House Hearings to Answer Question: Are Loan Servicers Honoring Their Commitments to Help Preserve Homeownership?
On Thursday, June 21, 2010, the House Committee on Oversight and Government Reform held a hearing they called: ‚ÄúForeclosure 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‚Äôs Home Affordable Modification Program (‚ÄúHAMP‚ÄĚ) 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‚Äôs Website, and you can read everyone‚Äôs 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‚Äôt recommend it.¬† I read all of them, and I‚Äôm pretty sure I‚Äôm going to have gastro-intestinal problems for the rest of the week as a result.¬† Yeah, I know, you found that funny, but you‚Äôre 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‚Äôs 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‚Äôt 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‚Äôs homeowners that are the problem here‚Ä¶ they‚Äôre 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‚Äôt you know it‚Ä¶ the homeowners screw it all up just like they‚Äôve screwed up everything else in their paltry, unremarkable lives.
Honestly, after reading what the bankers testified to, I don‚Äôt know why I even talk to you people‚Ä¶ 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‚Äôs program‚Äôs success?¬† You just want Obama to fail, don‚Äôt 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:
‚ÄúCHASE has consistently been among the leaders in implementing HAMP and other modification solutions for homeowners.‚ÄĚ
Well, that‚Äôs certainly true, right?¬† I don‚Äôt think there‚Äôs any question about that.¬† CHASE has definitely been ‚Äúamong the leaders.‚ÄĚ¬† Every time you see the leaders hanging out, look left or right and there‚Äôs CHASE.¬† Got to give it to them there.¬† Point taken.¬† Move on.
‚ÄúCHASE 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.‚ÄĚ
People, look‚Ä¶ that‚Äôs a lot of phone calls.¬† I‚Äôd 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.
‚ÄúMailed over two million letters to invite Chase customers to discuss their situation or help them complete their HAMP documents.‚ÄĚ
Oh my Lord‚Ä¶ now I did not know this, did you?¬† They mailed over two million letters to CHASE customers inviting them to come discuss things?¬† That‚Äôs a lot of work all by itself.¬† Don‚Äôt scoff‚Ä¶ do you know how many envelopes their employees must have had to lick?¬† Yuck!
‚ÄúHosted 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.‚ÄĚ
For heaven‚Äôs sake‚Ä¶ how much ‚Äúhosting and participating‚ÄĚ 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‚Äôre burned out.¬† I can only imagine what it‚Äôs 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‚Äôve got some remedial learners owning homes in this country, because they haven‚Äôt learned a damn thing, it seems.
‚ÄúCHASE is committed to keeping families in their homes‚ÄĚ
What more do you want‚Ä¶ blood?¬† They‚Äôre committed, homeowners.¬† Committed to keeping your dumb, broke families in their shoddy little homes‚Ä¶ that you shouldn‚Äôt have been allowed to buy in the first place.¬† How many favors can JPMorgan CHASE do for you people?
‚ÄúAt 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.‚ÄĚ
Well, I just don‚Äôt 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‚Äôre complaining?¬† Don‚Äôt you think all you homeowners are being just a tad ungrateful here?
I mean, really‚Ä¶ this is the testimony of a very busy man.¬† He didn‚Äôt have to come testify, he could have just said he got fogged in, or whatever.¬† He‚Äôs running a national leader in foreclosure prevention, and he‚Äôs 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?
‚ÄúWe 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 ‚Äď like other servicers ‚Äď we have faced challenges in getting documentation required from borrowers to complete the modification.‚ÄĚ
See, stupid homeowners.¬† It‚Äôs your fault.¬† I mean, according to CHASE‚Äôs published figures, CHASE offered 846,542 loan modifications since the beginning of 2009.¬† And here we are, only 18 months later, and they‚Äôve 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‚Äôt spell documentation, that‚Äôs pretty darn good, I think.
I mean, it‚Äôs not like they‚Äôve only permanently modified like five percent of the total.¬† That would suck.¬† Not my CHASE, baby‚Ä¶ they‚Äôve modified 5.6% of the total, so the gloating lamp is lit, ladies and gentlemen.¬† Hey CHASE‚Ä¶ you go girl.
‚ÄúLaunched 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.‚ÄĚ
Had you heard about this?¬† I hadn‚Äôt 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‚Äôt want to reduce the principal for the people living there?¬† They‚Äôd prefer to take it back and then donate it to a nonprofit?¬† Wow.¬† I‚Äôm 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‚Äôs principal for the homeowner, foreclosed, and then gave the house away to some non-profit‚Ä¶ and I will fly there and beat the crap out of whoever it is.¬† Think I‚Äôm kidding‚Ä¶ go ahead, find me the person who did that and we‚Äôll see who‚Äôs kidding.)
‚ÄúBased on the actual re-performance of permanent modifications completed by Chase, payment reduction appears to be the primary driver of post modification re-performance.‚ÄĚ
See, and they‚Äôre learning stuff at CHASE too.¬† They studied it for a couple of years and they‚Äôve come to the conclusion that when it comes to modified loans, payment reduction APPEARS to be ‚Äúthe primary driver of post modification re-performance‚ÄĚ.¬† They can‚Äôt be sure, of course, and no one would expect them to be.¬† But, at this point in the game‚Ä¶ it looks like if you lower the payment, damn if those stupid, broke, irresponsible homeowners don‚Äôt appear to actually make their payments.¬† Who would have ever thunk it?¬† Go figure.
You see‚Ä¶ the first year they did modifications, 60% of them made the payments go up, but then‚Ä¶ and quite surprisingly, I might add‚Ä¶ 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‚Äôs 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‚Ä¶ it APPEARS to have worked.
‚Äú2MP ‚Äď CHASE was one of the first major servicers to initiate the Treasury Department‚Äôs 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.‚ÄĚ
Well, technically speaking, I don‚Äôt believe that any second liens have actually been modified under the 2MP program, but hey‚Ä¶ at least CHASE was one of the first major servicers to participate.¬† That‚Äôs something.
‚ÄúThere 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.‚ÄĚ
See, there‚Äôs more of that learning happening again.¬† 75% of mortgage defaults are caused by issues of affordability‚Ä¶ so, borrowers default when they can‚Äôt pay!¬† Good for you guys at CHASE!¬† And the number one reason is ‚Äúa recession driven decline in income‚ÄĚ.¬† Very good, as well!
And what was it that caused the worst recession in 70 years‚Ä¶ the sharpest and deepest downturn in our economy since the Great Depression?¬† Come on‚Ä¶ you can do it‚Ä¶ it was the incomprehensibly greedy and entirely unregulated asshats like you guys at JPMorgan CHASE!¬† Yay!¬† Very, very good!¬† It‚Äôs 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‚Äôt live without you that you all got bailed out 100 pennies on every dollar.¬† Even better that that‚Ä¶ 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‚Äôs teat, aren‚Äôt 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‚Ä¶ she complains a lot about how difficult it was to integrate all those messy Countrywide loans into BofA‚Äôs system.¬† After that, however, she goes on to say pretty much the same unadulterated crap that Davey Lowman said above‚Ä¶ so why bother.¬† You can read it for yourself‚Ä¶ just scroll back up and click the link, and then scroll down and you‚Äôll 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‚Äôt a clone of the others, and his name is Edward J. Pinto.¬† I‚Äôve 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‚Äôt like my calling him whatever I called him, and said that I shouldn‚Äôt call him those things because he‚Äôd been doing his research into HAMP ‚Äúpro bono,‚ÄĚ which means free, if you went to college, or are visiting from ancient Rome.
I didn‚Äôt understand his reasoning at the time, to tell you the truth, unless by ‚Äúpro bono‚ÄĚ he actually meant ‚Äúokay to be sloppy and ill informed‚ÄĚ.¬† 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 ‚Äúpro bono‚ÄĚ.¬† 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‚Äôs wife.¬† And no, I‚Äôm not sorry about that‚Ä¶ it‚Äôs 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‚Äôt totally insipid and inane.¬† Speaking about HAMP he did make the following statements:
‚ÄúThe truth is HAMP has been a spectacular failure when measured against the original goal of helping 3-4 million homeowners avoid foreclosure.‚ÄĚ
He also pointed out Treasury‚Äôs propensity for ‚Äúapplying a rosy gloss,‚ÄĚ by showing that the May HAMP report stated:
‚ÄúMost homeowners in canceled trials became current on mortgage payments or enter an alternative modification.‚ÄĚ
But according to Mr. Pinto, and I‚Äôm confident that his numbers are right this time:
‚ÄúIt 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‚Äôs statement.¬† It turns out that some 95,000 or about 50% are in ‚Äúalternative modification‚ÄĚ.
Now, will you lookie at that.¬† I believe what you have right there is the Treasury Department lying its ass off‚Ä¶ again.¬† Yoohoo‚Ä¶ Mr. Geithner‚Ä¶ why can‚Äôt you ever tell the truth about anything?¬† It makes me sad.¬† You make me miss our ex-Attorney Generral, Alberto ‚ÄúI-can‚Äôt-recall‚ÄĚ Gonzales.
Then Pinto does it again, but right at the end he made me spit my coffee all over my desk.¬† He said:
‚ÄúThe Treasury Department also promised ‚Äúclear and consistent loan modification guidelines that the entire mortgage industry can use.¬† There are only two words to describe HAMP‚Äôs 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.‚ÄĚ
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‚Ä¶ 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‚Äôt the fault of servicers.¬† Okay dumbass‚Ä¶ I want to know how many street level modifications you‚Äôve 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: ‚ÄúServicers 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.‚ÄĚ
Oh, so what Ed.¬† The crisis has been going on three years, and we‚Äôve given the banks and servicers a blank check to help them with their many ‚Äúchallenges‚ÄĚ.¬† It was like‚Ä¶ 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‚Äôve 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‚Äôd like to blame just about anything on HAMP, and the Obama Administration‚Äôs stupidity and insensitivity in allowing it to go on this long, I don‚Äôt 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‚Äôt even be around in seven years‚Ä¶ in fact I‚Äôd be shocked it Fannie was still around next year or the year after at this time.¬† And who are they going to sue‚Ä¶ 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‚Äôll tell you one thing their threat did for me‚Ä¶ 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‚Äôm so looking forward to it.¬† I‚Äôm thinking about blogging and Twittering all about it as it unfolds.¬† What fun, don‚Äôt you think Fannie Mae?
Lastly, Herb Allison, the man from Treasury that simply cannot keep his mouth shut, had to weigh in with his ‚Äúeverything is going according to plan‚ÄĚ speech.¬† Yes, it‚Äôs Mr. Herb Allison, another past focus of mine.¬† If you believe anything Herb says, and I‚Äôm pretty sure no one does, then HAMP wasn‚Äôt 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‚Äôs testimony from March 25, 2010, but click that link and you can relive how distorted a human being‚Äôs though process can become.
‚ÄúAt 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.”
‚ÄúThe President‚Äôs statement about ‚Äėenabling‚Äô modifications is the reason that we have continued to report offers of trial modifications ‚Äď 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.‚ÄĚ
‚ÄúA 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 ‚ÄĒ an average reduction of around $500 per month.‚ÄĚ
‚ÄúIn 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.‚ÄĚ
‚ÄúThe 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‚Ä¶ everything‚Äôs going just great with HAMP and the whole foreclosure thing.¬† Stop being such Gloomy Gus’s, or Downer Dan‚Äôs‚Ä¶ We held a hearing and the bankers said everything is fine‚Ä¶ it was even on C-Span.¬† One crazy guy named Pinto made some points but obviously there‚Äôs nothing to worry about.
And there‚Äôs 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‚Äôre fine I tell you‚Ä¶ there‚Äôs nothing to fix here.¬† What foreclosure crisis?¬† I don‚Äôt see any foreclosure crisis.¬† And don‚Äôt worry‚Ä¶ I‚Äôm sure Congress will check with the bankers in a few months if they‚Äôre 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‚Äôs true‚Ä¶ people are swimming in it again. ¬†Apparently our guys in Congress asked the oil barons and they said‚Ä¶