Loan Modifications: Obama’s Part of Problem, Not Solution

I didn’t want to ever have to write that headline.  Like so many millions of Americans, I voted for Barack Obama and truth be told there was one big reason.  No, not Sarah Palin.  And not because he was the anti-Bush.  I voted for Barack Obama for a reason that didn’t show up in the polls: the housing foreclosure crisis; he would do something to stop it.

I know now that I’m far from being alone in this.  And I know why it didn’t show up in the polls, after all, during all that joy that was present during the month leading up to the Obama victory, and certainly immediately following it, who was going to talk to pollsters about something as depressing as being at risk of foreclosure?  Even today, few people want to make public the fact that they may be losing their home, or even that they’ve already lost a home to foreclosure.

It’s in the press, no question about it, but more in a macro sense.  It’s “out there,” as opposed to being “right here”.  Even here in Southern California, one of the hardest hit areas of the country in terms of people being at risk of foreclosure, I run my errands, go about my business, and don’t bump into it at all.  In fact, as I wait for my car to come up in valet parking, all I see are BMWs, Mercedes, and Lexii… the foreclosure crisis seems very far away, even though I know, and certainly as well as anyone, that it’s not.

I know because of where my writing has taken me.  I never intended to write over 150 articles about the foreclosure crisis.  And I never thought my writing would touch the lives of so many homeowners that they would call or write to me to tell me their stories and ask my advice.  Why would they?  I knew nothing about mortgages, and the only way I knew to avoid foreclosure was to pay my mortgage payment each month.  Why would anyone call me?  But they did and they have and they still do… every single day.  And I have no idea how many at this point… hundreds certainly, maybe more.  And I talk to them all, sometimes for hours at a time because I care a whole lot about what’s happened to them, and what’s happening throughout our country, and I don’t know if I can really matter, but I have to try.

I started writing about the meltdown in earnest about a year ago, although I did write a few articles beginning maybe a year before that.  My first was about what was happening on Wall Street and why.  I think the headline read: What’s Happening on Wall Street and Why… I’ve never been a very clever headline writer.  I wrote it to help people understand what I knew was a very complex problem, but also one that everyone would soon need to understand.

Then, the government followed by the press, started laying the blame for the crisis on “sub-prime borrowers,” and I felt compelled to get involved.  It was never “the borrowers,” who were at fault for causing this crisis, let alone the sub-prime borrowers.  People with relatively low credit scores and incomes who wanted houses did not destroy the U.S. and global financial markets, no matter what anyone might think.  And it wasn’t stated income loans either.

Of course, I chose sarcasm to express my point.  I made a tee shirt that read:  “Sub-Prime Borrowers Unite.  Be Nice to Me or I’ll Stop Making My Car Payments Too.”  And I wrote an article to go along with that sarcastic sentiment: “Coming to Terms With the New Power Elite: Sub-Prime Borrowers.”  The article was my attempt to point out the fallacies that had quickly become conventional wisdom… it was the sub-prime borrowers’ fault.  It was nonsense then… and of course we now know that 54% of the foreclosures are prime loans, that it wasn’t the borrowers at all… it was and is the banks that have caused this pain.

Borrowers didn’t break the capital markets.  Borrowers didn’t fraudulently package mortgage backed securities and stand by as they were improperly rated AAA.  Borrowers didn’t slice those securities up into a million derivatives, or leverage them to the hilt, before buying and selling them along with their worthless insurance policies known as credit default swaps.  Nope, as all of these things and more went on, there wasn’t a single borrower to be found anywhere.

Most annoyingly, it certainly wasn’t borrowers who, knowing that increasing future defaults were imminent, agreed to lower their bank’s reserves for future losses in order to pay themselves untold billions in bonuses.  There’s another way of putting that… it wasn’t borrowers that robbed the banks, it was the bankers that robbed the banks.  (Why they all still have jobs is beyond me.  How big a bank do you have to rob in this country to go to jail anyway?)

Of what were the borrowers guilty?  Every time I ask this question I get a fringe answer.  You know, the story: A 19 year-old college student bought an $11 million home on the water in Newport Beach.  Or how about: The family with income of only $3600 a month, but whose mortgage payment was $4800.  It’s a lot like when people talk about welfare fraud, and they point to some woman with 19 children who hasn’t even looked for a job since 1983, conveniently ignoring the fact that more than 70% of welfare spending is spent on children.

At worst, borrowers were guilty of bad judgment.  Of trusting bankers.  Of wanting more in life than they had in the past.  Mostly, however, borrowers were guilty of not seeing The Great Depression Part 2 coming around the corner, just like… say Henry Paulson, or Ben Bernanke.  Bankers, on the other hand, well… many of them were guilty of criminal fraud.  Of manipulating securities.  Of trading on inside knowledge.  Of lying left and right to everyone, if that’s still a crime in this country.

So, I wrote in order to help people who were suffering understand that what was happening in this country, as our economy slid further into the abyss, was not their fault.  It was a controversial viewpoint in the beginning, and I’m thankful it is much less so today.  One day, and not so far from now, it won’t be controversial in the least.  As of September 26, 2009, the Justice Department is working on 570 cases related to the demise of Wall Street’s banks, so it won’t be long before we all see the arrests and criminal charges levied against the mortgage bank robbers who used to think, a’la Enron, that they were the smartest guys in the room.  As far as I’m concerned… that day cannot come soon enough.  Maybe then we can start the healing process, and maybe we’ll be better for it.

Regardless of all that, here we are in the fall of 2009 and the crisis has only deepened, and deepened significantly.  Not only is that the case, but in addition, both our state and federal governments, by virtue of their incredible lack of understanding as to what’s really going on, have only made things worse… and significantly worse.  What’s up with these guys?  Do they just feel compelled to turn checkers into chess, or are they actually so out of touch that they can’t even see how incredibly stupid they so often appear?

I’m really not sure anymore, but if anyone in government is reading this, and I know that you are, then you might as well hear it from me… you’re embarrassing yourselves… terribly, and although it may not be showing up in today’s poles, it’s there… just under the surface, waiting for the curtain to close in the next election’s voting booth.

Brass Tacks…

Okay, so let’s dispense with the pleasantries and call it like it is.  According to our government, here’s all there is to know about getting a loan modification:

1. Call your bank directly.  You don’t need anyone to help you with a loan modification.  It’s easy, thanks to the President’s Making Home Affordable program.

2. If you feel you need assistance, call a HUD counselor, or other nonprofit.  That’s it, and that’s all.

3. Whatever you do, don’t pay anyone in advance, no matter what, because paying in advance always makes someone a scammer.

4. There are zillions of scammers out there ripping off what must be hundreds of thousands of homeowners each day.  I’m surprised every time I leave my house these days and return home without getting scammed.  Just lucky, I suppose.  Oh and by the way, so far the FTC and the Attorney General have shut down… 22 companies. I feel a lot safer.

5. If a private sector company wants to help homeowners, it should be willing to work for months on end with a lender or servicer and then send their bill at the end.  What a plan… become an unsecured creditor of someone who is having trouble paying their bills and already has bad credit.

And that’s not even the worst of it…

The irrational thinking has led to some of the most contradictory statements that I’ve ever heard come out of a legitimate government.  Try these…

  • These people paid this company $3,000 and they didn’t even get a loan modification.
  • No company can guarantee you that your loan will be modified.
  • If they fail to get your loan modified, they have to refund your money.
  • You don’t need help getting a loan modification; it’s easy to do it by yourself.
  • For help with a loan modification contact a HUD certified counselor.
  • The law firm took the client’s money and failed to deliver anything of value.
  • According to the Obama Administration, servicers aren’t doing what they agreed to do.
  • Bank of America only modified 4% of the eligible loans.
  • Lawyers are using their law licenses to con desperate homeowners out of $3,000.
  • August foreclosures came in at 356,000, the sixth straight month over 300,000.
  • Another wave of foreclosures expected.
  • The recession is over, probably.

Look… I’m not playing around here.  Stop treating the country like we can’t put two and two together.

The evidence of servicer nonperformance is now abundant, and coming directly from the U.S. Treasury, but nothing the government says has changed one iota.  Hasn’t anyone linked the two things together… the servicers’ refusals to do modifications, with the firms failing to obtain loan modifications?  Really?  Someone do something about this… this one is too stupid for me to mention ever again.

They attack private sector companies that charge a fee for trying to help someone accomplish something that the government can’t get done either, even after giving away a few hundred million.  WTF.

I read stuff like this every day.  Just a few weeks ago, a friend who knows how much this stuff annoys me, sent me an article that had appeared in a mid-western newspaper.  It was a front-page type of article, showing a nice young couple with a baby in their arms, in front of a foreclosed home, REO sign and all.  To sum it all up in a phrase… the story said that the couple had written a supposed law firm a check for $1,000 last March, the company was the now infamous FedMod… and that’s why they lost their home.

Holy macaroni!  I had no idea that could even happen to someone as a result of writing a check to a law firm, regardless of whether the law firm was legit or not.  I wrote a check to a contractor once for $2500 and got ripped off, but I didn’t lose my home or my car or anything as a result.  What the heck happened here?

I wonder what the government brain trust thinks when they see people continuing to write checks to companies up front, even though everyone in America has been told by the President and everyone else on down, not to do that.  Why do you suppose they keep doing it, are they stupid?  Don’t people watch television?

No, they heard you.  They’re doing it because they’ve tried what you suggested and it didn’t work worth a damn.  Are you listening, by the way?

There’s another possibility, of course.  They could all be in the pocket of the banks, but that’s hard to believe.  I’m not talking about Obama, Geithner, and the gang at the Harvard Goldman Club… they are unquestionably in the banker’s pockets.  I’m talking about everyone else in state and local government… the bankers can’t have bought them all over to their point of view, can they?  All of them?

I can’t be the only one that sees what the banks are doing here, right?  I know at least 100 attorneys that know what they’re doing because they’ve seen it first hand on hundreds of occasions.

Banks are telling homeowners that they don’t need a lawyer.  Isn’t that giving legal advice?  Isn’t that the unauthorized practice of law?  Why, yes… I believe it is.  But who in the country has the balls to sue or bring charges against a bank?  Likely, no one.  And besides… why all of a sudden does everyone care so much whether I hire a lawyer?  I’ve run my own firm for twenty years… and no one ever cared if I hired a lawyer before.  Now it’s seems that even the American Bar Association doesn’t think lawyers should be representing homeowners trying to obtain loan modifications.  Why do you supposed that would be?

The Bottom-Line…

President Obama… we haven’t heard from you on the housing and foreclosure crisis since last spring when you gave a speech to adoring and cheering crowds.  You set their expectations way above what your program delivers, your administration has spent more time grandstanding over the 22 firms you’ve shut down… you’ve made a mess.

One homeowner who watched your speech in late February recently told NPR that when he heard you describe the program he felt as if you were speaking directly to him.  And then he went through hell trying to get one.  It wasn’t his fault, Mr. President… it’s yours.

This whole thing… the foreclosure crisis is going to be laid at your feet in 2010.  Either you owe quite a few people an apology, or you better get on the stick and fix it… fast.

We didn’t vote for you in order to hear excuses about servicers being overwhelmed.  And we certainly didn’t vote for you in order not to hear from you… to have Treasury and the Fed stonewalling Freedom of Information requests.  We voted for you because it meant change.  And so far, when it comes to the foreclosure crisis, what you consider change is not the kind many people are believing in these days.

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