Testimony Before Congress: The Private Sector and Government Response to Mortgage Foreclosure Crisis
The date was December 8, 2009. Treasury Assistant Secretary for Financial Stability, Herbert Allison provided written testimony before the House Financial Services Committee.Â His testimony was titled: â€śThe Private Sector and Government Response to the Mortgage Foreclosure Crisis.â€ť And I read it.Â The whole damn thing.Â You can too.Â But, for those of you that have the good sense not to, I thought Iâ€™d pull out the highlights and provide a little commentary.
And away we goâ€¦
The Administration has made strong progress in ramping up the Making Home Affordable programs. Over 680,000 borrowers have entered into trial modifications and are already achieving significant savings.
Nice start.Â Iâ€™ve always heard that when testifying before Congress, itâ€™s always a good idea to begin with a boldface lie.Â Iâ€™m guessing that this is one of those guys that never fails to mislead.
For the program to succeed in the longer run, however, we recognize that we face several key challenges: reaching more borrowers who are eligible for the program, but who often don’t know how to get help or are not starting trial modifications even when approved; helping more borrowers in trial modifications convert to permanent modifications so sustainable help can be offered; and continuing to improve transparency and enhance the borrower experience, so the public and homeowners can be confident the program is assisting eligible homeowners as intended.
Okay, lookâ€¦ get it straight.Â Youâ€™ve got one challenge: Making banks actually modify loans.Â You donâ€™t have to reach any more borrowersâ€¦ youâ€™ve reached out to enough and ruined their lives.Â Until your abysmal failure of a program actually works, donâ€™t reach out to anyone else.Â As to the borrowers that are approved for trial modifications, but donâ€™t start themâ€¦ wellâ€¦ thatâ€™s because the modifications suck.Â And as far as improving transparencyâ€¦ do you even know what â€śtransparencyâ€ť means? Â Because you keep using that word and I do not think it means what you think it means.
The Administration has taken broad action to stabilize the housing market, including providing support for mortgage affordability across the market.
Shut up.Â Youâ€™re a jackass.
There are clear signs that our efforts are having a substantial impact.
Oh, I could not agree more.Â There are very clear signs that your efforts are making things substantially worse.Â Stop it, please.
House prices measured on a year-over-year basis are declining less rapidly, with some house price measures posting increases in recent months.
That sentence represents the quintessential example of why Americans donâ€™t trust politicians.Â At its core itâ€™s nothing more than an outright lie that went to college.
HAMP is on track to provide a second chance for up to 3 to 4 million borrowers by the end of 2012, averaging over 20,000 trial modifications started per week.
Donâ€™t you get it yet?Â No one is buying your â€śtrial modificationâ€ť crap anymore.Â Trial modifications are scary as hell.Â The term â€śtrial modificationâ€ť is nothing more than a euphemism for â€śyour house sold at auction yesterdayâ€ť.Â And as far as providing second chances, I only hope that you guys donâ€™t get one in 2012.
HAMP faces a number of challenges, including converting trial modifications to permanent modifications and helping Americans stay in their homes in an environment of elevated unemployment.
Yeah, well that certainly sounds like â€śthe recession is over,â€ť doesnâ€™t it?
All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them.
Liar.Â Do you even know how this process works?Â I mean in real life?Â First of all, borrowers have something like eight months to submit the necessary paperwork and by the time they begin a trial modification, most of them have submitted it three or four times.Â Secondly, you donâ€™t need to put people into a trial modification to ascertain whether the payment is sustainable any more than you would need to when originating a mortgage in the first place.
Currently servicers report that about 375,000 trial modifications will have finished a three-month trial period with timely payments before 12/31/2009.
And does that mean theyâ€™ll all be granted permanent modifications?Â At least â€śpermanentâ€ť the way the government thinks of it, which is five years, I believe?
For other borrowers, servicers report that the large majority are current on their payments, but have some of the required documentation missing from applications.
I believe this too.Â Totally.Â Would you like to know which borrowers these are?Â I can tell you.Â These are the borrowers you convinced not to hire anyone to help them.Â â€śJust call your bank directly,â€ť wasnâ€™t that what you said, you miserable piece of manipulative garbage? Â If these people end up losing their homes, itâ€™ll be because they took the governmentâ€™s crackerjack advice, nothing more.
Housing counselors and homeowners report that servicers are losing documents, while servicers report that homeowners are not providing documents despite repeated outreach.
Hereâ€™s an idea: Stop telling homeowners not to hire a lawyer or other expert to help them, and that problem would be solved overnight.Â As far as servicers losing paperworkâ€¦ thatâ€™s not all homeowners and housing counselors are reporting, is it?Â Why not tell Congress the truthâ€¦ once?Â Just to keep the rest of us off balance.
Thousands of borrowers have successfully converted trial modifications to permanent modifications â€“ but this is a low number compared to the total number of trial modifications. Although we know that not every borrower will qualify for a permanent modification, we are disappointed in the permanent modification results thus far.Â We all need to do better at converting borrowers to permanent modifications.
Really?Â Is that what you call it?Â A â€ślowâ€ť number?Â Compared to the total number of trial modifications? Â It’s low.Â Itâ€™s a low number. Â Like the odds of winning the lottery. Â Low. Â Like the odds of being attacked by a shark in Cincinnati. Â Low. Â Like the odds of you ever telling the truth. Â Low. Â And youâ€™re disappointed in the results thus far?Â Iâ€™m sorry youâ€™re disappointed. Iâ€™ll tell the people who have suffered the trauma of having to leave their homes because of youâ€™re incompetence that youâ€™re disappointed.Â Iâ€™m sure that will make some of them want to kill you less.Â You need to do a better jobâ€¦ BWHAHAHAHAHAH.Â You guys are clowns.
Treasury has made a number of improvements to its escalation process. We have worked with Fannie Mae to set up an escalation call center so that borrowers may seek immediate assistance in completing a modification request, or to report suspected misapplication of HAMP program rules by a servicer.
Oh goodieâ€¦ another government phone number for me to call every day.Â I have several friends in India I havenâ€™t spoken with since the last government help for homeowners line.Â I do like the idea of reporting suspected misapplication of HAMP program rules.Â I like it a lot, as a matter of fact.Â Make a note.
On August 4, we began publicly reporting servicer-specific results on a monthly basis. These reports provide a transparent and public accounting of individual servicer performance by detailing the number of trial modification offers extended and the number of trial modifications underway.Â As more detailed data is collected from servicers and validated through Treasury’s data processing systems, Treasury will release reports with greater detail on servicer performance.Â The October report contained trial modification data by state.Â The November report, set to be released on December 10th, will contain permanent modifications by servicer.Â Beginning in January, the reports will include operational metrics to measure the performance of each servicer in categories such as borrower wait time in response to inquiries and response times for completed applications.
Fair enough.Â Iâ€™ve totally enjoyed getting the data so far, and I cannot wait for metrics like â€śborrower wait time,â€ť and â€śresponse times for completed applications,â€ť so I can draw comparisons between them and things like the gestation period of a baby elephant, or the building of the Hoover Dam.
HAMP is built around three core concepts, designed to help the large segment of at-risk homeowners where foreclosure is both avoidable and where the homeowner wants to stay in the home.
First, the program focuses on affordability, in an effort to ensure that borrowers who hope to remain in their homes will be able to afford the modified mortgage payment structure.
For five years, right?Â After that, itâ€™ll be a Republicanâ€™s problemâ€¦ is that what you guys are figuring?
Second, HAMP’s pay-for-success structure aligns the interests of servicers, investors and borrowers in ways that encourage loan modifications that will be both affordable for borrowers over the long term and cost-effective for taxpayers.
And since when do you guys give a hamsterâ€™s petute about something being â€ścost-effective for taxpayersâ€ť?Â I think you can pretty much let that one go at this point.
Third, participating servicers are required to evaluate every eligible loan using a standard net present value (NPV) test. If the test is positive, the servicer must modify the loan.
First of all, no one but the man behind the curtain knows anything about the NPV formula.Â (Actually I do, but I havenâ€™t published it yetâ€¦ does that worry you?Â It should, and I know it does.)Â And besides that, you had better stop using words like â€śrequiredâ€ť and â€śmustâ€ť when talking about the banks.Â Youâ€™re going to anger them and they may dock your pay, or withhold their love in the future.Â Talk like that is no way to get Goldman, Morgan and Citi to come to The White House again.Â Last week at least they said it was fog that kept them in New York.Â Next time itâ€™s going to be rain, and after that â€śa chill in the airâ€ť.
The Administration expects that HAMP can help millions of at risk homeowners remain in their homes, and we are progressing toward our goal of providing assistance to as many as 3-4 million borrowers through the end of 2012.
Oh big deal.Â The Administration also expects to reduce the deficit by spending a trillion on health care. The Administration expects to win a war in Afghanistan in 18 months.Â The Administration expects to fix the banks by suspending the accounting rules.Â The Administration expects a lot of things.
Today, many borrowers are facing foreclosure or in some stage of the foreclosure process. These homeowners are struggling for a number of reasons, many of them outside the control of the borrower: Some were put in unsustainable loans; Many have seen their incomes decline; And some just bought too much home in the hopes of being able to refinance or sell after further appreciation.
Hmmmâ€¦ letâ€™s see.Â Who could have put them in â€śunsustainable loansâ€ť?Â And who could have caused their incomes to decline?Â And who would have even let someone buy more home than they could ever afford? Â And by the way, which homeowners broke the bond market? Â When the Administration figures out the answers to any of those questions, get back to me.
Based on a recent survey of servicers, we estimate thatÂ as of the beginning of November thereÂ were fewer than 1.5 million homeowners who were both 60+ days delinquent and likely to meet the HAMP requirements.Â This puts the approximately 650,000 borrowers who had begun trial modifications as of the beginning of November in a more complete context.Â Â As we have continually stressed, while no one wants to see foreclosures, not all delinquent borrowers will qualify for HAMP modifications.
There will be 3.9 million foreclosures this year alone.Â When will these lunatics realize that foreclosures breed more foreclosures?Â Fixing only a fraction of this crisis isnâ€™t going to fix a damn thing.Â If half the foreclosures are allowed to happen, the result will be another 1.5 million on the edge going over it.
HAMP is helping to stabilize home prices for all American homeowners and, in doing so, aiding the recovery of the U.S. economy. However, it will not reach those outside of the eligibility criteria and was not designed to help every struggling homeowner. Even with HAMP expected to help millions of homeowners remain in their homes, we unfortunately should still expect millions of foreclosures, as President Obama noted when he launched the program in February.
Do you think this guy believes that first sentence?Â Unless by â€śstabilizeâ€ť he means â€śleave in a free fallâ€ť.Â And I just watched President Obamaâ€™s speech from last February, and I didnâ€™t hear him â€śnoteâ€ť that we should expect millions of foreclosures anywayâ€¦ even with his $375 billion Making Home Affordable program in place.Â When did he say that? Â I did hear him talk about principal reductions and 3% fixed loans for 30 years though.
As with any new program with the size and complexity of HAMP, the program faces a number of challenges, which the Administration is addressing aggressively.
If the Administrationâ€™s handling of HAMPâ€™s challenges is an indication of the Administration handling something â€śaggressively,â€ť we are sooooo screwed.Â Â What a bunch of pansies.Â If thatâ€™s what the Administration looks like when itâ€™s being aggressive, I can only imagine how it appears when itâ€™s being lackadaisical and nonplussed.
Borrowers have expressed particular concerns about notices regarding foreclosure actions that were begun before they were considered for HAMP. Under the contract that all participating servicers have signed, any pending foreclosure sale must be suspended and no new foreclosure proceedings may be initiated during the trial period. Foreclosure proceedings may not be initiated or restarted until the borrower has failed the trial period and the borrower has been considered and found ineligible for other available foreclosure prevention options.
That hardly ever happens.Â I mean, who has ever heard of such a thing.Â A servicer foreclosing while a borrower is being considered for a loan modification?Â No way.Â That has only happenedâ€¦ CONSTANTLY!
Every borrower is entitled to a clear explanation if they are determined to be ineligible for a HAMP modification.Â Treasury has established denial codes that require servicers to report the reason for modification denials in writing to Treasury. Servicers are now required to use those denial codes as a uniform basis for sending letters to borrowers who were evaluated for HAMP but denied a modification. In those letters, borrowers will be provided with a phone number to contact their servicer as well as the HOPE hotline, which has counselors who are trained to work with borrowers to help them understand reasons they may have been denied a modification and explain other modification or foreclosure prevention options that may be available to them.
Donâ€™t laughâ€¦ it could happen.
Transparency of the Net Present Value (NPV) model â€“ a key component of the eligibility test â€“ is also important. We are increasing public access to the NPV white paper, which explains the methodology used in the NPV model. We are also working to increase transparency of the NPV model, including new tools that counselors can use to assist distressed homeowners applying for modifications.
Just out of curiosityâ€¦ when?Â Youâ€™re not releasing the NPV formula?Â I know it, and you know it.Â But donâ€™t worry about a thingâ€¦ Iâ€™ll be releasing the NPV formula way before Treasury does.
HAMP has been designed to allow unemployed borrowers to participate in the program. Unemployed borrowers who have 9 months or more of unemployment insurance (UI) remaining are eligible to include UI in their income for consideration in the NPV calculation. Unemployed borrowers are also allowed to include other sources of passive income like rental income as well as income from an employed spouse, which will qualify some borrowers for a modification.
All I can say is that I hope the Ghost of Christmas Loan Mods Past, Present and Future visits this guy on Christmas Eve.
And here we areâ€¦ finally at the Conclusionâ€¦ the end.Â See, that wasnâ€™t that painful, now was it? Â Well, reading it was, for me.Â And I didnâ€™t much like writing about it either, now that I mention it.Â Oh wellâ€¦ itâ€™s over at long last.Â You can read the whole thing here, but donâ€™t blame me if youâ€™re throwing up for days afterwards: Read Complete Testimony Here At Your Own Risk.
And now for theâ€¦
In nine months, the Administration has accomplished a great deal and helped homeowners across the country. But we recognize the continued commitment needed to help American families during this crisis and will aggressively continue to build on our progress to date.
BWAHAHAHAâ€¦ you guys and your recognizing… hysterical.
Sustained recovery of our housing market, and the mitigation of foreclosures, is critical to lasting financial stability and promoting a broad economic recovery.
No kidding. Â But I thought the recession ended in September. Â I thought we were already assured that recovery was upon us.
We look forward to continuing to work with you to help keep Americans in their homes, restore stability to the U.S. housing market and ensure a sustained economic recovery.
BWAHAHAHAâ€¦ Iâ€™m looking forward to it tooâ€¦ BWAHAHAHAâ€¦ really I amâ€¦. BWAHAHAHAâ€¦ I swear.