasury and to borrowers.  This will enhance Treasury’s ability to evaluate the program and consider options for further program enhancement.  We expect denial codes to become operational on Oct. 1.

We are working with servicers and Fannie Mae to streamline application documents and develop web tools, which can serve as a centralized point for modification applications, and for borrowers to check the status of their applications. 

Three, we are taking additional steps to expedite implementation, including greater disclosure of the NPV evaluation.

You know Mitch, I’m having a little problem with you leading off with the whole “we’ve developed denial codes” bit.  I know… it’s the servicers’ favorite part, but again… personally, since they’ve been pretty much denying loan modifications on a full time basis for a couple of years now… and all that without a denial code… so developing those codes probably could have been sidelined for a bit.  And back to the whole laughing thing… you see… it was the very first line when you said “made significant progress towards reaching implementation objectives”… see that even made you laugh when I said it back to you.  Yes, sir… you are funny, sir… missed your calling perhaps?

As Secretary Geithner has noted, we are committed to transparency and better communication in all of Treasury’s programs.  Accordingly, Treasury is focused on continued transparency and servicer accountability to maximize the effectiveness of HAMP.   Specifically, we have taken three additional concrete steps in conjunction with the July 28 servicer liaison meeting to enhance transparency in the program: 

On August 4, we began publicly reporting servicer-specific results on a monthly basis.   The second public report was published this morning, September 9.  These reports provide a transparent and public accounting of individual servicer performance by detailing the number of trial modification offers extended, the number of trial modifications underway, the number of official modifications offered and the long terms success of modifications.   


This must pertain to the Broad Housing Program that I haven’t seen.  And by the way, when you guys say “transparent,” do you really mean to say “opaque”?  Transparent’s the one you can see through, and opaque is the one you can’t.  No problem, sir, I’ll write it down and leave it with your aide.

Opaque?  Now you see, that’s where some of the confusion is coming from, right there.  Everyone thought you were saying transparent and really you meant to say opaque… that’s a good one, sir.  Well, misunderstandings do happen, sir, that’s right, sir.

Okay, sir… I’m going to go ahead and take off now, sir.  Thank you so much for letting me attend your speech on the housing crisis and how you guys in the Obama Administration have everything under control.  I’m going to sleep much better tonight, sir… Mickie… Michael… Mitch…Mr. Ass Sec.  I’ll have the whole title thing down by next time, I promise…

Oy vey.


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