Republicans Preparing to Play Politics With HAMP

House Republicans have introduced legislation that would repeal HAMP, the administration’s Home Affordable Modification Program, saying that the program is “a colossal failure,” and running around quoting the latest SIGTARP report published by the Inspector General for the program, Neil Barofsky.

So, just curious… who woke up the House Republicans, a group who have otherwise been fast asleep these last two-plus years, at least as far as the foreclosure crisis is concerned.  In point of fact, over the last two years, and even before that, the Republicans have been quiet as church mice about the failure of HAMP or any other effort to mitigate the damage being caused by the foreclosure crisis. Now, all of a sudden, they care?  Not hardly.

Besides, Barofsky didn’t say that the HAMP program wasn’t helping people or that the program’s construct was, in itself, the cause of its failure… in his testimony to Congress last week, he made it very clear that it’s the banks and their mortgage servicing companies that have caused HAMP’s failure, combined with Treasury’s unwillingness “to rein in or impose penalties on the mortgage servicers” whose record “has been nothing short of abysmal”.

Barofsky, the program’s “watchdog,” is saying that it’s NOT HAMP that has failed homeowners… it’s the banks and their mortgage servicing companies along with the utterly insipid and I would say, downright flaccid federal regulators that have misled and even defrauded millions of American homeowners, allowed the foreclosure crisis and housing prices to remain in free fall, and caused HAMP to be labeled a failure.

The truth about HAMP, and it’s important to remember that I have been one of the harshest critics of the program since the night it was first described by the president in late February of 2009, is that as of the second half of 2010, the program finally started to improve in its effectiveness, both in terms of providing modifications, and because it has positively influenced and to some degree standardized the structure of modifications offered outside of HAMP, and that are much more commonly offered by lenders and servicers.

HAMP, you should realize, is just one methodology for modifying a loan that is seriously “impaired” or in other words, in danger of default if not modified, but there are countless other ways such a loan might be successfully modified.

In a HAMP modification, the servicer multiplies the borrower’s gross income by 31% and then subtracts from that amount monthly property taxes, insurance, and HOA (Homeowner’s Association) dues, if applicable.  The result of that calculation is referred to as the “target monthly mortgage payment.”

Next, to determine the qualifying interest rate, the servicer adds to the loan balance any back payments that haven’t been made and any interest or escrow advances owed.  The servicer then simply lowers the interest rate in 1/8th of one percent increments, which if stated numerically is .125, all the way to the floor of 2%, or until the target monthly payment is reached.  If the target monthly payment cannot be reached even with a 2% rate, then the servicer extends the term of the loan up to 480 months, or 40 years.

HAMP guidelines also state that the servicer may consider reducing the principal in order to reach the target monthly mortgage payment, and although there are reports that say that such reductions have been granted in something like ten percent of cases, it’s far from clear how these decisions have been made, and they’re certainly not made very often.

The point is that even though, according to the latest SIGTARP report, there were only 522,000 permanent and 152,000 trial modifications under HAMP as of December 31, 2010, various reports also show that there have been at least 3 million loans modified in the aggregate, so loan modifications, whether under HAMP or through a servicer’s own in-house modification program, do get done every single day, and HAMP’s guidelines have helped establish some framework for all loan modifications, not just those modified under the program.

There’s no question that HAMP started very badly, but that was when the media and the banks were telling everyone that it was going quite well.  Then came the end of 2009, and we learned that there were trial modifications everywhere, but permanent ones could be counted on one hand.  Next up came the bloodletting and hundreds of thousands of homeowners were told they did not qualify for the program… and finally, the program’s rules changed and applicants were told that they had to document their income before they would be placed into a trial modification.

You see, up until June of 2010, anyone could get a trial modification.  In fact, some companies opened up and offered to get homeowners into a trial mod in a matter of hours.  The problems with that idea should have been obvious to anyone with a brain… people who did not qualify were told that they did and placed into a trial modification and I’m talking by the hundreds of thousands.  As of June 2010 things changed dramatically when the income documentation became a requirement of application.  Overnight, the number of people applying dropped through the floor.

As usual, the morons that report these things to the masses, claimed that this reduction in the number of applicants was the result of the foreclosure crisis abating, or some such other nonsense, but it should be easy to seen what was happening… the quality of applicants was improving.  Since then, things with HAMP have gotten progressively better, which is not to say that the program is performing as it was advertised by the Obama Administration, when the president said it would help 3-4 million homeowners, but better is still better.

And, as of January 26, 2011, Bloomberg is reporting that the number of participants in HAMP is still growing.  In November of 2010 participation was up by 4.5% over the prior month, and in December it was up by 5.5% over November’s numbers.

I’m not saying that the news about HAMP should be viewed as being positive, in fact far from it and deservedly so, but what Barofsky said in his report to Congress was:

“… while HAMP may provide a significant benefit for those who are fortunate enough to benefit from a sustainable permanent modification, given the current pace of foreclosures, HAMP’s achievements look remarkably modest, and hope that this program can ever meet its original expectations is slipping away.”

Barofsky’s criticisms of HAMP were primarily the same as what was said in the Congressional Oversight Panel’s December Oversight Report – A Review of Treasury’s Foreclosure Prevention Programs (“COP Report”), which was just published last month, in December 2010.

The congressional panel’s report and Neil Barofsky’s both concluded that HAMP’s ultimate performance would fall far short of its promise to help 3-4 million homeowners avoid foreclosure… to say nothing of the 8-13 MILLION FORECLOSURES EXPECTED BY 2012.  And to anyone close to the foreclosure crisis and the situation surrounding loan modifications, this was no surprise.

Both reports, however, also honed in on Treasury’s failure to hold mortgage servicers accountable for their inadequacies, which was likely the understatement of the century.  As stated in the COP Report:

“Treasury has also failed to hold loan servicers accountable when they have repeatedly lost borrower paperwork or refused to perform loan modifications. Treasury has essentially outsourced the responsibility for overseeing servicers to Fannie Mae and Freddie Mac, but both companies have critical business relationships with the very same servicers, calling into question their willingness to conduct stringent oversight.

Freddie Mac in particular has hesitated to enforce some of its contractual rights related to the foreclosure process, arguing that doing so “may negatively impact our relationships with these seller/servicers, some of which are among our largest sources of mortgage loans.” Treasury bears the ultimate responsibility for preventing such conflicts of interest, and it should ensure that loan servicers are penalized when they fail to complete loan modifications appropriately.”

And that was certainly illuminating, even for me.  I mean, I knew that banks had too much clout with our government in general, everyone should realize that by now, but I did NOT realize that even Fannie and Freddie were too scared of damaging their relationships with them to enforce the Treasury’s rules and expectations for the government’s program.  That’s absolutely amazing, if you ask me.

The COP Report was also fascinating when, on page 5 of the report, it pointed out the following as a way to improve the program’s performance:

“Treasury should also carefully examine HAMPs track record to pin down the factors that define successful loan modifications so that similar modifications can be encouraged in the future.”

No kidding… gee, now’s there’s an idea.

Now, who was it that, ON SEVERAL OCCASIONS, was asking Treasury to report on the percentage of homeowners who received modifications resulting in savings to borrowers of least 20% per month… THAT WERE REPRESENTED BY AN ATTORNEY?  Hmmm… if I could only remember… oh wait… I remember now… IT WAS ME last August when I wrote the article titled: Why Can’t We Answer the Question About HAMP That Could Save Taxpayers Tens of Billions.

I asked that question and made that request because in Treasury’s March 2010 HAMP Scorecard, it showed that the re-default rate on HAMP loan modifications was CUT IN HALF when the modifications resulted in monthly savings of 20% or more.  So, wouldn’t it be interesting to know how many of the homeowners that did receive modifications saving them 20% or more per month had expert help, as opposed to going it alone?  I sure thought it would, but maybe that’s just me… because I also know the answer, of course, and the percentage would be high… very high.

(By the way, should you be a nerd like me and want to see all of Treasury’s HAMP Scorecards to-date, here’s the link to the U.S. Department of the Treasury’s Program Results page.)

You see, I get to talk with dozens of homeowners in various stages of the loan modification process and from all over the country each month.  Because I write about the subject almost every day, they contact me to ask what I know about loan modifications or to find out whether I know any trusted attorneys in their area with whom they might speak.  Although I’ve never personally handled a loan modification, I do my best to help, and I try to follow their cases as they move forward.

I see the struggles that go on, the lies servicers routinely tell, the runaround… but I can’t remember the last time I saw a home lost to foreclosure that was qualified for a modification, or the last time that a lawyer’s work didn’t result in a significant savings for their client.  (Maybe I only get to see the good ones?  Well, that would be lucky, don’t you think?)

I have seen people about to give up based on what they were told by their servicer.  I’ll never forget the woman who called me right before the Christmas holiday this past year.  Her application had just been denied by Bank of America and the bank had scheduled a trustee sale date for January 7th.  Understandably, she was a wreck.  I listened to her describe her situation and offered to call a friend of mine who is a lawyer that helps homeowners get their loans modified.  To make a longer story short, my friend agreed to help the woman and two days before New Years Eve, I got the call: Bank of America had agreed to modify the loan in question.

Another couple that had called me some months ago, and that had tried for many months to get Chase to modify their loan, I also referred to a law firm that I’ve seen do some great work with loan modifications.  Just a couple of weeks ago I got their call: Chase had not only modified their loan, but they had granted the couple a $211,000 principal forbearance, and their monthly payment on their $475,000 mortgage would be only $1200 a month for the first few years, rising only slightly after that.  Could they have accomplished that on their own… no a chance in the world.

The overriding point is that back in 2009, I could not have made such statements, as evidenced by the dozens of articles I posted that ripped apart the misinformation that was coming from everywhere about how successful the program was… when it most definitely was not.  Throughout most of 2009, in fact, I routinely… and by that I mean daily… heard from homeowners who were being unfairly denied for loan modifications and were losing homes as a result.

Not only that, but if you remember 2009 it was the year of “you don’t need a lawyer, just call your bank directly… blah, blah, blah…”  Or the equally as popular, “call a HUD counselor.”  I think today, most homeowners have learned that this sort of statement is nonsense, although I will readily admit that it’s more than difficult to wade through the many scams out there in order to find a legitimate attorney, which is just one more thing the government has screwed up badly as related to the foreclosure crisis.

Of course, many homeowners need someone representing them in order to get their loan modified, is that so difficult to believe?  Let’s see… it’s Mr. and Mrs. Finnigan against JPMorgan Chase… what do you think will be the likely outcome?  And do you think it would have been homeowners that would have uncovered the robo-signers and all of the other fraudulent acts that the banks have been committing on a regular basis?

I just want to say that HATE being right about this stuff, but in Neil Barofsk’y recent SIGTARP report, it did point out that other Treasury programs have truly been spectacular failures.  For example, Treasury reported to SIGTARP that the FHA Short Refinance program, which was launched on September 7, 2010, HAD ONLY REFINANCED 15 LOANS as of December 31, 2010.

Well, my oh my… fifteen… well, I hope they were all in the same neighborhood… on the same block even.  And who might have called that one the day it was announced?  It’s getting boring, don’t you think?  Yes, it’s me once again.  In fact, as far back as April 2010, I was reporting on FHA-HAMP’s stellar progress.  It seems that when it comes to Treasury and programs to stop foreclosures, then hits just keep on coming.  Don’t even get me started on the 2MP program.  I wish there was someone offering odds and a betting window on this whole financial and foreclosure crisis thing… I’d be rolling in dough.

There’s a trick to knowing which programs will fail, in case you’re having trouble calling the shots.  Just look for the phrase, “responsible homeowners.”  If that’s who the program is for… then it’s a complete flop every single time.  Do you know why… because there aren’t any of those… there aren’t any irresponsible ones either.  At least neither exists in any meaningful number.  There are only homeowners.  Everything else is just a matter of timing and chance.

If you bought a house at the wrong time, in the wrong place, with the wrong loan… you’re an irresponsible homeowner.  If you didn’t do any of that, but you worked for Circuit City… well, how irresponsible of you.  And God forbid you had a serious health problem in the wrong year… like, 2004, maybe okay, but 2005… why you irresponsible sonofabitch you.

Here’s a quote from a mid-January AP News report that typifies the widespread lack of understanding I’m describing:

Foreclosures Spread Into Previously Safe Areas

In Seattle, Houston and Chicago, cities that were relatively insulated from foreclosures early on in the housing bust, a growing number of homeowners are falling behind on mortgage payments and finding themselves on the receiving end of foreclosure warnings. Others have already seen their homes repossessed by lenders.

All told, foreclosure activity jumped in 149 of the country’s 206 largest metropolitan areas last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

‘We’ve actually had a sea change in what’s causing foreclosures, from the overheated home prices and bad loans to a second wave of foreclosures actually caused by unemployment and economic displacement,’ says Rick Sharga, a senior vice president at RealtyTrac.”

Okay, so Rick Sharga’s an idiot.  A “second wave,” Ricky?  Do you live in this country?  Do you ever leave your office or talk to… I don’t know… people?  Let me ask you a question: What caused the damage in New Orleans during Katrina?  Was it the flooding or the rain and 70 mph winds?  It was the hurricane, you dolt.

There’s no “second wave” of anything… no “double dip” recession… we’ve been headed straight down the drain ever since July of 2007.  Yeah, I know auto sales did very well during a couple of months back in ’09, but it wasn’t an indication of an economic recovery, it was the breathtaking stupidity of the Cash-4-Clunkers program and the ever-present sycophants in the media.

Doesn’t everyone realize this stuff by now?  Doesn’t it make you wonder when one day Europe is about to burst into flames, and a week later everything’s fine?  Stand by though, because I’d guess that by sometime in April we’re going to read the following headline:

“Will the EU have a double dip?”

Okay, back to HAMP…

Here’s Barofsky from the latest SIGTARP Report:

“As SIGTARP and the other oversight bodies have chronicled in audits and reports, HAMP’s failure to have a material impact on the foreclosure crisis has many causes, starting with a rushed launch based on inadequate analysis and without fully developed rules, which has required frequent changes to program guidelines and caused unnecessary confusion and delay.”

Barofsky’s right when he criticizes how the HAMP program performed from its inception, throughout 2009 and into 2010… it’s astonishing to me that it’s taken him this long to figure it out, but he’s finally done so.  But beginning in June of 2010, HAMP finally started getting better, so House Republicans, who’ve done nothing and said nothing productive about the crisis since it began, now want to kill it.

With the apparent time delay involved with anyone in Washington learning anything about the foreclosure crisis, if they get their way, I figure they’ll succeed just in time for the program to be working smoothly.

Additionally, the rules of HAMP, which are referred to as “HAMP Guidelines,” have finally been seen by several courts as being more than mere suggestions, and that is opening the door to homeowners and foreclosure defense attorneys being able to successfully litigate when servicers fail to follow HAMP’s rules and improperly deny homeowners their modifications.

To see stark contrast between last year’s court decisions and this year’s, you can look at an article I wrote in mid-2009, Superior Court Judge Says: HAMP Has NO TEETH, and one I wrote just yesterday, California Appeals Court Rules Homeowners CAN Sue Banks for Fraud Over Broken Loan Modification Promises, along with an another I wrote a couple of months back, Federal Court: Borrower is Intended 3rd Party Beneficiary of HAMP – Homeowner Sues for Breach.

The Real Bottom-line…

HAMP certainly won’t end up helping the 3-4 million homeowners it was supposed to, but everyone involved has known that for a long time.  The COP Report estimates, however, that it will end up helping something in the neighborhood of 800,000… and I think that estimate is low because the program is improving on its own to some degree, and because if more pressure were to be put on Treasury to do more to fix the program’s inadequacies, there could still be time to help a half million or more homeowners remain in their homes.

Is it enough?  Hell no it’s not enough.  Am I angry about the incompetence of my elected officials in allowing the rape of the American middle class, while they pumped almost $13 TRILLION into Wall Street’s fat-cat bankers… you’re God damn right I am… in fact, I’ll never forgive this administration for what’s happened, and I’ll never trust what goes on in Washington D.C again for as long as I shall live.

But, I think we have to realize that even if the COP Report’s number turns out to be correct, that’s 300,000 more than have been helped by the program to-date, and when you consider all of the other government programs that have failed to stop foreclosures, and failed miserably… HAMP is clearly the hands down, first place winner.

Also, while HAMP has come up far short of helping the intended 3-4 million homeowners, it also hasn’t cost anywhere near the $75 billion that was originally slated for the program.  In fact, according to the Congressional Budget Office’s calculations, HAMP will end up spending only $4 billion, which when you consider that HAMP is one of the 13 programs funded by TARP, it’s not only one of the most successful relative to the others, but it’s got to be the least expensive as well.

But, those House Republicans, with the 2012 political circus about to begin, are awake now and looking to play politics with people’s lives if it will give them a new slew of sound bites for their guest spots on Fox News.  They want to repeal the last chance to save those 300,000 American homeowners from foreclosure through the HAMP program, because HAMP is a failure.

According to a story that quoted Rep. Jim Jordan (R-OH) in USA Today this past week:

“We think any objective look at this, it doesn’t warrant continued spending of taxpayer dollars,” Jordan said. He did not say what, if anything, he would replace the program with.

Consumer advocates said HAMP should be given a chance. “It’s far from perfect, but it’s the only thing going,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending.

Well, good sirs on both sides of the aisle in congress today… you have failed at absolutely everything you’ve done over the last three years, you’ve allowed for the destruction of the American middle class and you’ve done so without so much as shedding a single tear.  What gives you the right to take away the meager scraps of assistance that have managed to slip through the cracks?

House Republicans, you could have stood up for the millions of Americans that have lived through hell trying to get their loans modified, and for the millions that have fallen as a result of your willful blindness.  You could have torn apart the Obama Administration for its incompetence and total disregard for anyone not of the banking class.

But you did nothing to help anyone on Main Street in America these last two years… not one thing… except stand up and vote in unison against anything and everything, and threaten to filibuster hundreds of pieces of legislation.  You’ve worked from day one of the Obama presidency to create a deadlocked government and you’ve succeeded.  Congratulations.

Now, once again, when you could stand up and criticize the Obama administration for HAMP’s failure… and perish the thought, demand that what’s left be fixed… be made more effective… but once again your answer is only to try to kill what is fueling the only hope that at least 300,000 Americans have to stay in their homes.

The same USA Today story offered some insight into Treasury’s defense of the HAMP program…

“I agree that the servicer performance has been abysmal and that’s something that we have been trying to fix,” said Timothy Massad, the Treasury official in charge of bank bailouts. “Let me first make it clear, this is a voluntary program. Congress didn’t give us the tools to impose fines.

Oh really… now there’s something… you could fix that, right?

Make no mistake about it… there is nothing being proposed to replace HAMP… no program on the drawing board to save those that can be saved from foreclosure once HAMP is gone.  What’s left is all there is, at least until after the 2012 elections, and maybe for sometime after that.

I’ve dedicated the last two years of my life to write about the foreclosure crisis to try to help homeowners get through it that mush easier.  And I’ve got hundreds of letters thanking me for what I’ve written and what I’ve done.  But the other day, when I was feeling sad at not being able to do more, purely by chance, a homeowner I’d been speaking with over the past few months called me.

I told him how I was feeling, and that I felt as if I had to try to do more, and he replied by telling me that he and his family couldn’t have made it through what they’d been through without my help, and that I not only saved them but their children as well, and who knows what difference that will make in the future.

And for a moment, I thought of Oscar Schindler at the end of the movie Schindler’s List, when through tears he said, “I could have gotten more out.  I could have saved one more person.”  And Stern, the Jew who had helped him build his factory replied, “There will be generations because of what you did.”

And then I saw this story about House Republicans introducing a bill to kill HAMP… to kill the chances for 300,000 people to remain in their homes… and certainly more if the program could be improved.  And I thought… that’s what you feel you have time to do… that’s what you think is important in this country today?

You should all hide your faces from the people who sent you to Washington… you should all be ashamed for everything you have and haven’t done.  Your ignorance and insensitivity will be disdained for many years to come.  You’ve done great harm to this once great nation and you should be deeply ashamed for what you are trying to do today.

And Lord knows that I’m not defending or promoting loan modifications such that they are today… for in many cases, they help homeowners like a shot of whiskey replaces general anesthesia before an amputation.

But in point of fact, they are still helping some number of people remain in their homes… so make HAMP better… yes… you owe the American homeowners that and much more.  Don’t kill the only thing you’ve done that’s accomplished anything at all, just because it hasn’t done nearly enough… or because you think it will help you get elected in 2012… I assure you that it won’t.

I urge everyone reading this to write to your elected representatives and demand that HAMP be fixed, improved, changed… but congress cannot allow it to be killed for someone’s perceived political gain, for to do so after all that’s come before it, would be the ultimate insult to the 300,000 or more than it can still help.

Help… even if you can only help one more.

Mandelman out.

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