American homeowners in all 50 states should take note that it was only last November when a group of homeowners in Hawaii, with the support of Faith Action for Community Assets (“FACE”), whose members are predominately churches of various denomination and non-profit community groups, embarked on a grass roots effort to bring meaningful change to the process homeowners were being forced to endure when faced with the prospect of losing their homes to foreclosure.

The group also partnered with Hawaiian Community Assets, a non-profit group that provides housing counselors and whose wonderful relationships with families made a huge difference throughout the campaign, according to those involved.

The dialog about the foreclosure crisis began when FACE member ministers began talking openly about there being no dignity for the families trying to save their homes from foreclosure by the mainland banks.  That’s what motivated FACE to get involved in the first place.

The idea that some uncaring and enigmatic banking institution on the mainland would treat a homeowner at risk of foreclosure as the ministers were describing in their reports was intolerable to those involved in the group.

With the next legislative session scheduled to begin in January of 2011, FACE Policy Director, Kim Harman and other key members of the team, wasted no time finding out as much as possible about the foreclosure process, in order to begin drafting a proposed bill that would be strong enough to be effective.

The end result of their grass roots initiative is found in: Senate Bill 651

Harman explains:

“For example, our people went to the library each day in order to read all of the non-judicial foreclosure notices, and they compiled data on which banks were foreclosing on the most homes, among other things.”

Armed with the increasing breadth and depth of knowledge they were gaining through their research efforts, it quickly became clear that a cornerstone of the legislation the group would propose would be a mandatory mediation program.

Nevada State Senator-Ret. Barbara Buckley, who had been the driving force behind the creation and implementation of that state’s foreclosure mediation program, also became a supporter the group’s efforts.   Harman says:

“She (Buckley) even took the time to get on the phone with legislators in Hawaii, which helped give the concept legitimacy.

Rev. Robert Nakata, a retired state senator from Hawaii, and an individual said to have more energy than most twenty year-olds, signed on to help with the group’s lobbying efforts.  (The only way I can think to describe Bob Nakata, is to say that I spoke with him a couple of times over this past weekend and I hope to know him for the rest of my life.)

Rep. Bob Herkes sponsored the House version of the bill, and Sen. Roz Baker championed the bill in the state senate.  Sen. Baker was responsible for the section of the bill that requires the servicer, at least 14 days prior to foreclosure, to present among other things, “a copy of the promissory note… including any endorsements, allonges, amendments, or riders to the note evidencing the mortgage debt.”

Policy Director Kim Harman had glowing things to say about everyone involved in the grass roots initiative, but she said the homeowners that came out and supported the initiative really made the difference.

“We have well over a hundred families that very actively support the bill.   I mean people that came out for the hearings and press conferences, and carried signs during demonstrations,” Harman said.

Ding dong… Hawaii Calling

As part of the grass roots effort, the group specifically confronted Bank of America on two occasions… once bringing groups of homeowners to the bank’s offices in Honolulu and once on Maui.  In addition, they confronted Wells Fargo in Honolulu on two occasions, and once they paid a visit to Chase.  “At several of our demonstrations, we even had people playing the ukulele,” Harman says.

Harman believes that Hawaii’s legislators wanted to do the right thing, but in many cases were so busy with other priorities that it was difficult to develop a widespread understanding of what would constitute a really strong bill, and why such strength in a foreclosure prevention bill was unquestionably what was needed.

“We studied what wasn’t working in other states… we didn’t see any point to passing a bill that wouldn’t actually change anything for Hawaii’s homeowners,” Harman explains.

The state of the economy also made the establishment of a new program a harder sell, but Harman’s group is certain that a strong and effective foreclosure prevention bill will lead to cost savings for the state of Hawaii in the future.

She also pointed out that the legislative process itself was hard to deal with for many homeowners that wanted to support the bill, saying:

“Notices of hearings often don’t allow much time to notify members of the group, and of course not everybody can just stop working or drop whatever they’re doing to come support the bill with short notice.  But, we were really blessed to have well over 100 families truly committed to this bill… and they continue to go above and beyond to support this effort.”

The Bill’s Current Status…

Hawaii’s Legislature Poised to Passes Nation’s Strongest Foreclosure Protection Bill

On April 29^th, 2011… at 5:18 PM… what appears to be the strongest foreclosure prevention bill in the nation bill was passed by a vote of the Hawaiian legislature’s Conference Committee.

The floor vote of the House and Senate is scheduled for this coming Tuesday morning, May 3^rd, but could potentially be postponed for as late as next Thursday, which is the end of the legislative session.

Harman says she has been assured by all of the legislators with whom she has spoken that it will pass the floor vote, and from there it’s straight to the governor’s desk where it will either be signed or, perish the thought, vetoed.  The governor is expected to sign the bill between mid-June and early July.

“Both the governor and members of his staff have been great supporters of the mediation process contained in the bill,” explains Harman.

Ever-Present Risk, Brought to You by the Banking Lobby…

The banking industry doesn’t like this bill… no, wait… that’s not the right way to put that.  The banking industry hates this bill with the white-hot intensity of a thousand suns… there, that’s a little better.

Why?  Well, ask your friendly neighborhood banker and he or she will likely start talking about how the bill’s passage will lead to the people of Hawaii paying higher interest rates in the future.  Such a claim, however, is pure horse pucky.

First of all, bankers LOVE reasons to charge higher interest rates, it might even be considered their single favorite sport, so if this bill were going to cause higher rates in the future, one would have to think that the bankers would be for it, not against it.

Secondly, interest rates are not picked out of thin air by bankers and then offered to the rest of us.  That’s not how rates are set, banker-people, and you know that.  What if Chase decided to increase interest rates because they wanted to punish Hawaii for passing this bill?  What do you suppose the banks that compete with Chase would do with their own rates?

Not that our bankers are doing a whole lot of lending right now anyway… and they won’t be doing much for quite some time… but let’s say it’s 10 years from now and Chase wants to raise rates.  What will Chase’s competitors do when Chase’s loans become more expensive?  They’ll kick Chase’s butt, that’s what they’ll do.  And Chase will bring rates directly back to where the market had set them … because that’s a large part of how rates are determined.

And third, the bankers make it sound as if this bill creates some new laws… but it really doesn’t.  Banks are already supposed to have the promissory note, assignment, allonge, and whatever else is required by state law, before they foreclose… they’re supposed to make sure they own the loan and that the Chain of Title is intact… that is also already the law.  The new bill just says you just have to show these items to someone before you foreclose.

The cornerstone of the bill is the creation of the state’s mandatory mediation program, and bankers should remember that other states have mandatory mediation too, but I don’t see those states swamped by higher borrowing costs.  So, maybe you meant something else… like, you had a different lie in mind.

The real reason the bankers don’t like this bill is because it represents change, quality control… fairness, and accountability… and the bankers position is basically that they want to be able to do whatever they want, whenever they want as related to a homeowner behind on payments.  Period.  The banker’s position seems to be that nothing should interfere with foreclosing on someone’s home and that’s that.

Regardless any of these common sense points… none of that has stopped the banking lobby from giving it that old banker try to kill SB 651.  Lobbyists have been swarming all over Hawaii chatting up anyone who’ll listen as to all the reasons why this bill is a bad idea.

Memo to those working on the passage of SB 651…

It’s not over until the ink used by the governor for signature is dry… and in fact the next few days are critical… remember what happened to the Arizona bill on the way to the Arizona House of Representatives just a couple of weeks ago?

So, for my two cents… I’d be getting on those phones, asking others to call their representatives to express their support for the bill… and keeping an eye on the banking industry lobbyists… because as we all saw in Arizona recently, they are capable of making a bill that’s already passed the state senate 28-2… completely disappear over a weekend.

FACE’s Efforts to Prevent Corruption…

While I was speaking with Kim Harman yesterday, she started explaining one of the key tactics her group used in an effort to stop members of Hawaii’s legislature from turning a blind eye to corruption by banking industry lobbyists…

She told me that they had used Mandelman Matters articles.

Harman told me that she would read articles I had written and posted on Mandelman Matters that documented what had recently transpired in Arizona with the disappearing S.B. 1259, to Rev. Bob Nakata, and as a retired state senator, he then went to both the House and the Senate to make sure that the leadership saw and was current on what was happening in Arizona as it unfolded… asking for vigilance in making sure that such corruption did not visit Hawaii.

I have to tell you that as I spoke with FACE’s Policy Director, Kim Harman, and she told me how the group had distributed and used my articles in conjunction with their lobbying effort and grass roots movement, I had tears in my eyes as she spoke and I am honored to have been able to help.

Maui homeowner, Marcy Koltun-Crilley, another key member of the group…

Marcy is a reader of mine, who is originally a New Yorker who came to live on Maui just shy of 20 years ago… and after experiencing the lies being told to homeowners by Bank of America first hand, she became resolute in her desire to help fix what was obviously broken.

Marcy wrote to me about what was going on in Hawaii, and because I love Hawaii… I jumped at the chance  help.  I wrote an article about how a group of homeowners, accompanied by FACE leadership, had visited Bank of America without an appointment.  Homeowners Pay Unexpected Visit to Bank of America in Honolulu

I wrote it to say something very seriously and very clearly… although I will admit… it has the very definite potential to make you laugh if you know anything about the people of Hawaii.  According to Kim, the article had a very positive impact on many in the group working towards the passing of the bill, and I could not have been happier to know that.

We who live in the contiguous 49 states of the United States of America have a lot to learn from the people of the Great State of Hawaii.

My prayers are with them during these next few days… I hope yours are as well.  If this bill passes as expected, we have reached the turning point in the foreclosure crisis, and I’ll be writing about we need to do next.

Mandelman out.

P.S.  Coincidentally , the State of Arkansas has just passed a foreclosure prevention bill that, although it does not go quite as far as Hawaii proposal, is still a bill that will prove effective to some significant degree.   Here’s a link to the

Arkansas Foreclosure Bill

This article originally ran in December 0f 2009, but I’m reposting it because maybe it will be read by someone who will find it even the least bit interesting.

Training personnel to properly interact with those losing homes to foreclosure is not only the right thing to do… it’s also likely to improve a mortgage servicer’s bottom-line.

Losing a home to foreclosure is something most people never forget. It’s an event likely to stay with you for the rest of your life. It’s certainly not something most people think will happen to them… until it does. And it can happen to anyone at any stage of life, young, old, rich, poor… all can find themselves at risk. As the off-color colloquialism says about life… stuff happens. Although many people might not readily agree, foreclosures are statistically a “there-but-for-the-grace-of-God-go-I” type of situation.

Of course, there are times when more stuff happens to more people, and today is obviously an example of such times. The economic conditions that we’re experiencing today are causing more foreclosures than at any time since the 1930s. When housing prices began to collapse a couple of years back, no one could have seen just how far things would go, and how difficult it would be to bring our economy back to life, as we’ve known it.

One of the causalities of our accelerating economic downturn has been a shared understanding of its cause. Some blame our politicians, some blame Wall Street’s bankers, some blame the Federal Reserve, and we’ve all heard that it was the sub-prime borrowers themselves that are the root cause of our recession.

Belief in a Just World

As human beings, we need to understand the causes behind events that negatively impact our world in order to feel safe. When we don’t understand how or why something happened, when something appears

to have been a truly random occurrence, it frightens us terribly because we can’t plan to protect ourselves from such an event.

Melvin Lerner is a prominent social psychologist. In his 1980 book, “The Belief in a Just World: A Fundamental Delusion,” he argued that people want to believe in the inherent justice of the economic system in which they live, and want to believe that people who are suffering are responsible for their own situations. He conducted a series of experiments and provided empirical evidence showing that after an initial feeling of sympathy, people tend to develop negative views toward others who are suffering. And that’s the type of negative tendency that seems to be in play today.

So, perhaps it shouldn’t be surprising that instead of having sympathy for homeowners that are losing their homes to foreclosure, many people are blaming the homeowners themselves for their predicaments. It’s just an example of the general tendency that was documented by Melvin Lerner and other social psychologists many years ago.

The Sanctity of Contracts

The other factor that comes into play involves the phrase: “sanctity of contracts.” We live in a nation with a capitalist economy that depends on the sanctity of contracts. Our founding fathers put the contract clause into the U.S. Constitution to make clear that people need to live up to the documents they sign. Article I, Section 10 of the U.S. Constitution states: “No state shall pass any law impairing the obligation of contracts.”

So, people have the tendency to view those losing homes to foreclosure as not living up to the contracts they’ve signed. They bit off more than they could chew, is a phrase often heard by those who lack sympathy for borrowers in foreclosure.

How do these factors manifest themselves in human terms? To understand, picture a line of moving trucks extending for hundreds of miles, taking the furniture of countless families to storage lockers. Picture the schoolchildren saying goodbye to their classmates, leaving the comfort and security of their own bedrooms. Picture the parents sitting up late at night looking through bills trying to figure out how they can save their home, or resigning themselves to the fact that they can’t make it. Picture the arguments, the crying, feelings of loss, of failure… picture the moment when all hope is lost.

Picture the day they must leave their home, getting in the car, pulling away from their home, the ones that turn to look back, the ones that force themselves not to look. The radios that aren’t turned on because no one wants to hear music at a time like that. These people you’re picturing aren’t going on vacation, they are being abruptly moved to the other side of town. They won’t have their own yard to play in. They won’t have their patio to relax on as they watch their children run and play. They’re losing their most prized possession… their home.

Yet, it’s also easy to take a stern view of this spectacle. The arguments go something like this: Foreclosure is not the end of the world. There are valuable lessons to be learned from such a life experience. They got themselves into this mess, now they have to pay the price for their own irresponsible actions.

The Price Paid by Children

Some of the hardest-hit victims of foreclosures are children. According to the Center for Responsible Lending, over the last two years: “Over 1.95 million youth have been affected by foreclosure.”

Brenda Jones Harden, Ph.D., wrote that “children exposed to violent, dangerous, and/or highly unstable environments are more likely to experience developmental difficulties.” Children hear more than most parents think they do, so parents’ stress is transferred to their children more than anyone might think.

Oftentimes, the kids come to feel that they are both a financial and emotional burden. They can begin making sacrifices for their families, wanting less, eating less. Some children are forced to quit teams they’re on, or stop taking music lessons simply because their parents cannot afford them. Even young children start taking on weekend jobs to help pay the family’s bills. Vacations are cancelled, and other normal childhood comforts are left by the wayside.

There are other enduring side effects as well. Being uprooted creates instability in a child’s life. They lose friends, teachers, teammates, social circles, perhaps most importantly, confidence. Being forced to change one’s lifestyle is both difficult and stressful for adults. For children, it can be a nightmare.

Children that are displaced by foreclosures often start bringing home lower grades. They exhibit behavior caused by lowered self-esteem. Behavioral issues often become common problems among kids because they feel that they don’t belong in their new setting. Frequently, families that lose their homes can’t afford to move into a neighborhood of equal socio-economic standing. The children can find themselves in new surroundings that may have more crime, inferior school systems, and fewer activities available for youth.

The Great Depression of the 1930s changed a generation. Those that lived through those difficult times altered the way they lived the rest of their lives. What will our nation experience a decade from now as a result of the millions of foreclosures our country continues to experience in these difficult times? No one can know the answer to that question, but it seems clear that there will be some discernable impact on segments of our population, and today’s children are certain to pay a price.

Exhibiting Anger

The crisis we’re experiencing is morphing as it continues, and we can expect continued changes that lead to further problems in our society as the recession lengthens and broadens in scope. One of the factors that’s changing is that the level of anger among foreclosed homeowners certainly appears to be rising, and lenders and mortgage servicers, faced with managing and marketing the volume of foreclosed properties, are increasingly seeing that anger in very tangible terms.

According to the National Association of Realtors, foreclosed properties already make up 45% of home sales, and the number is climbing. Home prices have continued to decline at record pace in 2009, and there are no signs of them stabilizing. Further price declines will undoubtedly result in even more foreclosures. Homeowners remain unable to refinance out of unaffordable adjustable rate mortgages (“ARMs”), and as the market continues its decline, more homeowners, realizing that they have little hope of building equity, will choose to walk away from their properties.

Homeowners losing homes to foreclosure have started advertising their home’s fixtures on Websites like craigslist.com. Some are stripping their home down to its wiring, destroying its plumbing, tearing out entire kitchens, and even removing roofing tiles. Garage doors are disappearing. Built-in cabinets are gone. Even furnaces and air conditioning units are up for sale by homeowners losing their homes to foreclosure.

Recently, the media reported that one homeowner in Monsey, NY, actually leveled his home with a bulldozer just a few days before the property was scheduled to be sold at auction.

Of course, not all homeowners experience that level of anger, or if they do, choose not to exhibit their anger in such extreme ways. But the trends are disturbing. More and more often homeowners are damaging their homes before being forced out as a result of foreclosure.

Communities Suffering

The large number of foreclosed homes on the market today means hundreds of thousands of homes sitting vacant. And vacant homes are magnets for partying teenagers, drug users, vandalism and crime. Broken windows, smashed plaster, huge holes punched in walls, graffiti on walls throughout the homes, debris, and much worse are becoming more commonplace, as more neighborhoods are seeing more foreclosed homes remain on the market for longer periods of time.

Abandoned homes from the foreclosure crisis have a direct impact on the rise in crime in numerous communities. Even when not the result of homeowners or local teenagers, thieves start breaking into these vacant houses, stripping them of valuables, and the destruction of property and vandalism is making the homes even more difficult to sell. Often, as a result, it requires more money to repair these homes than the homes would sell for in today’s market.

According to a recent study by Dan Immergluck of the Georgia Institute of Technology in Atlanta, and Geoff Smith of the Woodstock Institute in Chicago, “when the foreclosure rate increases one percentage point, neighborhood violent crime rises nearly 2.5 percent.” A study conducted in Austin, Texas last year, found that “blocks with unsecured buildings had 3.2 times as many drug calls to police, 1.8 times as many calls reporting theft, and twice the number of calls reporting violence as blocks without vacant buildings.”

According to a paper on the impact of foreclosures, published by NeighborWorks America:

“When homes are abandoned because of foreclosure, entire communities begin to deteriorate. Garbage, un-mowed lawns, pests and dilapidated roofs and porches are eyesores. The lack of care can change the entire atmosphere in a community. The people who remain may have feelings of loneliness, fear and frustration. To make matters worse, potential buyers find conditions like these unattractive, turning them away and cause the empty homes to remain on the market for months and even years.”

Neighbors Pay Too

According to the Center for Responsible Lending, “Foreclosures cost neighbors $223 billion.” The Center also cites that “Over 44 million homes in the United States will experience property devaluation as a result of foreclosures in their neighborhoods. Forty-two counties in the United States can expect to see their property tax base erode by more than $1 billion. And households located in proximity to lost properties could see the value of their property decrease by $5,000, on average.”

According to a story in USA Today, Vallejo, California, once a vibrant and flourishing place to live, recently had to declare bankruptcy when the collapsing housing market caused their local economy to go over the edge. “Vallejo cut 87 jobs and slashed funding for parks, a library, a senior citizens’ center and other public services, but it wasn’t enough to hold off the bankruptcy filing.”

Unfortunately, social programs and public services are often the first things to be cut from municipal budgets, and seeing the irony in this vicious cycle is unavoidable. The programs that are cut first are often the programs that exist to help those suffering from the crisis that caused the cuts in the first place.

Gimme’ Shelter

Of course, the question we should all be asking, with so many people losing homes, is where is everyone moving to? According to the National Coalition for the Homeless:

• 76% of displaced homeowners and renters are moving in with relatives and friends.
• 54% move to emergency shelters at some point.
• 40% are already ending up on the streets.
• 61% of state and local homeless coalitions say they’ve seen a rise in homelessness since the foreclosure crisis began in 2007.

Of course, many homeowners that lose their homes to foreclosure ultimately become renters, and the increasing demand for rentals has, quite predictably, led to rising prices. So, not only do foreclosure victims have a tough time qualifying for rental housing due to their damaged credit scores, but many are being priced out of the market as well.

And that’s not the end of the rental story. Foreclosures are affecting renters too. Many of the foreclosed properties nationwide are apartment unit buildings. According to the Furman Center: “60% of the 15,000 foreclosure filings in New York City last year were on multi-unit buildings.” And the result is families forced out of their apartments often with very little notice. According to the National Low Income Housing Coalition, “In the State of Nevada alone, 5,000 families have been evicted from their rental homes in the last 18 months.”

The coalition also reports that in suburban Los Angeles, a tent city of more than 200 displaced residents has emerged. Notoriously high rent payments in the LA basin are leaving many with no other option than to pitch a tent or live out of their car in settlements like this. At this settlement there is no electricity, no plumbing and no drainage. There is nowhere to properly store food. Clearly, the lack of plumbing and refrigeration poses serious health risks to the residents of this makeshift community.

Homeowners Attitudes About Banks Worsening

Lenders, mortgage servicers, hedge funds, and various real estate investors are all more than aware of the crisis and its ramifications. Yet, distressed homeowners continue to report their frustration and anger over the way they are treated by their bank. And for banks and mortgage servicers wondering about the outcome of this increasing homeowner dissatisfaction… well, the writing is on the wall.

In a November 2008 story, published by the Oakland Tribune (Oakland, California), customers of Countrywide, Wachovia, and Wells Fargo, among others, describe the banks as uncooperative, ineffective and rude.

“Countrywide says it wants to help people restructure? That’s baloney,” said Dawn Aguiar, who bought her Fremont home for $587,000 in 2005. “They have not been helpful at all.” She financed the purchase with a $586,000 mortgage from Countrywide, but homes in her neighborhood now sell for $450,000 to $500,000, so her house is “under water” – worth less than the loan. Her adjustable rate loan balance increases monthly, and she’s behind in her payments.

“One lady I spoke to was so rude, she had a real attitude,” Aguiar said. “She talked down to me like I was a deadbeat.”

The complaints from homeowners at risk of foreclosure about rude treatment by bank personnel are mounting in number and visibility. A quick check online yielded the following:

Mark Gagliardi about Countrywide: “They’re not proactive. No calls, no follow-ups. And when I call them, I get put on ignore.”

Sue Chai Spaulding about Bank of America: “They don’t want to help you. But they shouldn’t take this so lightly. These are people’s lives. They have been rude to me.”

Rachelle Gonzales about American Home Mortgage: “It’s so frustrating. They say they’ll help. Then they say no. They have called me names. They have called me a slime. This has been awful. Just awful.”

On one Website discussion about homeowners losing homes to foreclosure, the following discussion thread was easily found:

The first comment said: “The best way to ruin a house beyond repair is this… Get yourself a couple of bags of cement and mix a lot of water to make it a bit light… Drop it down every open pipe in your house (sink, toilet, bathtub, sewer pipes, main water pipe) then let it set. The repair will cost the bank more than the house… replacing every pipe in the house means they have to redo the house. They might be able to charge you tho… ha, ha.”

To which another replied: “Awww… the poor banks. Whatever will they do? Ain’t karma a bitch?”

And then another added: Yes they could, but, what can they get out of you when you have nothing to lose? Remember kids, fire cleanses everything.

And then another: “Great point. I hate banksters.”

And another: “Payback’s a bitch.”

And then another: “I think this is funny as hell. Everyone getting evicted should take all they want, then burn the place down.”

And another: “The bank may own the house but not the appliances! Of course they should take them – they are theirs. I can find NO sympathy in my heart for bankers or real estate agents – they’re right up there with tax collectors.”

And then another: “If the lender makes things hard, they get to live with the consequences. That house will be torn to shreds.”

And lastly: “If you ask for peace, prepare for war.”

The Cost of Foreclosing

The costs involved in foreclosing on a home are high and getting higher. Lost principal and interest payments, tax and insurance payments, maintaining the property, lost servicing fee income, costs of collection efforts/servicing, legal costs for handling the foreclosure, administrative fees, costs of restoring the property to saleable condition, real estate commissions… all play a role in negatively impacting a lender’s bottom-line.

According to estimates from Standard & Poor’s, published in 2008, the average cost to a lender, expressed as a percentage of the loan balance is 26%. The costs breakdown as follows:

Amount lost in interest payments: 13.6%

Property taxes paid by lender: 3%

Legal fees paid by lender: 1%

Real estate agent commissions: 6%

Home maintenance: 3%

With the housing crisis still in full swing, home prices still not at bottom, and many forecasting millions of foreclosures still to come, it’s clear that lenders will endure more pain over the next few years. What banks and servicers need to consider is how homeowner attitudes are likely to change for the worse as the crisis continues.

Our politicians have recently started to see how populist anger can make governing much more difficult. The outrage over the AIG bonuses provided an example of how close many of our nation’s citizens are to marching in the streets. One can only imagine how homeowners will feel a year or two from now, when many of those who thought they could make it through our economic downturn, find that they have not. No one can know for sure, but one thing seems certain: If they’re getting angry today, they’ll be that much angrier a year from now.

Loan Modifications

As the economy has deteriorated, the number of foreclosures has continued to increase, which places further downward pressure on home values, which in turn causes more foreclosures and does further harm to our economy. Today, we all realize that foreclosures benefit no one, although to-date, we have not united behind a solution to this very serious ongoing problem.

As a result of this dangerous, downward spiral, the cost of foreclosure in some parts of the country is reaching the level at which no one, including the investors that own the property, wants to foreclose.

One alternative is loan modification. If, by modifying the terms of an existing mortgage, the borrower can afford the mortgage payments and therefore remain in the home and avoid foreclosure, it’s often true that everyone, even the investors that hold the mortgage on the property, comes out ahead. For investors, it’s really a question of which alternative, foreclosure or modification, offers the greater financial return. There are several methods for determining the cost differential between the two alternatives, for example one could compare a present value calculation with the expected cost of foreclosure, factoring in variables like repairs and reconditioning, expected time on the market, and assumptions about trends in home prices.

It’s worth considering, however, that lenders and servicers continue to struggle with loan modifications, which are transactions that are particularly time and labor intensive and often produce unsustainable results. As an example, studies published last year indicate that when banks attempt to handle loan modification negotiations directly with a borrower, the end result is that 60% are back in default in six months.

The reasons for this are many, but the overriding fact is that negotiations between a bank and an individual homeowner at risk of foreclosure, are obviously not negotiations between equals, and that manifests itself

in high re-default rates in the first year.

By contracting with qualified and quality loan modification firms, banks may be able to increase the diameter of the pipeline and therefore modify more loans, keeping people in their homes where they’re supposed to be.

Cash for Keys

A number of lenders have adopted the practice of offering to pay a homeowner about to lose a home to foreclosure a cash payment for leaving the home undamaged. Lenders report offering payments of $1500-$3,000. But with the incidence of borrowers damaging their homes before they leave rising, offering three grand may only be keeping the already honest… honest.

For those angry enough to strip wiring out of a home, remove a garage door, or even sell the air conditioning unit, three thousand dollars is not likely to accomplish much.

The Best Way to Catch Flies

Lenders seeking to reduce their costs of foreclosures should consider the old axiom: You catch more flies with honey than you do with vinegar.

As it relates to a lender’s loss mitigation and collection personnel, it means that training them to better understand the psychology of foreclosures, to feel more empathy for those losing homes, to identify with a parent with children in financial distress… and more… banks can expect to be repaid hundreds of times over.

People in foreclosure, and those at risk of going into foreclosure, are often scared, lonely, tired, insecure, and sometimes confused. They’re not thinking clearly and they’re on the edge. A little kindness at a time like that can go a long, long way. A little rudeness, on the other hand, can push someone into a rage. It’s not easy to work with distressed homeowners day after day. And even though some might feel like they’re not letting their true feelings come through, at times like these, that can be difficult, if not impossible to do.

Here are some ideas that I think bank management could consider to change the way their personnel behave toward distressed borrowers.

1. Explain what distressed borrowers are thinking and how they are feeling. Give them the details. Ask them to imagine what they would do and how they would feel. By bringing them into this kind of discussion, you’ll force people to realize that others worry about the same things they do, and once they share their thoughts and feelings with co-workers, they’ll stop seeing those in trouble as getting what they deserve.
2. Share the facts about the costs that neighborhoods, communities and society as a whole pay as a result of foreclosures. You can use some of the statistics presented earlier. People sometimes fail to see how something that hasn’t happened to them personally, affects everyone personally.
3. Play the Foreclosure Game – Ask people to calculate what would have to happen to place them at risk of losing their homes to foreclosure. You can even create cards that describe various catastrophes that happen to people in life. For example: You are injured in a car accident that leaves you unable to work for three months; the driver that hit you is uninsured. A month later your spouse is laid off from work, and you have a tuition payment of $18,000 due in 90 days. You can’t take out an equity line on your home, nor can you borrow from the bank. And your retirement plan account has been reduced by 40% as a result of the latest market correction.
4. Consider asking a borrower who already lost his or her home to foreclosure to come in as a guest speaker. Often times, it’s harder to harbor ill feelings about someone you’ve met face-to-face, and the personnel stories from people who have come through it, can have a lot of impact.
5. Conduct role-playing exercises in which one person is the borrower and the other the bank manager. The borrower starts by explaining to the bank manager how they got in so much trouble. The rest of the group votes on the level of empathy and compassion the bank manager has communicated during the call.
6. Review your personnel training manuals to ensure that they are not placing counterproductive restrictions or using guidelines that make it more difficult for your people to spend the time needed. For example, do your people try to spend less than a certain amount of time per call? If the answer is yes, you may want to consider either lifting that requirement, or lengthening it.
7. Changing culture has to start at the top. Have all of your organization’s top managers speak at your training sessions. When your loss mitigation personnel hear the CEO talk about foreclosure victims with sympathy and caring… they’ll stop and listen.
8. Clip and distribute articles that highlight the heartbreaking stories of people losing homes due to no fault of their own. Many people today, still have the impression that those that got in trouble did it to themselves. Show data on the number of prime loans that are now defaulting. Examples that destroy that perception help to open minds.
9. Encourage your people to share stories with each other at regular meetings. This is not something you want to do just once and leave it alone after that. This is an ongoing program intended to make sure that the people you have on the phone aren’t causing someone to punch holes in their walls when they hang up from the call.
10. Consider increasing the number of breaks your people take during the day. And consider providing some items “just for fun” in areas where breaks are taken. An Etch-a-Sketch, Slinky, or even Play-Doh, can all bring back happy memories and help to relieve stress, or on the more serious side, provide an exercise ball, weights, or even a treadmill or two… exercise kills stress.

Conclusion

Human beings have a need to see bad things that happen to someone as not being their problem. And because of how this crisis has unfolded, many people have come to believe that everyone losing a home is an “irresponsible sub-prime borrower”. This belief can color how someone interacts with a distressed homeowner.

Those losing homes today are going through very stressful times. Many have lost jobs, and are struggling to make ends meet. Many have young children. And many have lost all hope. It’s easy for someone under that kind of stress to become angry, and an angry homeowner losing a home to foreclosure is likely to damage the home before leaving.

Banks and servicers need to take a look at how loss mitigation personnel are trained to deal with homeowners at risk of foreclosure, because as the months and even years go by, the situation will only get worse. By helping personnel to better understand what’s happening and how these customers are feeling, they can spend a little extra time, or offer a kind word that can make the difference between a home left in decent condition, and one in need of thousands of dollars in repairs.

Most importantly, communicate with the people that interact with troubled borrowers on the phone every day. It’s a hard job and constant exposure to tragic situations and frustrated or angry customers can wear one down, even if the person doesn’t realize it.

Today, just like my mother used to say… It pays to be nice.

Mandelman out.

I’ll tell you what… there are times in life when you’ve just got to love Texas. People in Texas just don’t like getting misled, lied to, pushed around, and generally abused, so it’s not a great place for banks to do what banks do.  But apparently, Bank of America is just as abusive to the homeowners in Texas as they are to the homeowners in the other 49 states, and they’re being treated to a little Texas hospitality as a result.

The Texas Housing Justice League and 15 Texas homeowners have filed suit against Bank of America N.A. and its subsidiary, BAC Home Loans Servicing, alleging abusive servicing practices.  I’m not saying that homeowners in other states aren’t just as upset about being abused by the banks, but it’s the homeowners in Texas that aren’t just complaining, they’ve banded together to file the suit, and I’m guessing that not only is this going to be interesting, but it’s probably only the beginning of these types of actions.

I’ve said it before, I’ve even told bankers before… the banks may have taken an early lead against homeowners in this crisis, and they may think they’re winning, but in this country, if you push people far enough, they’re going to fight back.  And in the long run, Americans have a long history of coming out on top, as in… would you like a torch or a pitchfork?

The lawsuit, filed in US District Court, Southern District of Texas, Victoria Division, describes:

“… a systematic home loan servicing scheme that includes hours of telephone runaround, misleading and inconsistent information, lost correspondence, verbal abuse, and extensive delay, all of which have documented costs not only in terms of money, but in health. The facts in this case reveal the harsh reality that underlies the loan servicer’s press statements about loan modifications and forbearance agreements following collapse of the U.S. housing market.”

Yeah, that sounds about right.  I’d recognize Bank of America anywhere.

I’m no lawyer, but is Bank of America going to dispute these allegations, or just stipulate to them and go from there?  Because I would think even the judge would have to suppress the urge to snicker if the Bank of America lawyer started out by saying the bank didn’t do what the homeowners are alleging.

As in: “It’s not true, your honor.”  HAHAHAHAHAHAHAHA… “Order in the court, this court will come to order.”  Isn’t that about how that would go?

Here are some of the highlights from the complaint:

“Many of the Plaintiffs were told that they were eligible for loan modifications or other workout assistance, only to spend months being shuffled through Defendant BAC’s “Home Retention,” “HOPE”, “Foreclosure,” “Bankruptcy” and “Collections” departments with no resolution.”

Okay, so that’s standard operating procedure at Bank of America, right?  I mean, they probably have a manual that describes that runaround, wouldn’t you think?

“Others simply wanted to know that they had been reviewed accurately for eligibility in any available programs, that a denial of assistance was final, and that their arrearage had been correctly calculated. Instead of providing Plaintiffs with basic information about the servicing of their loans and providing timely screenings for workout assistance, however, Defendant BAC misrepresented material information to the Plaintiffs about their loans, and forced them into a scheme of operation so dysfunctional that the constant barrage of misinformation, misdirection, and deliberate inactivity amounted to abuse and harassment.”

“Plaintiffs describe feeling “harassed,” “like a yo-yo,” and “blocked at every turn.”

Are you loving this as much as I am?  A yo-yo, huh?  I like it… I might have used a different metaphor, but I suppose in court you can’t just say what you’d want to say.

“When Plaintiffs called Defendant BAC the information they received over the telephone often conflicted with written statements or prior telephone conversations. In many of the telephone calls Defendant BAC spun Plaintiffs in a labyrinth of transfers from one department to another and back again. Plaintiffs spent hundreds of hours on the telephone, explaining their stories to a different person each time they called; often they were transferred between departments, knowing they would never speak to the same person again, and wondering if the information being provided would be contradicted by the next person they spoke with. Often, it was.”

Oh my God, I wish I made money at this, because I’d love to be able to go to Texas and watch this case proceed in person.  It’s going to be one for the books, that’s for sure.  I’m thinking there would have to be some stand up and cheer moments.  And I wonder how much trouble I’d get in for throwing rotten tomatoes at Bank of America’s lawyer in the parking lot.  I know, so immature, but guess what?  I know you are, but what am I?

What’s interesting about this case is that they’re using RESPA, the Real Estate Settlement and Procedures Act, as the basis for the complaint.  As in…

RESPA Count: Part A

Plaintiffs each sent Defendant BAC written applications for a loan modification, including a hardship affidavit, and written submissions of financial information that were “qualified written requests” within the meaning of RESPA, in that Plaintiffs sought information about their eligibility for a loan modification or other methods to minimize their losses.

The complaint also describes how special it is to call Bank of America on the phone.

“Requests to speak with supervisors or managers were met with resistance. During the course of telephone calls to Defendant BAC, Plaintiffs often found themselves disconnected after waiting on hold to speak to a supervisor, or were told that no supervisors were available. Some Plaintiffs sought out face-to-face interviews by contacting Bank of America branch offices, but simply found themselves on speakerphones with the same unaccountable departments that had previously been providing them with misinformation by telephone.”

Well, wait a minute… maybe they should have tried communicating with Bank of America in writing, instead of just by phone.  Could be… right?  Maybe they just don’t have good phone skills.

“Written communications did not fare better. Plaintiffs’ written submissions were often lost or misplaced.  Plaintiffs were asked to sign the same documents three, four or even five times, and were asked to provide the same information repeatedly. Many of the Plaintiffs were assigned multiple “negotiators” who would not return telephone calls, or provide timely information to Plaintiffs.”

Oh well, I guess not.  So, maybe Bank of America is hoping that the judge will think that it’s all just an isolated incident, and that it’s not something that happens to everyone.

“Plaintiffs’ experiences are not isolated incidents, but instead reveal a pattern and practice by Defendant BAC of deliberately misinforming borrowers in default or at risk of default, and refusing to respond to Plaintiffs’ legitimate, written and oral requests for information.”

Whoops… I guess that’s not going to be an easy case to make either.  So, what about the damages?

Damages

Plaintiffs suffered damages including, but not limited to loss of credit, foreclosure, emotional harm, embarrassment and humiliation.  Plaintiffs’ damages were proximately caused by Defendant BAC’s noncompliance with the requirements of the mortgage servicer provisions of RESPA.

Defendant BAC has engaged in a pattern and practice of non-compliance with the requirements of the mortgage servicer provisions of RESPA, and Plaintiffs seek $1,000 in statutory damages per violation.

Plaintiffs seek attorney fees under 12 U.S.C. § 2605(f)(3).

So, anyway… there’s of course a lot more involved and I’m not going to include it all in this article, or it will be longer than my usual articles, and that would make it REALLY LONG, I realize.  Here are the other Counts listed in the complaint, but I’ll provide a link at the bottom to the actual complaint, so the attorneys reading this can dive right in to the details.  But here’s the overview:

Count Two: Breach of Contract – Loan Modification Agreement

Count Three: Breach of Contract – Forbearance Agreement

Count Four: Breach of Contract-Promissory Note and Deed of Trust

Count Five: Violation of the Texas Property Code

Count Six: Breach of Oral Contract-HAMP Trial Modification

Count Seven: Unreasonable Collection Efforts

Count Eight: Intentional Misrepresentation

Count Nine: Texas Debt Collection Act

Here’s how the complaint wraps up, with that wonderful Request for Relief section that always asks for the order, as they say in the sales biz.  And this one’s a good read.

REQUEST FOR RELIEF

A home is uniquely valuable. It is the largest investment many low income Texans will make in their lifetimes, and provides one of the few opportunities for low income Texans to build wealth. But a home is also where many of the Plaintiffs and other low income Texans raise their children and accumulate their memories. Misrepresentations that jeopardize a borrower’s home are unconscionable and the damage is irreparable. Defendant BAC’s misrepresentations to borrowers are systemic in nature and widespread in practice. Plaintiffs therefore ask that this court:

(1) Enter a temporary and permanent injunction that Defendant BAC, including its agents employees and contractors, refrain from practices, policies, and plans that result in or increase Defendants’ misrepresentations, errors, falsehoods, barriers to timely, accurate communication with Plaintiffs which are identified by the Court through the course of this litigation;

(2) Award each individual Plaintiff their actual, statutory, and exemplary damages;

(3) Award Plaintiffs their costs and attorney fees; and

(4) Grant such other relief as Court finds necessary and just.

Here’s a link to the actual complaint: 15 Texas Homeowners v. Bank of America.

Although for lawyers, I’m sure I’m stating the obvious, but for others… RESPA is a federal statute so I would think that this sort of thing could be happening all over the place… like in all 50 states.  And it’s also worth mentioning that what Bank of America is accused of here, is every bit as true for Chase, Wells, One West, US Bank, Aurora, Saxon… are you feeling me here?  Come on, multiply the number of banks and servicers times fifty states, and before you know it we could be having a national block party… I’ll bring the beer.

So, let’s all keep an eye on this, okay?  And not throw in the towel just yet.  There’s a lot going on around this country related to the foreclosure crisis.  We’re in a river, not a lake… the water we’re standing in today, won’t be the same water we’ll stand in tomorrow.

We have to win this eventually, we just have to.  We cannot just let this country deteriorate into a depressed land of inequality, lacking in opportunity, rife with corruption, besieged by poverty and dominated by a small oligarchy of immensely wealthy bankers and corporate executives who drive our elected officials like slaves.  Think that’s too dramatic?  Do you?  Which part, specifically?

We cannot lose this.  I have a daughter.

On Thursday, June 21, 2010, the House Committee on Oversight and Government Reform held a hearing they called: “Foreclosure Prevention, Part II: Are Loan Servicers Honoring Their Commitments to Help Preserve Homeownership?” The committee was supposed to be investigating the overall effectiveness of the processes put in place by loan servicers as related to the implementation of the administration’s Home Affordable Modification Program (“HAMP”) and any other loan modification programs designed to help homeowners avoid foreclosures.

Here is the list of people the committee brought in to testify:

Mr. Sanjiv Das, Chief Executive Officer, CitiMortgage, Inc.

Ms. Barbara J. Desoer, President, Bank of America Home Loans

Mr. David Friedman, President and CEO, American Home Mortgage Servicing, Inc.

Mr. Michael Heid, Co-President, Wells Fargo Home Mortgage, Wells Fargo & Co.

Mr. David Lowman, Chief Executive Officer, Chase Home Finance, Inc.

Mr. Edward J. Pinto, Consultant

Okay, so if you click that link above, where the type is blue, it will take you to the House Committee’s Website, and you can read everyone’s testimony there, however, because I both know and like my readers very much for the most part, I want to be clear that I don’t recommend it.  I read all of them, and I’m pretty sure I’m going to have gastro-intestinal problems for the rest of the week as a result.  Yeah, I know, you found that funny, but you’re not the one who just washed down a Zantac 150 with a tall glass of straight bourbon.

Want me to cut to the chase, no pun intended?  Go straight to the bottom-line?  Okay, I will.

Everything’s going just fine.  There are no real problems with HAMP or with the servicers who are implementing HAMP.  Oh sure, there have been a few challenges, but most of them have been caused by the borrowers who just can’t seem to do a Gad damn thing right.  Leave it to a borrower to be unable to send in the right paperwork six or seven times, unwilling to wait on hold for 4.5 hours in order to be disconnected, and unable to prove their income with anything but paycheck stubs, financial statements, and tax returns.

Clearly, all you have to do is read the testimony of those very credible bankers and it’s homeowners that are the problem here… they’re the ones that caused this whole economic collapse in the first place, and then when the Obama Administration went out of its way to come up with a program to save these poor saps from foreclosure, wouldn’t you know it… the homeowners screw it all up just like they’ve screwed up everything else in their paltry, unremarkable lives.

Honestly, after reading what the bankers testified to, I don’t know why I even talk to you people… you homeowners.  Losers!  If you guys would stop making a mess of HAMP and just let the banks take control, they could modify your loan and preserve home ownership in this country in no time at all, we can all see that very clearly now.  Why do you homeowners insist on being such an impediment to the President’s program’s success?  You just want Obama to fail, don’t you?  You must all be Republicans.

Just look at a few of the things that Mr. David Lowman, the Chief Executive Officer of Chase Home Finance had to say:

“CHASE has consistently been among the leaders in implementing HAMP and other modification solutions for homeowners.”

Well, that’s certainly true, right?  I don’t think there’s any question about that.  CHASE has definitely been “among the leaders.”  Every time you see the leaders hanging out, look left or right and there’s CHASE.  Got to give it to them there.  Point taken.  Move on.

“CHASE has handled over 18 million inbound calls to our call centers from homeowners seeking foreclosure prevention assistance in 2009 and through May 2010, including 3.8 million calls to our dedicated customer hotline for modification inquiries.”

People, look… that’s a lot of phone calls.  I’d like to see a homeowner handle that many phone calls.  Let’s give credit where credit is… you know, that may not be such a useful expression going forward.  Just thinking out loud over here.

“Mailed over two million letters to invite Chase customers to discuss their situation or help them complete their HAMP documents.”

Oh my Lord… now I did not know this, did you?  They mailed over two million letters to CHASE customers inviting them to come discuss things?  That’s a lot of work all by itself.  Don’t scoff… do you know how many envelopes their employees must have had to lick?  Yuck!

“Hosted and participated in more than 711 homeowner events in 2009 and through May 2010 to educate and inform homeowners about the loan modification process and assist in the completion of required documents.”

For heaven’s sake… how much “hosting and participating” can one bank be expected to do over two years.  I know my wife and I can only handle attending one or two Bar Mitzvahs a year and we’re burned out.  I can only imagine what it’s like to be constantly hosting and participating, hosting and participating.

And why do they do it?  To educate and inform stupid homeowners about the process and how to complete the required documents, and obviously we’ve got some remedial learners owning homes in this country, because they haven’t learned a damn thing, it seems.

“CHASE is committed to keeping families in their homes”

What more do you want… blood?  They’re committed, homeowners.  Committed to keeping your dumb, broke families in their shoddy little homes… that you shouldn’t have been allowed to buy in the first place.  How many favors can JPMorgan CHASE do for you people?

“At CHASE we are working very hard to help families meet their mortgage obligations and keep them in their homes by making their home payments affordable. As a national leader in foreclosure prevention, we have continued to expand upon and improve our programs to keep families in their homes.”

Well, I just don’t know what else Mr. Lowman could say.  Here you have a company working not just hard, but VERY HARD to help families meet their obligations by making their payments affordable.  And you’re complaining?  Don’t you think all you homeowners are being just a tad ungrateful here?

I mean, really… this is the testimony of a very busy man.  He didn’t have to come testify, he could have just said he got fogged in, or whatever.  He’s running a national leader in foreclosure prevention, and he’s busy expanding and improving in order to keep people in their homes.  So, do you think you could stop being so critical, and let him get back to expanding and improving?

“We have made solid progress in offering HAMP trial plans to about 257,000 homeowners and have over 87,000 homeowners in active HAMP trial plans through May 2010. We are now working very hard to convert homeowners to permanent HAMP modifications and have successfully converted about 48,000 homeowners, but – like other servicers – we have faced challenges in getting documentation required from borrowers to complete the modification.”

See, stupid homeowners.  It’s your fault.  I mean, according to CHASE’s published figures, CHASE offered 846,542 loan modifications since the beginning of 2009.  And here we are, only 18 months later, and they’ve made solid progress, with about 48,000 permanent HAMP modifications on the scoreboard.  Hey, when you think about the challenges of dealing with stupid homeowners who can’t spell documentation, that’s pretty darn good, I think.

I mean, it’s not like they’ve only permanently modified like five percent of the total.  That would suck.  Not my CHASE, baby… they’ve modified 5.6% of the total, so the gloating lamp is lit, ladies and gentlemen.  Hey CHASE… you go girl.

“Launched a program for discounted sales and donations of foreclosed properties, through which we have completed over 700 transactions with 182 non profit agencies in 30 states.”

Had you heard about this?  I hadn’t heard about this.  These guys are just overachievers.  On top of having all those homeowners throwing challenges in their way as far as modifying loans goes, CHASE had time to launch a program for discounted sales, and for donations of foreclosed properties?  And they did 700 transactions?

You mean to tell me that there have been 700 people in this country that donated their foreclosed properties to non-profits in 30 states?  They didn’t want to reduce the principal for the people living there?  They’d prefer to take it back and then donate it to a nonprofit?  Wow.  I’m getting all teary eyed over here.  Really makes me proud to be an American.

(Side Note: Someone find me one of these pieces of garbage that refused to write down the loan’s principal for the homeowner, foreclosed, and then gave the house away to some non-profit… and I will fly there and beat the crap out of whoever it is.  Think I’m kidding… go ahead, find me the person who did that and we’ll see who’s kidding.)

“Based on the actual re-performance of permanent modifications completed by Chase, payment reduction appears to be the primary driver of post modification re-performance.”

See, and they’re learning stuff at CHASE too.  They studied it for a couple of years and they’ve come to the conclusion that when it comes to modified loans, payment reduction APPEARS to be “the primary driver of post modification re-performance”.  They can’t be sure, of course, and no one would expect them to be.  But, at this point in the game… it looks like if you lower the payment, damn if those stupid, broke, irresponsible homeowners don’t appear to actually make their payments.  Who would have ever thunk it?  Go figure.

You see… the first year they did modifications, 60% of them made the payments go up, but then… and quite surprisingly, I might add… 60% of those modifications re-defaulted a year later.  For a while it was a real mystery, but then those innovative and inquiring minds at JPMorgan CHASE did some hard ciphering and came up with an idea: let’s lower the payments and see what happens then.  Of course, there was a lot of disagreement in the boardroom, but to their credit they took the chance and by golly… it APPEARS to have worked.

“2MP – CHASE was one of the first major servicers to initiate the Treasury Department’s Second Lien Modification Program (2MP), which we began in May 2010. 2MP is a systematic approach to modifying all second liens where the underlying first lien has been modified under HAMP.”

Well, technically speaking, I don’t believe that any second liens have actually been modified under the 2MP program, but hey… at least CHASE was one of the first major servicers to participate.  That’s something.

“There are many reasons borrowers face affordability issues.  In our experience, the number one reason is a recession-driven decline in income, whether it is a spouse losing a job, fewer hours at work, underemployment, or finding a new job that pays less than the previous one.  Data from the Federal Housing Finance Agency suggest that 75% of mortgage defaults nationwide are caused by issues of affordability: borrowers default when a life event (or cumulative life events) causes them not to be able to pay their mortgage with income and savings.”

See, there’s more of that learning happening again.  75% of mortgage defaults are caused by issues of affordability… so, borrowers default when they can’t pay!  Good for you guys at CHASE!  And the number one reason is “a recession driven decline in income”.  Very good, as well!

And what was it that caused the worst recession in 70 years… the sharpest and deepest downturn in our economy since the Great Depression?  Come on… you can do it… it was the incomprehensibly greedy and entirely unregulated asshats like you guys at JPMorgan CHASE!  Yay!  Very, very good!  It’s the circle of life, Simba.

The only difference is, that when you guys went bankrupt, you bankrupted the entire global financial system and our government was so scared that we couldn’t live without you that you all got bailed out 100 pennies on every dollar.  Even better that that… you got huge bonuses for being the biggest crooks and failures in the history of the world.  And in fact, you guys at CHASE are still feeding at the taxpayer’s teat, aren’t you?  Why yes you are.  I know you are because my nipples are still sore.

Look, I could go on and reprint the testimony of the woman from Bunk of America… she complains a lot about how difficult it was to integrate all those messy Countrywide loans into BofA’s system.  After that, however, she goes on to say pretty much the same unadulterated crap that Davey Lowman said above… so why bother.  You can read it for yourself… just scroll back up and click the link, and then scroll down and you’ll see transcripts of each of their testimonies, and I use that term very loosely.

There was one person testifying at the hearing though, that wasn’t a clone of the others, and his name is Edward J. Pinto.  I’ve actually emailed back and forth with Mr. Pinto, mostly because of his response to my calling him a jackass, or possibly a moron in one of my past articles.  It seems that he didn’t like my calling him whatever I called him, and said that I shouldn’t call him those things because he’d been doing his research into HAMP “pro bono,” which means free, if you went to college, or are visiting from ancient Rome.

I didn’t understand his reasoning at the time, to tell you the truth, unless by “pro bono” he actually meant “okay to be sloppy and ill informed”.  For a couple years, Pinto was the Chief Credit Officer for the now entirely bankrupt, and by that I mean both morally and fiscally, Fannie Mae, where perhaps he also worked “pro bono”.  For the record, I was Pro Bono years ago when I lived out in the Palm Springs area.  But then Sonny died in a skiing accident and so I became Pro Bono’s wife.  And no, I’m not sorry about that… it’s late.

I do have to say that Mr. Pinto, in many ways, redeemed himself in my eyes with his testimony, meaning that it was at least much more honest and wasn’t totally insipid and inane.  Speaking about HAMP he did make the following statements:

“The truth is HAMP has been a spectacular failure when measured against the original goal of helping 3-4 million homeowners avoid foreclosure.”

He also pointed out Treasury’s propensity for “applying a rosy gloss,” by showing that the May HAMP report stated:

“Most homeowners in canceled trials became current on mortgage payments or enter an alternative modification.”

But according to Mr. Pinto, and I’m confident that his numbers are right this time:

“It turns out that of the 194,000 canceled trial modifications with a disposition path, only 19,000 or 9.8% were current. Not quite as reassuring as Treasury’s statement.  It turns out that some 95,000 or about 50% are in “alternative modification”.

Now, will you lookie at that.  I believe what you have right there is the Treasury Department lying its ass off… again.  Yoohoo… Mr. Geithner… why can’t you ever tell the truth about anything?  It makes me sad.  You make me miss our ex-Attorney Generral, Alberto “I-can’t-recall” Gonzales.

Then Pinto does it again, but right at the end he made me spit my coffee all over my desk.  He said:

“The Treasury Department also promised “clear and consistent loan modification guidelines that the entire mortgage industry can use.  There are only two words to describe HAMP’s guidelines: numbing complexity.  At last count HAMP had 800 requirements and servicers are expected to certify compliance.  With ever changing regulations, a constant need to re-evaluate past decisions in light of new regulations, and multiple appeals, it is no wonder that the HAMP pipeline became clogged through no substantial fault of servicers.”

At no fault of whom, Mr. Pinto?  No fault of servicers?  Why did you have to go and say something like that?  I was being nice… was going to be nice to you through the whole article.  And then you have to go running off at the mouth saying it wasn’t the fault of servicers.  Okay dumbass… I want to know how many street level modifications you’ve seen up close.  How many homeowners have you spoken with, and how many hours have you sat on hold waiting for Bank of America to answer the damn phone.  BofA has 44 million credit card holders and they manage to answer those phone calls.

He even cites the GAO as proof that what he was saying was right:

The GAO observed: “Servicers faced challenges implementing HAMP because of the number of changes to the program, some of which have required servicers to readjust their business practices, update their systems, and retrain staff.”

Oh, so what Ed.  The crisis has been going on three years, and we’ve given the banks and servicers a blank check to help them with their many “challenges”.  It was like… when I was reading the Bank of America woman whine about Countrywide integration, I wanted to throw up, or smack her hand with a ruler.  You bought Countrywide for $4 billion, as I remember it, Ms. President, or at least that moron Kenny Lewis did, so deal with it.  Nobody forced you to buy it, although we realize that your bank was pretty easy to talk into anything.  The point is, we’ve got something north of $100 billion into your insolvent bank, so go borrow a trillion at 0% and fix it, whatever it is.

Pinto also blames the failure of HAMP for creating strategic defaults, but even though I’d like to blame just about anything on HAMP, and the Obama Administration’s stupidity and insensitivity in allowing it to go on this long, I don’t know if you can blame HAMP for strategic defaults.  I think strategic defaults are caused purely by homeowners with above average intelligence, actually using their noggins.  They walk away because they should walk away.

And I know, Fannie wants to punish them by not letting them buy another home with a Fannie Mae loan for seven years, but besides the fact that no one cares about threats made by a bankrupt mortgage company that won’t even be around in seven years… in fact I’d be shocked it Fannie was still around next year or the year after at this time.  And who are they going to sue… and how will they prove what happened?  Nope, Fannie is just another barking dog trying to intimidate American homeowners, after being a big part of the problem in the first place.

I’ll tell you one thing their threat did for me… it made me want to strategically default, and since our homes that had appraised for $925,000 in 2005, just had a neighbor short sale sell for $360,000, I very well may just get my chance.  I’m so looking forward to it.  I’m thinking about blogging and Twittering all about it as it unfolds.  What fun, don’t you think Fannie Mae?

Lastly, Herb Allison, the man from Treasury that simply cannot keep his mouth shut, had to weigh in with his “everything is going according to plan” speech.  Yes, it’s Mr. Herb Allison, another past focus of mine.  If you believe anything Herb says, and I’m pretty sure no one does, then HAMP wasn’t supposed to help 3-4 million homeowners avoid foreclosure.  Are you sitting down, because this is going to give you Exedrin Headache #22.

You might remember me writing about Herb Allison’s testimony from March 25, 2010, but click that link and you can relive how distorted a human being’s though process can become.

“At the time we launched HAMP in March 2009, President Obama said that the program would “enable as many as 3 to 4 million homeowners to modify the terms of their mortgages.”

“The President’s statement about ‘enabling’ modifications is the reason that we have continued to report offers of trial modifications – the offer is when a homeowner is able to get a modification, and 1.4 million offers have been extended in the first twelve months.”

“A very similar picture of progress arises from the number of actual trial modifications begun, over 1.1 million in twelve months. Actual trial modifications are the point at which homeowners begin a lower mortgage payment — an average reduction of around $500 per month.”

“In a program scheduled to last nearly four years (March 2009 until the end of 2012), either the 1.1 million or 1.4 million in the first year places the program well on schedule to the goal announced by President Obama.”

“The Administration has never said that the program would implement 3 to 4 million permanent modifications, which take place only after the homeowner has been offered a trial modification, has performed for at least three months in a trial modification, and has met the full documentation requirements for the permanent modification.

One important reason for having permanent modifications in the first place was a recognition that not all trial modifications would become permanent, such as when a borrower does not make the three payments needed to receive a permanent modification.

Herb, Herb, Herb… no you didn’t.  You did not just say that when President Obama said that HAMP would help 3-4 million homeowners by modifying their mortgages, he wasn’t talking about “PERMANENT” modifications, he was talking about trial modifications?  Herb, do you understand that even the “permanent modifications,” offered under HAMP are really only lowered for five years, after which time the interest rates do go up again?  So, even HAMP’s permanent modifications are only temporary, Herb.  And now you’re saying that Obama only meant 3-4 million trial modifications?  You are a jackass, Herb.

When you get home after work does your dog bark at you?  It’s because he doesn’t trust you, Herb.

So, you see everybody… everything’s going just great with HAMP and the whole foreclosure thing.  Stop being such Gloomy Gus’s, or Downer Dan’s… We held a hearing and the bankers said everything is fine… it was even on C-Span.  One crazy guy named Pinto made some points but obviously there’s nothing to worry about.

And there’s no way that 20 million foreclosures, trillions in evaporated equity, near 20% unemployment and a basket of insolvent financial institutions could ever turn into another Great Depression.  We’re fine I tell you… there’s nothing to fix here.  What foreclosure crisis?  I don’t see any foreclosure crisis.  And don’t worry… I’m sure Congress will check with the bankers in a few months if they’re unsure how things are going.

I guess I’m going to have to find something else to write about.  Bummer.

In a related story, I understand that the Gulf of Mexico is actually doing very well also.  Yes, it’s true… people are swimming in it again.  Apparently our guys in Congress asked the oil barons and they said…

You want to know why there are some 1.3 million trial loan modifications and only 168,000 and change permanent modifications, if you can even call them permanent?  Because no one knows whether they qualify for a HAMP loan modification before they head down that road.  No one.

If anyone tells you differently… they’re lying, or maybe they just don’t know any better.  The published guidelines can tell you if you aren’t qualified, but not if you are qualified.

And it’s all because of a formula that’s seems as closely guarded by the Treasury Department as our nation’s missile defense codes.  It’s a secret and we the people are not allowed to know.  I’m going to help in that regard, so read on… and if you’re even thinking about applying for a loan modification… ignore this article at your peril.

And away we go…

The Home Affordable Modification Program (HAMP) established by the Obama administration is a mess, and there’s no debating that point of view at this stage of the tragic game.  As one observer said: “The rhetoric is portrayed to the public is couched in the language of hope, responsibility and transparency — and only when one pieces together the details of the plan do the true effects become clear: the government will (probably) be mandating a significant transfer of wealth from private sector investors to program participants, all of whom are breaking their word, many of whom are likely criminals.”

At the core of the HAMP loan modification program is the “NPV Test” (NPV stands for “net present value“), which is the test that determines borrower eligibility for the program.

The NPV test’s stated purpose is to determine whether a lender would be better off financially by writing down and modifying the loan, or by taking no action and presumably foreclosing assuming the borrower’s default.  In mathematical parlance, it is the comparison of two multivariate formulas to see which is greater.  This “formula” aspect gives the public the illusion that the program has objective, numeric inputs and therefore doesn’t allow for random decision making by the banks or servicers.

The problem is that the Obama administration has written the test, and the banks decide who will take it and how it is to be graded… to homeowners, it’s a secret.

According to the document titled: HOME AFFORDABLE MODIFICATION PROGRAM BASE NET PRESENT VALUE (NPV) MODEL SPECIFICATIONS:

“The base NPV model was designed by an expert working group including the Department of the Treasury, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac.  It was designed specifically for the Home Affordable Modification Program. The base NPV model reflects aggregate data across many servicers, as well as the professional judgment of the working group.”

The HAMP plan requires that a borrower be given a new, discounted, “MODIFIED” loan, provided that certain tests are met.  HOWEVER, the inputs to determine whether those tests are met are not available to the public.  No one, with the exception of the government agencies involved, is supposed to know the actual inputs of the HAMP NPV test that will determine who is required to give a delinquent homeowner a modified loan.

Let’s look at the initial “Summary of Guidelines” provided on March 4^th of 2009, where it states:

“Parameters of the NPV tests are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions foreclosure costs and timelines, and borrower cure and re-default rate assumptions.”

The HAMP guidelines were also released on March 4^th, but NO ACTUAL NUMBERS (despite what was promised that would be “spelled out” in the Summary) were provided:

“Required parameters for the NPV Test will be published separately.” (Page 5)

An addendum was also provided, titled the “Net Present Value Model Parameters” — but the problem is that only one actual number was provided in these “parameters” (the discount rate) and that numeric input may be modified by a lender or servicer.  But, under the “Standard NPV Model” it states:

“Complete details on components outlined below are forthcoming.” (Page 16)

The Cure and Re-default Rates will come from: “A default equation with parameters based on GSE analytics, and Treasury will update these tables periodically based on incoming data.” (Page 16)

The Property Value: “… will be determined in accordance with the Guidelines” (Page 16)

Incentive Payments:

“… to be determined in accordance with the Guidelines”  (Page 17)

Other Parameters:

“The remaining parameters will come from data sets held or produced by the Federal Housing Finance Agency: home price forecast, valuation of house price depreciation reserve, foreclosure timelines, and foreclosure costs and REO stigma.” (Page 17)

However, if you go to the FHFA website and search for any of those “parameters,” you won’t find a single one on their Website at least.. None.  Not a one.

That’s right… the inputs for the formula that determines whether a private bank will be required to write down billions of dollars in mortgages is entirely unavailable for public viewing.  However, this appalling lack of transparency is only the beginning.  As stated in the HAMP “Base Net Present Value (NPV) Model Specifications” document, when discussing assumptions detailing home prices:

“A servicer must use the home price projection provided in the base NPV model.  A servicer does not have discretion to substitute a different projection.”  (Page 5)

The data would have to be considered even more questionable, as the “home price projection for the program has been made available by FHFA exclusively for this program…. the projection is not based on the FHFA House Price Index.”  In other words, this data is a special set, not based on any official data, but servicers are required to use it.  The same logic is applied to the “REO ‘Stigma’” (houses foreclosed upon sell for less than similar non-foreclosed homes):

“REO stigma values vary by state and home price, servicers are not permitted to change the REO assumptions in the base NPV model.” (Page 5)

Assistant Treasury Secretary, Michael Barr has said that:

“Even if HAMP is a total success, we should still expect millions of foreclosures” as administration and industry efforts continue to stabilize a crisis-stricken housing sector.  He said a strong housing market was “crucial” to our sustained economic recovery and described the slump in prices and demand in the housing sector as being “at the center of our financial crisis and economic downturn.”

He noted: “Much more remains to be done and we will continue to work with other agencies, regulators and the private sector to reach as many families as possible,” Barr said.

Look, these guys are playing hide the mousie, simple as that.  And that’s being kind… like giving them the benefit of whatever doubt could possibly exist… maybe if you’re 8 years old.

Diane Thompson, one of my personal heroes, and a lawyer at the National Consumer Law Center has tried just about everything to get the formula released, even testifying to congress on several occasions.

“There are assumptions built into the (HAMP NPV qualification) model, and they may not be the right ones,” said Diane Thompson of the National Consumer Law Center.  “Someone needs to be able to review it.”  (Read more here.)

(Ya’ think?  Probably a good idea, but what the heck do I know?)

But to-date no one has or can.  Well, that’s not entirely true.  I have, and I can.  And I also know what homeowners can do to find out whether they qualify for a HAMP loan modification… or why they don’t… before they apply and therefore avoid heading down a road that, without running the report, is little more than guesswork.

That’s why we have something like 1.3 million trial loan modifications and only something like 170,000 permanent modifications, don’t you get it?  No one knows who qualifies and who doesn’t… for sure.

If you find you don’t qualify for HAMP, then you won’t have to go down a path that requires you to make months of trial payments only to find your home in foreclosure anyway.  At least you’ll know where you stand.Someone who understands the program’s qualifications can often tell you if you DON’T qualify for HAMP, but they can never know for sure if you do.  No one.  It’s simply impossible without knowing the NPV formula, and the formula is entirely too complicated for guesswork to have even a remote shot at coming close.

I have the answer… the only real answer… for the moment anyway.

Beginning this next week, homeowners will be able to contact me at Mandelman Matters to get access to the software platform that generates a report showing whether they qualify for a HAMP loan modification and the terms of that modification.  It will incorporate a version of the secret NPV test that, while not exact, is within HAMP guidelines.   It will also qualify a homeowner for other government programs as well, like the HAFA short sale program many are now pushing, for example.  It will answer the question I’ve heard homeowners ask every day for over a year now: What the heck is going on with my bank and why won’t they modify my loan, or tell me why they haven’t modified my loan?

Does that guarantee that a bank will do what they’re supposed to do?  Don’t be ridiculous.   Obama gave the banks trillions and not only don’t they do everything he tells them to do, at least three of them barely take his calls.  Okay, I don’t know that, but trains from NYC to DC don’t stop running in the fog nowadays, do they?

Having the report helps homeowners a whole lot because it’s generated using a version of the same software platform being used by major banks and servicers to determine HAMP qualification, and it does mean that if a homeowner doesn’t get the modification the report shows he or she to be qualified for, then that homeowner would have a way to push back.  It levels the playing field and clearly the banks don’t want anyone to have it.

I don’t think I’ll publish any further details at this time, but there will be lots coming in just a few days.  I’m only halfway kidding when I say… if I disappear all of a sudden, someone please say something about it… please?  I’ll have the details on my laptop and on flash drives hidden all over the place, so find one and expose these government goons should I find myself in some Eastern Block detention facility, not listed in your Fodor’s Guide, unable to place a call to my attorney.

So, with the report you’ll know if you qualify for a HAMP loan modification and what the terms of that modification would look like if you chose to pursue it.  You’ll also know if you qualify for a HAFA Short Sale, another government program that allows homeowners to avoid foreclosure by selling the house for less than is owed.  You’ll know a lot… and certainly a whole lot more than you can know without the report.  You’ll know what the bank knows, but that doesn’t mean you’ll turn into a major dick or anything.

And should you find that the report says you don’t qualify for a HAMP loan modification, that DOES NOT MEAN that you can’t get your loan modified, it just means that you won’t get it modified under the government’s HAMP program.  However, many or even most of the banks and mortgage servicers have internal loan modification programs and you may qualify for one of those.

If your report shows you qualify for HAMP, you can send it in to your lender or servicer along with the other required paperwork and you should have no trouble getting your loan modified in line with what the report says.  The new Website I’m launching will provide you with everything you could possibly want to know about handling the loan modification process yourself… without having to hire anyone to help.  Of course, if you have problems or simply don’t feel as if you can tackle it alone, you can always take the report to an attorney and as he or she to help.

And by the way… if you find you don’t qualify for HAMP, then you won’t have to go down a path that requires you to make months of trial payments only to find your home in foreclosure anyway.  At least you’ll know where you stand.

Are you feeling me here?  Getting the report is all upside, as far as I can see.  I cannot think of a reason not to run one specific to your situation before you even consider anything else.

If you’re a homeowner considering a loan modification or a short sale, email me at Mandelman Matters: mandelman@mac.com and get off the guessing-go-round related to loan modifications under the government’s HAMP program.  Know what the banks know before you decide which path is the right one for you and your family.  Seriously… I’m not kidding when I say that I wouldn’t even think about starting without it.

Nevada Residents: You, along with the residents of various other states, have a state run mandatory mediation program that allows you to request that a mediator be appointed to review your situation before your lender is permitted to foreclose on your property.  Don’t go into such a mediation unarmed… get your report and hand it to your mediator.  Without it, there’s very little to mediate.

IMPORTANT NOTE: As most of my readers know, Mandelman Matters has never sold advertising or received revenue from anything having anything to do with loan modifications, short sales, mortgages, appraisals, or anything in the real estate industry.  However, in the case of this report, I’ve decided that I will officially endorse it without reservation, and that a company in which I’m financially involved will receive a small percentage of the fees charged each time a report is run. If you have further questions regarding this issue, feel free to contact me directly at mandelman@mac.com.

A judge in New York, The Honorable Jeffrey Arlen Spinner, was shown what its like to request a loan modification from IndyMac/One West Bank… and he was not at all impressed.  In fact, he was so offended by IndyMac’s attitude and treatment of homeowner Diana Yano-Horoski that he decided the only responsible decision he could reach, in addition to publicly chastising the bank, was to wipe out the homeowner’s entire indebtedness to IndyMac.  Will the decision be appealed?  Probably, but I think that’s besides the point.  This appears to be the first decision by a court based on the behavior of a bank or servicer towards a homeowner… and as far as I’m concerned, it’s about time.

In Judge Spinner’s decision, he wrote that the homeowner had been eminently reasonable in her requests for a loan modification, while IndyMac Bank (recently renamed “One West Bank”), throughout the process, was completely unwilling to entertain any outcome short of foreclosure.  The judge referred to IndyMac’s conduct as being “inequitable, unconscionable, vexatious and opprobrious,” so obviously this is a guy who can complete the Sunday crossword in the New York Times using a pen.  But he didn’t stop there.  He went on to say:

“Plaintiff’s conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff’s actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant.”

IndyMac/One West Bank… Mortifying abuse… completely devoid of good faith… harsh, repugnant, shocking and repulsive.  Bravo, Judge Spinner… Bravo!  When I read it for the first time, it literally brought tears to my eyes.

It all started when IndyMac wanted to foreclose on a home located in Suffolk County, New York. The mortgage involved secured an adjustable rate note with an initial interest rate of 10.375%, with an original principal amount of $292,500.  Because the loan was considered “sub-prime” or “high cost,” and I suppose based on a New York State law, the homeowner requested that the court schedule a settlement conference.  And that’s when things started to go wrong.

The court tried five times to get IndyMac to cooperate and attend the settlement conference, and finally the court had to direct what some would refer to as the world’s most intolerable bank, to produce an officer of the bank and show up in court.

On September 22, 2009, Karen Dickinson, IndyMac’s Regional Manager of Loss Mitigation showed up to represent the bank.  Ms. Dickinson claimed that IndyMac was the servicer of the loan, and that Deutsche Bank was the owner, although the record holder was IndyMac Bank FSB, an entity no longer in existence, so who the heck knows what the real deal is on that point.

Judge Spinner wrote that at that conference, it was made clear to the court that IndyMac had no intention of resolving the matter in any way but to foreclose on the property.  At first, Ms. Dickinson insisted that the homeowner had recently been offered a “Forbearance Agreement,” which she claimed had been defaulted on immediately, but after “substantial prodding” by the court, she finally admitted “with great reluctance” that the agreement had not been sent to the homeowner until after the stated first payment was due!  So, just so we’re clear… Ms. Dickinson lied to the court.

According to IndyMac, the total amount due on the mortgage is now $525,000, and the bank freely conceded that the property today is worth no more than $275,000.  The homeowner’s daughter had offered to purchase the property for its fair market value, but good old IndyMac, who is nothing if not consistent in its unreasonableness, flatly rejected the offer.

IndyMac also refused to consider a loan modification that would rely on any more than 25% of the income earned by the homeowner’s husband and daughter, both of whom live in the house.  IndyMac’s excuse was that “We can’t control what non-obligors do with their money,” which caused the judge to consider the logical follow-up question: How does the bank control what the obligor does with her money?

Judge Spinner found IndyMac’s position to be “deeply troubling,” which only shows that he’s an adult with a brain and a conscience.  Further, Judge Spinner stated that there have been “a plethora of sub-prime loans in this County’s Foreclosure Conference Part have been successfully modified with the lender’s reliance upon the income of non-obligors who reside in the premises under foreclosure.”

IndyMac rejected whatever the homeowner offered in terms of an alternative solution.  And Judge Spinner stated that “It should be noted here that Defendant did not even request any waiver or “forgiveness” of the indebtedness aside from some tinkering with the interest rate, just a modification of terms so as to enable her to repay the same.”

The judge described Ms. Dickinson as having an “opprobrious demeanor and condescending attitude”.  And even though, as I read the judge’s decision, I had no idea what that meant, I cheered along anyway.  After looking it up, I discovered that the first definition of “opprobrious” is written as “expressing scorn, contempt or severe criticism,” and the second definition says, “bringing shame or disrepute”.  So, obviously Ms. Dickinson completed Banking & Servicing 101, where I’ve decided they teach you to be an obnoxious prick or bitch, depending on your gender.  (I’d like to take a moment to say a small prayer: Dear God… please let me have the opportunity to kick at least one banker’s ass before I die.  Amen.)

There was some back and forth… Dickinson claimed that the bank had offered the homeowner not one but two modification offers, but that both were refused by the homeowner.  The homeowner basically replied that Ms. Dickinson was clearly smoking crack and out of her mind.  Then Dickinson said that the homeowner’s financial status made her ineligible for a modification under Federal HAMP Guidelines, to which the homeowner basically replied that Ms. Dickinson was smoking crack and out of her mind.  (Okay, that’s not verbatim or anything, but you get the idea, right?)

The judge couldn’t figure out why IndyMac thought they were owed over $500,000 either.  He tried a lot of math equations, but none seemed to make any sense.  Finally, Judge Spinner decided that “the pendulum of credibility swings heavily in favor of Defendant”.  He also said that, taking into consideration the conduct of IndyMac in its entirety, compelled him to invoke an “ancient and venerable principle” known as “Falsus in uno, falsus in omni,” which is Latin for “false in one, false in all”.  (I don’t know about you, but if Judge Spinner ever goes on Jeopardy, I’m betting on him to win by a landslide.)

In the elegant words of Judge Spinner: “Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.”

Judge Spinner also commented that even though the homeowner and her husband have health problems, they, along with their daughter, managed to appear at each and every scheduled conference before the court.  The judge also said that the homeowner, at each appearance, tried their best to resolve the matter “in an amicable fashion, only to be callously and arbitrarily turned away” by IndyMac.

Then Judge Spinner pointed out several things that I have not heard of a court recognizing up until this decision.  He said:

“Were IndyMac amenable, the homeowner would presumably continue to maintain the property’s physical plant, pay taxes thereon and the property would retain or perhaps increase its market value. IndyMac would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars.  In addition, no neighborhood blight would occur from the boarding of the property after foreclosure, which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area.  In short, a loan modification would result in a proverbial “win-win” for all parties involved.  To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.”

Wicked smart… this judge is wicked smart.  If he’s willing to run, I’m willing to support him for President of the United States in 2012, or any other office he might be interested in for that matter.

Judge Spinner also wrote: “The maxim of “clean hands” fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or inequitable conduct in the matter with relation to which he seeks relief.”  And that statement was followed by a whole string of numbers and squiggles that lawyers seem to understand and claim as useful, although I have my doubts.

The judge said that the court, when attempting to reach a decision as to whether to permit the foreclosure, is required to look at the entire situation, and to give careful consideration to “whether the remedy sought by Plaintiff (IndyMac) would be repugnant to the public interest when seen from the point of view of public morality”.  And let’s face it… as far as the public morality thing goes, IndyMac is way repugnant.

Judge Spinner wrote:

“Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary.  The compass by which the questioned conduct must be measured is a moral one and the acts complained of need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong.  Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be.”

And then in closing, my new favorite judge of all time wrote:

“The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant’s benefit.  This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.”

My Conclusion…

Okay… first of all I’d just like to again say “Bravo!” to Judge Spinner for doing the right thing, and for sending a message to IndyMac, and hopefully to all the other banks and servicers, that their egregious behavior as seen consistently throughout today’s crisis will not be tolerated forever by the people of the United States of America.  This decision, as several attorneys have told me, will likely be overturned on appeal… but I have to tell all of the homeowners reading this: I don’t care about that at all.

IndyMac may have changed their name to One West bank, but they will not be able to hide from thousands of homeowners, should they follow suit and file suit.  If it were me, I’d get started immediately.  As anyone close to the foreclosure crisis knows… this isn’t a fluke, this is how IndyMac behaves towards all homeowners at all times.  They are in the home stealing business, and they are not to be trusted… ever.

I have personally received hundreds of stories from homeowners that describe unconscionable behavior on the part of IndyMac/One West Bank.  In point of fact, just yesterday, a homeowner in Buena Park, California called to tell me that IndyMac told her last Friday at 3:30 PM, that she had until Monday at 9:00 AM to come up with some $72,000 or her home would be sold on Monday at noon.  When the homeowner responded that she would be able to pay the $72,000, but would need 4-5 days to get it from her retirement plan account, IndyMac simply and callously said no.  Monday at 9:00 AM was it.

I’m not a lawyer.  Let’s be very clear about that.  And I’m told that this case in New York provides no precedent as it is not an appellate court decision.  In fact, I’ve been told a lot of things by attorneys attempting to diminish the value of Judge Spinner’s decision.  But, again… I don’t care.  People… if you feel that you’ve been or are being tormented by the bastards at IndyMac/One West bank… call an attorney… or file the damn case yourself, if you think you can handle that path.  This homeowner did it, and I think you can to.

Will you win… who knows, but I have to believe that we’ve all been quiet long enough, and with this next year being an election year… there’s no better time to make a statement.  And you have to think that a few thousand lawsuits filed by homeowners across the country would have to be noticed by someone, don’t you?  Look, I don’t know what I’m talking about here, but I wouldn’t let it go just because a couple of lawyers don’t think it will provide legal precedent.

(Sorry, lawyers reading this… but there are times when a citizen should disregard the letter of the law and make a statement, and I don’t want to discourage anyone from doing so based on this decision.)

I would also like to say to Mrs. Diana Yano-Horoski, the homeowner in this case who appeared before the court as a Defendant Pro Se, meaning that she did not have a lawyer: “YOU GO GIRL!”  You are quite sincerely my idol and I will never forget your courage and dedication to pursuing justice in the face of oppression.  You are clearly a patriot who has great faith in this country… and I salute you.

To Judge Spinner… I hope you understand just how much joy you have brought to me, regardless of where things go from here, I’ll always remember reading your decision and feeling renewed hope and faith in our nation as a place where tyranny will not endure.

To Michael Dell and George Soros… This is only the beginning.  Your bank has gone too far and cannot survive the onslaught of homeowners who will never have anything but hatred for what you have allowed to take place.  Mr. Soros, I suppose you are insulated, as no one knows what you do for a living.  Being Jewish myself, the fact that you’re a Jew offends me.  But… Mr. Dude-You’re-Getting-a-Dell… we know where your bread is buttered, and I for one would rather return to using an IBM Selectric II typewriter, white out and all, then ever touch the keyboard of a computer with your name on it.

And last, but by no means least… to Ms. Karen Dickinson. F#@K YOU.  How dare you?  Have you no shame?  You are a person so utterly lacking in character that, for the first time in my life, I find myself fantasizing about the possibility that one day forced sterilization programs will prevent people like you from reproducing and polluting our society as a result.  Everything about you offends me.  All I can do now, is everything possible to put you out of my mind forever.

Pssst… Karen… over here…

When it comes to obtaining a loan modification, Wells Fargo’s reputation is a long way from being stellar.  In fact, they’re one of the worst, according to several attorneys who have had significant experience working with the bank on behalf of clients over the past six months.  So, when I read this past week that a woman in Phoenix had filed a complaint claiming that Wells Fargo had ignored her request for a modification, it was hardly news to me.

According to a story from KPHO.com, Channel 5 in Phoenix, the woman’s name is Bobbi Giguere, and apparently she applied to Wells Fargo for a modification this past December after losing her job, and got nothing but lies, the run-a-round, and finally a foreclosure notice in return.  The KPHO.com story quoted her as saying:

“I sent them everything they asked for, and then when I called to follow up they said, ‘What paperwork? What modification?  We don’t know what you’re talking about,’” said Bobbi Giguere.

So, now a federal bankruptcy judge in Phoenix, Judge Randolph Haines, has ordered that a top Wells Fargo executive must come and testify about the bank’s loan modification policies.

Ms. Giguere’s bankruptcy attorney was also quoted in the story as saying that it’s “very unusual” for a judge to issue such an order.  “The judge is trying to send a message to Wells Fargo and other banks that they need to pay better attention to customers who want to modify their home loans,” Nussbaum told Phoenix’s Channel 5.

Okay, so what?  Big deal, right?  Yet another story about a bank or servicer not doing what they’re supposed to do under the president’s Making Home Affordable program.  Well, here’s the rub…

Again, according to the KPHO.com story, Wells Fargo responded by issuing the following statement from Mary Coffin, the bank’s head of home mortgage servicing.  It said:

“We appreciate the court giving us the opportunity to share our servicing practices, which include working with all customers facing hardships — even if they declare bankruptcy — until every reasonable option to prevent foreclosure has been exhausted.”

The bank “appreciates” the court providing the opportunity to “share” servicing practices?  Does anyone not see just how far from contrition we are here.  We, and by “we” I mean anyone involved in obtaining loan modifications from servicers, all know what’s going on here… Wells Fargo is full of you know what.

They routinely deny having received paperwork, routinely refuse to comply with the rules of the president’s program, and obviously aren’t the slightest bit concerned that they be called to task for their widely known shortcomings that are putting people out of their homes and onto the street.  Their practices are costing our president a great deal of credibility, and preventing our economy from even coming close to starting on a path to recovery.

CBS 5 News also reported that after running the story, many other homeowners contacted the station, “sharing remarkably similar frustrations”.

According to the station:

“Getting the runaround about lost paperwork was amongst the most common complaint.  The complaints came from customers using a variety of loan providers, including but not limited to Wells Fargo and Bank of America.”

Channel 5 also quoted Arizona Attorney General Terry Goddard as giving banks and servicers “a D minus” when he was asked to grade them as related to helping homeowners obtain loan modifications.  He went on to refer to the servicers’ response to the president’s program as “pathetic”.

Apparently, Channel 5 called Wells Fargo for a comment on the case and Ms. Coffin replied that the bank “could have offered better customer service and definitely could have communicated better.”  Well, gee golly whiz… could they now?  Is that all they could have done?

Listen, I’ve had enough with the sugarcoating that surrounds this issue.  What the bank/servicer could have done is live up to its agreement to participate in the Making Home Affordable program.  Wells Fargo took billions of dollars from taxpayers and they agreed to the terms of the president’s program.  They need to live up to that agreement and they’re not… not even close.  What was the percentage of Wells Fargo loans modified under the program that was reported last week in the administration’s “report card”?

Oh yeah… 6%. And in response, Wells Fargo’s Mike Heid, co-president of Wells Fargo’s mortgage unit issued the following statement:

“We know we’ve fallen short of our customer service goals in some cases.”

They’ve got to be kidding.

According to Phoenix’s Channel 5, “a Wells Fargo executive is scheduled to testify in federal court on September 3rd.  The hearing was originally scheduled for this week, but the judge granted Wells Fargo an additional two weeks to research internal records and prepare their case.”

Wells Fargo needed a little extra time?  In my view, they should have been given the same amount of extra time they’ve too often given homeowners before they’ve foreclosed on their homes… none.

1. Will the Real Scammers Please Stand Up?

Charging advance fees for loan modifications… Telling homeowners to stop making payments because they must be in default to be eligible for a loan modification…. Starting foreclosure proceedings even while a homeowner is under consideration for a loan modification.

What’s this?  They must be talking about some scammer loan modification company, right?

WRONG!  But thank you for playing…

Those are the charges leveled in Congress last week against MORTGAGE SERVICERS that have signed on to participate in President Obama’s HAMP program, administered by Treasury, whose lofty goal is to modify millions of mortgages for struggling American homeowners.  I, on the other hand, want to be 6’8”.

Sen. Chris Dodd, D-Conn., has politely requested that the administration investigate the alleged abuses of the program.  Well, bless his heart.

“If true and widespread, abuses of this kind threaten to undermine the effectiveness of the HAMP program and deny the relief on which so many Americans are depending for their financial stability,” Dodd, Chairman of the Senate Banking Committee, wrote in a July 23rd letter to Secretary Geithner and Housing Secretary Shaun Donovan.

Really?  Now why would that be the case?  Don’t you need “effectiveness” before you can “undermine effectiveness?”  How do you undermine something that isn’t even there?  Oh, never mind… I’m probably being to particular again… you know me and words.

And besides all that… I’m sorry, Senator… but that’s just not enough.  Not even close.  Why aren’t these servicers being branded as “scammers” as so many private sector firms were when similar allegations have arisen against them?  It’s not funny either; it’s a big part of why so many Americans don’t trust you or anyone else in government today.  Do you think no one notices?

So, I assume you’ll be following the investigation carefully and reporting publicly on your findings, right?

Well, I will your Senatorship… I most definitely will.

(Oh, and by the way… how do you sleep at night?)

2. JPMorganChase & their loan mod numbers… true patriots, every last one of them.

JPMChase says that they’ve modified 131,000 mortgages… so, yay!

Except that only 11,000 were done as a part of President Obama’s Making Home Affordable program and therefore are from Fannie and Freddie.  So, I’m confused… maybe someone could help me here…

I wonder which loans JPMChase modified first?  No, not the ones they own?  Ya’ think?  No, they wouldn’t do that, would they?  And which ones came second?  The ones on which they have the servicing contract?  Well, now you’re just being cynical.  And how about last?  Go ahead, JPMChase… throw us taxpayers a bone, would you?  I guess since the GSEs are now owned by the government they can wait, right?

Of course, right.

3. Mortgage Servicers Pledge to Accelerate Modifications

Extra, Extra… Servicers called to a command performance in Washington D.C.  Timmy G. to the rescue.

The Obama administration said that more than 200,00 trial loan modifications have begun, and is setting a goal of starting 500,000 by November 1^st.  These guys really inspire confidence, don’t they?  When they say they’re going to take action, they mean it.  They get everyone together, roll up their sleeves and commence goal setting.  Then they go to lunch.

So far, they claim to have started 200,000 trial loan modifications, and what… now they’ve set a goal of starting 500,000 trial loan modifications by November 1^st?  I heard they set another goal too: To begin thinking about starting up to 1,000,000 pre-trial partial modifications by some time in the future.  It’s good to have a goal, I suppose.

The Making Home Affordable modification program has been promoted as being designed to help 4 million struggling borrowers save their homes.  4 million… Well, that’s a relief.  There’s a light at the end of the tunnel… at this pace, only 8 more years and we can start to put this downturn behind us… assuming they stay on plan, of course.  Everything’s coming up roses.

According to Mr. Timmy G… “Today’s meeting was an opportunity to identify ways to accelerate the program and bring relief faster”.

Thanks for effort boys. I’ll be here on the sidelines holding my breath.

4. Countrywide’s Promised Loan Relief Falling Short For Many

As part of a court ordered settlement, the now defunct sub-prime mortgage giant, Countrywide, promised $1 billion in relief to its legions of struggling Florida customers.  Eight months later, borrowers trapped in problem loans say Countrywide is not living up to the terms of the deal.

Look, I know what you’re thinking… that I’m going to be mad.  But I’m not mad at all.  In these uncertain times nothing makes sense to me anymore and I’ve started to appreciate a little consistency in my life.  The way things have been going if Countrywide starts living up to stuff, I’ll probably have a stroke.

The $8.4 billion settlement between Countrywide, Florida and ten other states, allowed Countrywide to avoid prosecution for using “deceptive sales and marketing practices to sell borrowers risky, high cost mortgages.  Perfect… even the settlement allowed Countrywide to avoid stuff.  Well, I’ve always said one should play to one’s strengths.

“My 1 year-old nephew has more teeth than the settlement agreement”, said Dennis Donet, a Miami foreclosure attorney.  Lord, how I do love a funny foreclosure attorney.

A spokeswoman for Attorney General Bill McCollum, however, said that the AG’s office still has the matter under review, but that it appears the company is sufficiently complying with the settlement… one of the largest of its kind in U.S. history.

Fair enough, then.  McCollum says it’s sufficient, and that’s sufficient and will have to suffice.

5. Frank Threatens Banks to Stop Foreclosures

A senior House Democrat threatened banks Wednesday saying that if they don’t volunteer to save more homeowners from foreclosure, Congress is going to make them.  In a sternly worded statement, Rep. Barney Frank (D-MA) said that Congress isn’t afraid to revive legislation that would permit bankruptcy judges to write down a person’s mortgage.

In response, banks in Massachusetts on Thursday foreclosed on an extra 3,000 homes in Frank’s congressional district, causing a crowd of newly homeless families to burn Frank in effigy in the town square.  (Kidding, kidding… I’m a kidder… I kid.)

6. One in Ten California Homeowners Now in Default

New data from First American Core Logic shows mortgage delinquencies climbed in June, with both California posting a default rate of 10%.  That means that 1 out of every 10 mortgage holders in California has missed enough mortgage payments to receive a Notice of Default (“NOD”).

However, actual repossessions are not keeping pace with the defaults. It looks as if the Lenders are dragging their feet on foreclosures.

Lenders say that they’re trying to put the foreclosed homes on the market at an orderly pace, to keep prices from collapsing.

See… and when I started writing this story, I wasn’t sure how I was going to make it funny at the end.  “At an orderly pace, to keep prices from collapsing,” these guys slay me.

7. Bankers Reaped Lavish Bonuses During Bailout

In 2008, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those same nine banks lost $81 billion.

No, don’t read that again.  Just move along.  There’s no reason to do that to yourself.

8. FTC Seeks Comment on Proposed Rules to Protect Consumers from Debt Relief

Well, well, well…  It looks as if our friends at the FTC have decided to target the Debt Relief Industry.  Now they want to prohibit law firms from charging fees until they have provided the debt relief services.  This is becoming a recurring theme… Shut down any firm that is assisting consumers with reducing their debt to banks.  If you owe a bank money and

9. Who is Doing Loan Mods in North Florida, and how many are they doing?

Here’s a list of the top 10 banks and credit unions engaged in loan modifications in North Florida.  The number of loan modifications was obtained from the respective Clerk of the Courts offices between April 1 and July 12, 2009.

1.  VyStar                                             86

2.  Wells Fargo/Wachovia            80

3.  Sun Trust                                      79

4.  Regions                                         43

5.  BBVA Compass                           41

6.  First Federal Bank of Florida  31

7.  U.S. Bank                                      31

8.  Bank of America                         29

9.  1st National Bank of Nassau   27

10. Prosperity Bank                          26

So, at this rate, the problem faced by the region should about be wrapped up by 2877, assuming they don’t hit any bumps in the road.

10. HUD Announces new Making Home Affordable Guidelines

HUD Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) has implemented changes to its loan modification program to ensure consistency with the Obama Administration’s Modification Program.  So, as of August 15th, FHA borrowers will no longer receive return calls from their servicers, will have their submissions lost at least three times every 90 days, and will be illegally charged advance fees to obtain loan modifications.

I’m kidding… I’m a kidder.

As of August 15^th, FHA borrowers will be able to reduce their monthly mortgage payments through the use of a partial claim, which defers the repayment of mortgage principal through an interest free subordinate mortgage that does not become due until the first mortgage is paid off.  So, we’ve now got a program that not only allows a homeowner to remain in their home, it cements them into it forever.

The FHA plans to pay servicers for each FHA loan modified under this program, which is perfectly understandable because its worked so well in the past, they have piles of extra cash laying around, and the servicers need as much dough as they can get their hands on in order to pay out billions in bonuses next year.

11. Which paragraph is the real one?

One of the following paragraphs was taken word for word from a national consumer publication.  One talks about loan modification firms, and the other about the banking industry.  Don’t rush… if it were easy I wouldn’t have put it here.  Go ahead… which one appeared as the real sentence?

A

“The loan modification industry is teeming with confidence men and charlatans who rip off desperate homeowners facing foreclosure,” he said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

B

“The banking industry is teeming with confidence men and charlatans who ripped off desperate homeowners and caused them to go into foreclosure,” he said. “Despite making promises and even guarantees, these scam artists pocketed thousands of dollars from each victim and then didn’t provide an ounce of relief.”