Why Can’t We Answer the Question About HAMP That Could Save Taxpayers Tens of Billions?

The latest data on the Home Affordable Modification Program, which was published by U.S. Treasury as of March 31, 2010, in the HAMP Report, shows that 50% of loan modifications re-default after one year.  BUT… that same report also showed that when loan modifications result in homeowners saving 20% or more per month, THE PERCENTAGE OF RE-DEFAULTS DROPS IN HALF.

Making Home Affordable was slated to be roughly a $380 billion federal program.  So… if 50% of loan modifications re-default in a year, we are clearly spending a great deal of money, tens of billions of taxpayer dollars, unnecessarily.  But… we waste half as much when the modified payment terms result in a monthly savings to the homeowner of at least 20%.

So, the obvious question is…

Does hiring a lawyer, or other third party, to help you get your loan modified lead to a homeowner receiving a modification that saves at least 20% a month, more often than going it alone?

Not only could the answer to this question easily save taxpayers tens of billions in failed loan modifications, but by virtue of a re-default rate reduced by half, the savings to our society in terms of foreclosures prevented would be perhaps incalculable, but unquestionably astronomical.

Luckily, this should not be a difficult question to answer in the least, in fact the Treasury department obviously has the data we need already, because they know that the re-default rate is reduced by half when monthly savings are 20% or more?  All we have to do is request that lenders and servicers provide the following data:

Of homeowners granted loan modifications with monthly savings of 20% or more, how many were represented by attorneys, or other third parties?

You see, when an attorney represents a homeowner applying for a loan modification, lenders or servicers are meticulous about requiring a signed authorization that allows the financial institution to discuss matters with that borrower’s legal counsel.  So, lenders and servicers know precisely which homeowners hired lawyers to represent them, and which did not.

If the data were to show that, when a homeowner hires a lawyer when attempting to obtain a loan modification, the homeowner receives a modification that saves 20% or more each month… say 70%, 80% or even 90% of the time… well, then that would show the relative efficacy of such representation.  We could immediately begin moving towards saving tens of billions of taxpayer dollars by arming homeowners with this important fact.

The FTC is, at this moment, considering the adoption of a rule related to loan modifications that could all but remove private practice attorneys from the loan modification landscape by requiring them to work for up to a year or more without being compensated, sending their bill for services rendered only after the modification has been granted by the lender.

How is it possible that we don’t all want to know if hiring an attorney significantly increases the likelihood that the homeowner will save 20% or more per month, thus saving the taxpayers tens of billions by creating a sustainable modification and a re-default rate that’s reduced by half?

If the government is right in their position that homeowners don’t benefit from hiring attorneys, or other third parties to obtain loan modifications, then the data will show that to be the case.  If, however, being represented by a lawyer does in fact significantly increase your chances of getting your loan modified such that you save 20% or more each month, then the data will establish that as well, right?

Why guess, when we can settle this in a matter of days, and potentially save tens of billions for taxpayers at a time when we could really use the savings.

So, here’s the pivotal question:

Are you better off, according to the data, with a lawyer representing you when attempting to get your loan modified?

In this country, we measure the polar ice caps in centimeters, but as to anything having to do with hiring an attorney to help obtain a loan modification and it’s been… I’m sorry, no… we couldn’t possibly… we’re far too busy measuring everything else that moves on the planet, and we simply cannot be expected to measure one more thing.

Why can’t we know the answer to this one simple question, when that answer has the potential to save untold billions in taxpayer dollars?  Because I want to state clearly and unequivocally that having personally conducted interviews with well over a thousand homeowners, and over 100 attorneys, over the last 18 months, I forecast the following:

The data will show that being represented by an attorney or other third party significantly increases the likelihood of obtaining a modification that saves 20% or more per month, and therefore re-defaults at half the program’s current re-default rate.

In fact, I would not be the least bit surprised to find that, of homeowners who received modifications that saved them 20% a month or more, the percentage represented by an attorney or other third party is above 80%.  And that, of those whose modification saved them less than 20% monthly, 80% or more handled the process on their own.

But, as I said, why guess when it’s so easy to find out for sure.

Banks know the answer to this pivotal question; they know who is represented by a lawyer or other third party because they require a signed authorization to speak with someone other than the borrower.  And Treasury already knows how many loan modifications resulted in monthly savings of 20% or more, because they know that reaching that threshold of monthly savings results in a re-default rate reduced by half.

I can’t be the only person in America to have considered this question, can I?  Wouldn’t the answer, one way or the other, be important, if for no other reason than to settle the issue once and for all in order to move forward with certainty as to the best path?  Then why hasn’t it been asked and answered, now three years into the crisis?

I’m afraid I may know the answer.  If I’m right in saying that I’m not the first to consider looking at the data related to the amount of monthly savings, bumped up against whether a homeowner is represented by an attorney, then I’m also right in my forecast that a very high percentage of those who’ve saved at least 20% monthly were in fact represented by attorneys and other third parties.

Because if Treasury looked at this issue before and found the opposite to be true, they would have rushed to publish their findings in order to reinforce their message to homeowners, which continues to be: “Don’t hire a lawyer, call your bank directly… and besides they’re all scammers if they charge a fee.”

Would anyone care to wager on how this is going to go?

I don’t know why we don’t already know the answer to this question, or why it would be that we wouldn’t be able to find out… except that the banks don’t want us to know because the plain truth is that they don’t want homeowners to be represented by anyone when at risk of losing their homes.  And if that’s what is established as a result of such an inquiry, then I would leave it to the American people to decide whether or not that’s an acceptable position for the banks to take.

However, for an elected politician or government bureaucrat to not spend the small amount of time it should take to find out the answer to such a question… one that could so clearly result in saving tens of billions in taxpayer dollars, especially during crises such that we are facing today… well, I would find that refusal to border on being treasonous, and at the very least irresponsible, unresponsive and seemingly corrupt.

In fact, I’m absolutely positive that MY own elected congressional representative is going to be very interested in obtaining the answer to this simple and unquestionably important question, if for no other reason than that this is an election year.  And instead of being far away in the U.S. House of Representatives, he will be home in MY district… in MY hometown… at MY local library, perhaps.

And I will be there too, wherever he is… asking him why he has not been able to obtain the answer to such a simple question that could save the taxpayers tens of billions of dollars, to say nothing of the foreclosures prevented, should that turn out to be the case.

I’m positive he will be very interested in doing everything he can to find out the answer to this question, because if he isn’t… I will do everything possible to blog his corrupt ass directly out of office… on behalf of distressed homeowners from sea to shining sea.

What do you think?

How about if we all write letters to our elected representatives demanding to know the answer to this question, because the answer has the very definite potential to save many billions in unnecessary taxpayer funded expenditures associated with the current program, which is saving homes in one year, only to have simultaneously created next year’s foreclosures 50% of the time?

Oh, wait a second here… I know why we can’t ask the banks to tell us this information…

Actually… check that… NO I DON’T.

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