Why Can’t We FIX Something About the Loan Modification Process?



I’ve seen my government screw up quite a few things in my lifetime… enough so that a bar set at a height a toddler could easily clear could be said to represent my expectations today.  Of course, I was born during the early years of the Vietnam War, so it’s not like the years ahead were destined to have any chance of being called the “Age of Competence” where government was concerned.

Nixon’s “price and wage freeze,” which started out as a 90-day measure taken to control of what was seen as out-of-control inflation when it remained above 4 percent throughout 1971, ended more than 1,000 days later with inflation solidly into double digits.  And a couple years later, Watergate was… well, what can anyone say about that mélange of malfeasance and discomfiture that was entirely unnecessary in light of Nixon’s landslide victory to a second term in 1972.

I remember clearly watching the footage of our anything but orderly departure from South Vietnam.  It had the same sort of je ne sais quoi one might expect at a Black Friday Sale, the moment the doors opened at a Wal-Mart in New Jersey.  You might get out alive, but there was no question about the experience being life-threatening.

While President Gerald Ford was running against Ronald Reagan in 1976, when during the second debate I watched him tell the country: “Eastern Europe is not occupied by communists,” I knew for sure that intelligence was not a pre-requisite for becoming the leader of the free world.

By the time a group of students in Iran succeeded at taking over our embassy, I wasn’t all that surprised, but I would not have predicted that they would be able to hold Americans hostage for 444 days, until I watched the abortion of Operation Eagle Claw.  The rescue mission not only failed, but it failed to get off the ground… destroying the two aircraft involved and killing eight servicemen, while never coming close to engaging an enemy.

President Reagan did some things that led to prosperity for some, me included, but he also left office with a national debt three times the size it was when he arrived, his spending cuts, among other things, became famous for putting the mentally ill on the streets as part of the growing homeless population, he managed to all but ignore AIDS for almost a decade, and he embraced the apartheid government in South Africa that was committing one of the most horrific crimes against humanity the world has ever seen.  And then there was Iran-Contra.

Secretly negotiating the sale of arms to Iran with hopes that the deal would result in the release of seven Americans being held hostage by a rebel group with ties to Iran… after telling the American people that we would never trade arms for hostages… is the sort of scenario that I was used to learning that my government embraced behind closed doors.


Then the first President Bush said “no new taxes,” right before he raised taxes, and that was the end of that.  The fact that he vomited on the Prime Minister of Japan was funny, however, so I remember him fondly.

President Clinton kicked off his presidency by putting an annual cap on CEO pay of $1 million, which led to the proliferation of stock options in compensation packages, and ultimately gave us retiring CEOs with enough wealth to start their own space programs.  Bill also gave us NAFTA and 40,000 factory closings, and not exactly staying on top of corporate accounting, led to his leaving office amid the implosion of WorldCom, Enron, Tyco, HealthSouth, Adelphia and numerous others.

As to the infamous “blue dress,” well, that was totally worth it, as far as I’m concerned.  I’ll go pay-per-view anytime I can watch the President of the United States respond to a question on television by saying: “Well, that depends on what your definition of ‘is’ is.”

Six months after our troops had taken Bagdad, when President Bush admitted there weren’t any weapons of mass destruction… that threw me into a tizzy.  I was used to my government lying better than that.  I was expecting a picture of a camel with a nuclear weapon strapped to its back, and hearing my president tell the truth about having been wrong made me uneasy.


Then, however, my lack of faith in government was restored when Katrina slammed into New Orleans and showcased the skills of Mike “Brownie” Brown, who President Bush had appointed to run FEMA.  Watching John Travolta fly his own plane to New Orleans to deliver bottled water before the federal government could get there was comfort food for me.

Scooter Libby, Alberto Gonzales, John Ashcroft, John Bolton, Paul Bremer, Christopher Cox, a bunch of graduates from Pat Robertson’s Regent University to staff the Justice Department… all combined to make George W. Bush’s presidency into compelling television, but then came the economic meltdown to end all economic meltdowns.  And there’s nothing like being caught flat-footed when the Great Depression Part 2 hits, to make elected officials look like an entire herd of deer-in-headlights.

Paulson and Bernanke ran to congress yelling that the sky was falling… and in fact it was.  Hank needed $700 billion in small, unmarked bills and he didn’t have time to explain why.  Congress hemmed and hawed for a couple of days, signed the essentially blank check, and Honk went off to save the world… which he apparently did… although no one is exactly sure how.

And then it was OBAMA.  In terms of being President of the United States, Obama only had slightly more experience than I would have had, but Inauguration Day in Washington D.C. looked like all four Beatles were about to perform a free concert on the National Mall, after which billions of dollars would be dropped from helicopters.


We all waited for our new, smart, caring, different, dedicated, understanding and in general practically perfect in every way president to fix our country in every way possible once and for all.  He turned out to be a disappointment to many, but with expectations like the ones many in this country had for him, there was only one way for things to go.

It was the third week of February when he announced his housing rescue plan… just a month after being sworn in… the Making Home Affordable Plan.  Looking back, I don’t know why everyone watching didn’t stop to wonder how well thought out the plan could possibly be, given that it was developed in less time than it normally takes to lose five pounds.  The crowds went wild, however, and I do mean wild.  I don’t think I’ve ever heard Americans cheer quite so loudly or for so long.

So, HAMP was born… widely described as the single most critical component needed in order to stabilize and restore our decimated housing market and get the American economy back on track. 

And it didn’t work, euphemistically speaking.

And this will be its sixth year.

And we’ve only spent a few billion of the $75 billion originally budgeted.

And yet we’re doing nothing about it… again.

And almost no one seems to care.

And I don’t understand why.

The incomprehensibly arduous, inconsistent and often tortuous process homeowners must endure in the hopes of getting their loan modified, is essentially the same at most servicers as it was in 2009.  Oh sure, they don’t lose your paperwork anymore, usually, but they’ve come up with other inexplicable delays and unexplained uncertainties to throw into the mix, and according to anyone’s numbers, we’re barley making any progress at all towards putting an end to unnecessary foreclosures.

And when I talk about the loan modification process, I’m not guessing, nor am I basing my views on limited or third party information.  I’m basing it on hard facts learned from extensive personal experience… of which I have as much, if not more, than anyone in the country.

You see, when I started my blog, it was to help people understand what had happened and what was to come… to tell them it wasn’t their fault… that Ben Bernanke should never have blamed the crisis on “irresponsible sub-prime borrowers.”  I wanted to help explain securitization and mortgage-backed securities… things I knew few would understand and I could explain.

So, I gave out my email address and even my cell phone number online.  I thought if people had questions after reading my articles, they should be able to contact me.  I had no idea how many would contact me, and to be entirely candid, had I known how many there would be, I probably wouldn’t have done it.

But, as a result, one of the rarely mentioned outcomes from what I’ve done since 2008, is that in a very real sense, I’m running what is likely the largest and longest running qualitative research study in history… like a focus group of thousands that runs for six years straight.

Ever since those first months writing Mandelman Matters, the calls or emails from homeowners and others involved in the foreclosure crisis have never stopped.  Some days there would be a couple dozen emails and as many phone calls… some days there were even more.  And very quickly, the numbers of homeowners that I had talked to was in the hundreds… after that it became thousands.  And as a result, although I don’t often bring it up, I know what is, and isn’t working for homeowners at all times.  I don’t need a source for the information… I know what homeowners are experiencing in real time as well, if not better, than anyone anywhere.


10 Things I Know Are True About the State of the Loan Mod Process Today…

1. I get the same number of homeowners calling and writing in for help or advice related to foreclosure and getting a loan modification today as I ever did.  There’s been no drop in call or email volume, and in fact, the numbers of both continue to increase.

2. The needs of the homeowners contacting me haven’t changed at all, and for the most part, neither have their reported experiences applying for loan modifications.

3. The only thing that has changed is that they’ve been ripped off more than once… usually more than twice, and oftentimes, three or four times or more.

4. They don’t know what to believe anymore, but they’re starving for answers on which they can rely, whether good news or bad.

5. The vast majority, in fact, does have sufficient income to qualify for a loan modification.

6. Almost everyone has been in the process over two years, many three or four… and even more.  Several times each day, I talk to a homeowner who hasn’t made a mortgage payment since Bush was in the White House.  And yet, at the same time, there are still brand new homeowners only now coming into the loan modification process.

7. The timing involved in trying to get a loan modification is as mysterious as it is inconsistent.  If I had to answer the question of how long it takes, my answer would be: “Between a week or two… and six years.”

8. The loan modification process is akin to being asked to think of a number between one and ten… you say “8” and they say, “WRONG, try again.”  And then you have to get back in line at the very end, which is 6-12 weeks away from your next guess.

9. Sometimes there are sale dates involved, which adds an exciting “Beat-the-Clock” element to the whole experience.  I suppose that without a little dual tracking and a sale date here and there, it would be boring.

10. No one has an accurate understanding of why any of the above is the way it is.  Many have come to believe that it’s by design… that servicers somehow benefit from the way things are, which is why so little has changed.  Others have even more nefarious theories to explain servicer behavior.

 It’s Just Not Good Enough… 

Suffice it to say, it’s not anywhere near good enough.  And that’s causing new and compounding old problems.  It’s also costing everyone involved, except maybe the foreclosure mills, a fortune, while literally destroying bank brand equity by the billions.

It would seem to me that the only thing we can’t afford to do is nothing.

And after five or six years, how can it be that we can’t we fix anything about the loan modification process or program?  Do we have some sort of national learning disability?  Isn’t there anything even worth trying?

Well, I’ve got a few ideas to throw out there, if nothing else, maybe they’ll get the ball rolling and others can chime in, and if not, if you like any of the ideas below, perhaps you can pass along this article to your elected representative with your recommendation that he or she catch up on what’s really going on with the loan modification process today.

Keep in mind that there isn’t likely going to be one thing that’s going to fix everything… the problem is too big and too complex.  But, here are a few ideas that I think would help the situation in some significant way, that would be relatively easy to implement, and might lead to improvements in other areas.  And, if nothing else, perhaps they’ll get the ball rolling in the new idea department.



1. The 2-Year Rental Relief Program.

If you’re a homeowner who is over 90 days delinquent, what if could elect to enroll in a 2-Year Rental Relief Program.  You’d sign a Deed in Lieu of Foreclosure, and receive a rental agreement that allows you to rent the home for up to two years… at a below market rent… maybe with the first three months free and a cash-for-keys allowance on moving day.  As part of that agreement, you agree to keep the home in good condition, and not to contest the eviction.

How many homeowners do you suppose would take that deal and happy that their ordeal has ended?  I don’t know, but I’d bet the number would be in the hundreds of thousands.  And why wouldn’t that be a good thing… to cut hundreds of thousands off of the future foreclosure figured in one fell swoop, as they say?

Investors could start getting some payment streams from the rents being paid, and let’s face it.. it’s going to take at least two years for servicers to foreclose anyway.  If you have enough income to support a modified payment then fine… apply for a modification, but if you don’t… maybe the 2-Year Rental Relief Program would be the best possible answer to a terrible situation.

Are there issues to be resolved to make such a program work in real life… of course.  But, the benefits to servicers, homeowners and investors might make the problems worth solving.

2. Streamline government agency foreclosure and loan modification rules.

In case you didn’t know… every federal agency involved in mortgage financing, Fannie, Freddie, FHA, VA and USDA… each have their own individual rules for the handling of loan modifications, short sales and foreclosures.  And that makes things much harder than need be on servicers who are obviously still struggling to handle the volume of delinquent loans seeking to avoid foreclosure.

Well, since all of those agencies are parts of… or under control of the federal government… why can’t we streamline the government agency policies and procedures related to loan modifications, short sales and foreclosures?  I don’t care what anyone says, each agency does not need its own set of rules.

To make it appreciably better for homeowners applying for modifications, they could all agree on one set of rules.  And if any of the directors of the agencies won’t do it… then let’s fire them for being unimaginably immature and uncaring despots.

3. Services divide customer service staff by borrower situation.

If you’re a borrower who is self-employed, what if you were directed to call a special number that connected you to a group of representatives trained and designated as “self-employed specialists?”  I would think those working in that group would get better and better at handling the needs of self-employed borrowers seeking loan modifications… instead of the way it is now, where no two calls a customer service rep gets each day are alike.

Or, what if June was FHA Month… we’re only talking to people with delinquent FHA loans during the month of June.  If your loan is Fannie or Freddie, please wait until July… that’ll be your month.

Look, I’m not saying specifically that’s what should be done, but it just occurs to me that it’s difficult to get better at something unless you do it over and over, and if every borrower you talk to every day is as unique as a snowflake, you won’t get better at your job for a long time.

Ever fly on Southwest Airlines… the airline with no seat assignments?  “In a moment we’ll start boarding with line A, rows 1 through 16… rows 1 through 16.”  And they take off on time almost every time.  Baseball stadiums are engineered to move more than 50,000 people from their cars to their seats in 15 minutes, with time for a dog and a beer to boot.

I’m not saying I know the right answer here, but when I don’t see anything new being tried, even though the status quo is quite obviously far from ideal, it makes me want to know who’s working on the problem, and what’s stopping them from doing anything at all.

4. Communicate better.

From the beginning, we have had some combination of a failure to communicate, and the worst communications skills ever seen by mankind.  At times, the quality of communications with delinquent borrowers by servicers would have been better if handled by farm animals, and that would be funny if it weren’t true.

We’re starting year six of foreclosure management at servicers, and yet somehow, their ability to communicate with borrowers during the loan modification process is not markedly better, or at least is inconsistent as the weather in New England.

Had servicers started communicating with borrowers six years ago in French, without knowing how to speak French, everyone would be fluent in French today.  So, how can we not be better communicators after six years using the English that we all knew how to speak on day one?

It’s ridiculous… inexcusable… and immeasurably costly.  Fix it, damn it.

5. HARP 3.0 and HAMP 6.

It’s year six and it still feels like we’re beta testing the software.  Even Microsoft gets the bugs out by Version 6.  Why can’t we make meaningful improvements in the loan modification process that can be seen across the board after six years of practice?  You’d think after six years of practice, you’d get better by accident.

Well, the crisis isn’t over, not by a long shot, no matter what the P.R. pros say in their press releases, so it’s certainly not time to pack up the tent on how things are done or what the programs offer.  The good news is that we’ve got plenty of money for new government programs since the old ones have been so ineffective that we actually underspent by tens of billions… something I can’t remember ever happening before in this country.

Usually, our government programs end up spending $1500 on a hammer or $25,000 on a toilet seat, as I recall.  Coming in far under budget has never been our government’s strength, and we’ve got more than $14 trillion in debt to prove it.

So, let’s hear it… what’s going to change next year as far as getting foreclosures to stop and housing to recover?  Anyone?  Anyone?  Fannie?  Freddie?  How about you guys actually try participating in a few government programs for a change?  You remember the government… it’s where you get the money that keeps you from drying up and blowing away in a strong breeze.

And a new and improved HAMP 6 is long past due.

In addition, HARP 3.0 needs to become a reality.  Introduced by U.S. Senators Robert Menendez and Barbara Boxer, Senate Bill 3085… “To provide for the expansion of affordable refinancing of mortgages held by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.”  That’s Fannie and Freddie, for those who didn’t know.

HARP 3.0 would give HUD the authority to extend streamlined refinancing to all loans insured by government-sponsored enterprises. This means that borrowers with GSE loans would no longer be hindered by appraisal or loan-to-value requirements.


My point is…

Going on six years ago, we were all told that preventing foreclosures and the recovery of our housing markets was critical to our economic recovery.  Well, what we’ve done since then has, at the very least, come up short… way short.

So, how can we be okay with it?  How cane we not be demanding that our government whose program hasn’t worked… fix it… or at least keep trying to make it better?  How can we be okay with not accomplishing what was needed to allow our economy to recover?

I’ve seen my government fail at lots of things over the years, but this failure is too important and too costly to allow it to continue.  We’ve lost more than five million homes to-date… and recent forecasts show we’re going to lose an additional 7.5 to 9.5 million homes to foreclosure over the next few years absent any further remedial action.

And those forecasts are based on things like Fannie Mae’s recent quarterly filings with the SEC.  Fannie says, for example, that it expects 71 percent of sub-prime loans, 67 percent of the Alt-A loans and over 40 percent of prime loans, all to go into default and be lost to foreclosure in the years ahead.

How can anyone think that’s even remotely okay?  It’s not like we’re talking about something we can’t prevent… like a meteor headed for Earth.  These are foreclosures… we’ve prevented several million… why can’t we do better?  Why do we have to accept another 10 million homes lost to foreclosure over the next few years?  Considering we’ve lost five million homes to-date, I can’t even imagine what this country will look like in 2018, after we’ve seen 15 million homes lost.

Don’t just do something… sit there!

Yeah, that’s not even funny anymore.


Mandelman out.


P.S. Listen, if you not only enjoyed this article, but also found it valuable in terms of educating others, you should take the time to forward it around, not only to others you know, but also to your elected representatives at both state and federal levels… the editor of your local newspaper… your local television station… the governor of your state… heck… the White House too, if there’s a way to do that.

If you don’t take the time to help spread the message, fewer get to hear it… and we get what we deserve for the effort we didn’t put into it… nothing. I took me about 20 hours to write and edit this article… now it’s up to those reading it to spread it around.  That’s what social media is all about.

It’s up to you, but I’m just saying…


































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