A New Take on explaining the dismal failure of the Home Affordable Mortgage Plan
The investigative reader of this blog will notice I’ve been writing it for almost seven months. The motivation of this post comes from another article I found that gives an in-depth explanation of regulations that hinder the award of permanent mortgage modifications to distressed homeowners.
Just about every fact in this article is news to me. I’ve never seen any of these reasons for the one percent of completed mortgage modifications under the Home Affordable Mortgage Plan (HAMP). Those same investigative readers will find the linked article very interesting, as did I.
The distressed homeowner probably will not. The short story is that the national attorneys I represent are 95 percent successful at negotiating beneficial and affordable mortgage modifications and making lenders adhere to the HAMP guidelines in a timely manner. We know the guidelines better than the lenders.
Last year more than two million Americans lost their homes to foreclosure. This year that number is expected to be even higher. Foreclosure takes a huge toll on homeowners and their families, and sends financial shock waves throughout the economy.
Since the start of the recession in 2007, more than five million homes have been taken back by lenders. The Center for Responsible Lending estimates that as many as 13 million more homes could fall into foreclosure over the next five years.
Mortgage modification is a tool for the under-employed, the ‘other’ 10 percent of the nation’s homeowners who have sufferd severe loss of income. It is not a tool for the un-employed.
Since the program began in March of 2009, more than three million homeowners have become eligible for assistance. (This ‘eligibility is determined by distressed homeowners who actually dared to open just the right letter out of the large number of other collection letters sent by their lender. The actual number of eligible distressed homeowners is assurdly much higher.) In turn, mortgage servicers have reached out to these borrowers, initiating the modification process. Roughly 760,000 homeowners have received loan modifications on a trial basis. (There is no excuse for a trial modification. The lender uses this trial modification as an excuse to lose submitted supporting documents and to confuse the distressed applicant in the process.) That’s why just 31,000 modifications have been made permanent. That’s a one percent success rate.
Under current law, if a bank modifies a mortgage it must record the write-down as an expense on its books. The bank, though, didn’t lose any money—it’s still scheduled to receive the totality of the loan principal, just less interest. This (and other) rule(s) makes banks reluctant to modify. They don’t want to take the “loss,” which can get very big for larger mortgages with long modified periods. So there’s a huge financial disincentive to offer modification.
Here the author repeats the often-cited observation that the mortgage servicer makes more money on a foreclosure than a mortgage modification. This comes as an unbelievable statement to the un-initiated. But I see it validated several times every month. <bold>Your lender is not on your side. They’re on THEIR side.</bold>
Another obstacle comes from auditors and regulators, who are imposing an ever-increasing load of paperwork on customers and banks looking to modify. In many cases, there are more forms needed to modify a loan than to get a mortgage in the first place. (This is the biggest surprise in the article to me. But ultimately it doesn’t matter. The attorneys have all of that covered. Your lender never loses any documents for an original mortgage or refinance application. Trust me!)
Lastly, the author refers to ‘strategic defaulters’ who aren’t suffering a severe loss of income but have stopped paying their mortgage payments in hopes of obtaining a mortgage modification. I’ve never read this definition anywhere else. ‘Strategic defaulters’ are described as homeowners who are so far ‘underwater’ in the property value that they assuredly will never recover their investment. They are only guilty of good sense.
While regulations may not be helping the HAMP mortgage modification process, it is no excuse. There is a preponderance of evidence that lenders avoid beneficial and affordable mortgage modifications just as the distressed homeowner dreads opening any mail from their lender after a default.
When you want to get to the front of the line for either a timely mortgage modification or expert short sale of your house, call me. I can qualify you with U. S. Dept. of Justice-bonded application software.
Read it here
