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  1. SIGTARP: Mortgage Modification Program Failing due to “Extraordinarily Poor” Mortgage Servicer Performance

    1 By on April 29, 2011

    Yesterday the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released its quarterly report on TARP.  Although the prose lacks some of the zing that the former SIGTARP, Neil Barofsky brought to the position, it is still somewhat informative.  It turns out that over 500 banks still owe the government bailout money, and as of now, the “treasury’s ultimate return on its TARP investments depends on many variables that are largely unknowable at this time.”  Hardly a ringing endorsement of the program.

    SIGTARP slammed mortgage servicers, deeming their performance “extraordinarily poor”:

    “Unfortunately, Treasury’s signature program — the Home Affordable Modification Program (“HAMP”) — has been beset by problems from the outset. Many of these problems relate to the structure of the program, which puts the ultimate decision to modify a mortgage in the hands of mortgage servicers, whose performance has been extraordinarily poor. SIGTARP, through its Hotline, continues to receive a substantial number of complaints from the public regarding HAMP servicer performance.”

    The report says that complaints include lost paperwork, lacking communication, contradictory information, erroneous negative credit reporting, ridiculously long trial modifications, failure to have a single point of contact, and more.  Sadly, if you have been following the foreclosure crisis and robo-signing debacle, you know that these complaints are pretty much par for the course.

    HAMP is still falling well short of its initial goals of permanently modifying 3-4 million mortgages.  As of this time, it has issued less than 600,000 permanent modifications.  The Home Affordable Foreclosure Alternatives program has been even more of a dismal failure, achieving around 5,200 short sales.

    Category: Mortgage Rates

  2. Despite Efforts to End it, Foreclosure-Modification “Dual-Track” Still Plagues Some Homeowners

    By on April 19, 2011

    An article from yesterday’s Los Angeles Times by Alejandro Lazo discussed one of the more odious foreclosure tactics, the mortgage modification-foreclosure “dual-track”, and the efforts being undertaken to end this practice.

    “Dual-tracking” occurs when a distressed borrower requests a loan modification from a bank, and the bank starts both the modification process and the foreclosure process at the same time, sometimes without fully explaining the situation to the borrower.  Frequently, borrowers who thought they were in line for a modification will suddenly receive a notice that their home is to be auctioned in a foreclosure sale.

    Banks and lenders defend the practice by saying that the lengthy time it takes to process foreclosures and modifications could leave the bank open to large losses if the borrower does not qualify for modification (it often takes more than a year to foreclose on a house, although time to foreclose is largely dependent upon state laws).  Many borrowers, housing advocates, and some lawmakers decry the process as deceptive and unfair.  Some claim it is a way to squeeze a few more mortgage payments from a borrower who is hoping for a modification before ultimately foreclosing.

    A spokesman for Iowa Attorney General Tom Miller (who is leading an effort to reach a foreclosure settlement with large banks) commented in the LA Times article:

    “We don’t think that a homeowner who is making a good-faith effort to work through their troubled mortgage should have the roof ripped out from over them while they are negotiating, or trying to negotiate.”

    Continue Reading…

    Category: Mortgage Rates

  3. House Ends HAMP, Bill Unlikely to Pass the Senate

    1 By on March 30, 2011

    It was pretty much fait accompli, but yesterday the House of Representatives voted to end the Home Affordable Modification Program (HAMP), the Obama Adminstration’s flagship foreclosure prevention program. The bill to terminate the program was passed it a 252-170 vote that fell mostly along party lines.

    Republicans used two rationales to kill HAMP, that it is ineffective (very true), and that it is not financially responsible given the current state of the deficit (dubious).

    I wholeheartedly agree that HAMP is ineffective.  HAMP was routinely lambasted by the former Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky.  Among other things, he said that HAMP was “a failure”, a provider of “false hope”, and that HAMP left the borrowers it was meant to save “in a far worse place than they would have been had this program not existed.”  HAMP has issued about 540,000 loan modifications, far short of the 3 to 4 million homeowners the Obama Administration claimed it would help in 2009.  Eight to thirteen million foreclosure filings are expected before the program winds down. By any objective measure, HAMP is a failure.

    Continue Reading…

    Category: Mortgage Rates

  4. HUD Fights Back Over Efforts To Kill HAMP, Foreclosure Prevention Programs

    By on March 14, 2011
    The Department of Housing and Urban Development (HUD) is speaking out over Republican-led Congressional efforts to kill several of its foreclosure prevention/mitigation programs.  Among the programs that would be ended if House Republicans had their way: The FHA Short Refi program (which the house terminated last week), the Home Affordable Modification Program (HAMP), the Neighborhood Stablization Program (NSP), and the Emergency Homeowner Loan Program (which the House voted to end last week).  Bills that would kill the NSP and HAMP will reach the house this week.
    The programs have been roundly criticized for not doing enough to prevent foreclosures.  This is certainly true of HAMP, which only permanently modified the mortgages of 1 out of every 4 homeowners who applied for help.  The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said that the program only offers “false hope” and that many who applied for modifications through HAMP are “in a far worse place than they would have been had this program not existed.” The FHA Short Refi program has been similarly ineffective, as almost no loans have been modified through it.  The effectiveness of NSP and EHLP is still largely to be determined.
    Category: Mortgage Rates

  5. TARP Watchdog Resigns, Blasts HAMP Once Again

    1 By on February 21, 2011

    If you read this blog regularly (and the traffic numbers suggest that you don’t), you’ll know that I have become a fan of Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).  In essence, he is the guy who oversees TARP and periodically publishes a report to Congress on the successes or failures of the program.  I have come to like his blunt, plain language reports on TARP.  Barofsky showed himself unafraid to criticize the government or its programs.  Unfortunately, he is resigning in March.

    While generally positive on the impact of TARP, Barofsky cited the failures of the government’s flagship foreclosure prevention program, the Home Affordable Modification Program (HAMP) in his resignation, saying that those borrowers it was designed to save are “in a far worse place than they would have been had this program not existed.” He added:“it is absolutely heartbreaking the number of families that are not being reached by this program.”

    This is not the first time that Barofsky has been critical of HAMP.  Back in January, he described the program as a “failure“, saying that regulators “are afraid to rein in or impose penalties on the mortgage servicers” and that these servicers’ track records are “nothing short of abysmal“.  He went further, saying:

    “The most specific of TARP’s Main Street goals, “preserving homeownership,” has so far fallen woefully short, with TARP’s portion of the Administration’s mortgage modification program yielding only 207,000 (out of a total of 467,000) ongoing permanent modifications since TARP’s inception, a number that stands in stark contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost to foreclosure since January 2009.”

    There’s not a lot more to say about this story.  I hope the next SIGTARP is as committed to his/her role of overseer as Barofsky was.

    Category: Mortgage Rates

  6. HAMP, FHA Short Refi, Numerous Other Housing Programs Could be Eliminated

    By on February 10, 2011

    Financial austerity, eliminating the defici, and eliminating the federal debt has suddenly become very popular in Washington, D.C.  The House Financial Services Committee is going to meet later today to discuss upcoming proposals for the Federal Budget.  Among other areas up for review, a large number of public housing programs would be reviewed for inefficiencies and redundancies and potentially eliminated.

    Among the programs to be reviewed or eliminated:

    • Fannie Mae and Freddie Mac will be reviewed and the committee will entertain proposals to “modify or eliminate” Fannie and Freddie’s statutory charters.
    • The committee will consider what role, if any, the government should play in the secondary mortgage market.
    • Fannie and Freddie’s participation in mortgage modification programs will be examined.
    • The Community Reinvestment Act – may be updated or eliminated entirely.
    • The National Flood Insurance Program will be reviewed.
    • The committee will look into appraisal fraud and the need for appraisal regulatory reform.
    • HUD, Rural Housing Service, National Reinvestment Corporation – the committee will review HUD programs with an eye toward eliminating inefficient or duplicative programs.
    • FHA Single Family program – will be examined to ensure losses will not expose taxpayers to risk.
    • FHA multi-family program – will also be examined to ensure losses will not expose taxpayers to risk.
    • The Home Affordable Modification Program (HAMP) – the government’s “flagship” loan modification program, which has by most accounts been a dismal failure, would be eliminated.
    • Section 8 Housing Choice Voucher Program, which provides rental assistance for low income families would be “reformed”.
    • NeighborWorks America, a government chartered non-profit program that focuses on mediation and community reinvestment would be eliminated.
    • HOPE VI – a program that provides grants that allow public housing authorities to demolish and refurb distressed buildings would be eliminated.
    • HUD’s public housing programs would be reviewed.
    • The new mortgage broker compensation rules will be reviewed.
    • Rural Housing and Economic Development Program would be eliminated.
    • The Neighborhood Stablization Program would be eliminated.
    • The Sustainable Communities Program would be eliminated.
    • The Public Housing Capital fund would be eliminated.
    • The Federal Housing Administration’s Refinance Program for underwater borrowers (aka the FHA Short Refi Program) would be eliminated.

    Undoubtedly, there is a lot of waste in the federal government, and many housing programs should be reviewed.  That said, it seems to me that the amount of money that would be saved by eliminating or reducing these programs pales in comparison to the truly gigantic amount of money that we have dumped into wars in Iraq and Afghanistan (three trillion dollars!).  I find much of this talk of cutting the budget and the deficit (from both sides of the aisle) to be disingenuous political grandstanding to say the least.

    Category: Mortgage Rates

  7. Automatic Foreclosure Mediation Pushed As Solution To Mortgage Mayhem

    By on February 2, 2011

    foreclosure alternatives, mortgage mediation, home loan modificationsRequiring banks to hold mediation sessions with homeowners facing foreclosure could be the solution to the foreclosure crises, argues the Center for American Progress, a liberal think tank.

    Banks should be mandated to hold mediation sessions with homeowners before any foreclosure for mortgages guaranteed or owned by the government. That would include mortgages backed by Fannie Mae, Freddie Mac, the VA and FHA.

    What’s more, mediation sessions should be scheduled automatically, instead of waiting for a request from the homeowner. In mediation sessions, the homeowner and bank meet in the presence of a neutral third-party in an attempt to reach a loan modification agreement. Learn about foreclosure alternatives.

    “Even though none of the parties are under any obligation to settle in mediation, in practice they settle more than half the time,” wrote Alon Cohen, a consultant on housing issues for the group, in the study just released. “It does not mean all foreclosures will end or that all homeowners will receive a modification.”

    Banks and mortgage services, in addition to homeowners, would benefit. For every mortgage modified in mediation, the mortgage servicer cuts its losses by 60 percent, according to Cohen. Fannie Mae and Freddie Mac alone would save over $6 billion and over 177,000 homeowners would stay in their homes.

    Continue Reading…

    Category: foreclosures

  8. Watchdog Tells Congress: HAMP is a “Failure”

    By on January 28, 2011

    Neil Barofsky, the special inspector general for the troubled asset relief program (SIGTARP) testified in front of Congress on Wednesday about the progress of the bailout program.  He said that TARP has by and large been a success, and that most of the money that was lent to corporations under the program has been paid back.

    Despite the success of the overall program, he said that the government’s flagship foreclosure prevention plan, the Home Affordable Modification Program (HAMP),  has been a “failure”.  Barofsky said that the program has failed in large part because regulators are “afraid to rein in or impose penalties on the mortgage servicers” he added that the track record of those servicers “has been nothing short of abysmal”.

    SIGTARP has been highly critical of HAMP in past reports, saying that the program

    “The most specific of TARP’s Main Street goals, “preserving homeownership,” has so far fallen woefully short, with TARP’s portion of the Administration’s mortgage modification program yielding only 207,000 (out of a total of 467,000) ongoing permanent modifications since TARP’s inception, a number that stands in stark contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost to foreclosure since January 2009.”

    Barofsky said that unless something is done to improve the effectiveness of the program, there will be increasing pressure to shut it down.  Indeed, Rep. Jim Jordan and other House Republicans have introduced a bill that would end HAMP.  The bill does not include a plan to replace HAMP with anything.

    As far as I can tell, HAMP has largely been a failure because it fails to properly incentivize all parties that have a stake in a mortgage to work together to modify it rather than foreclose on it.  A successful program will have to align the interests of investors, second lien holders, servicers, and borrowers in order to achieve mortgage modifications on a large scale.

    Category: Mortgage Rates

  9. Mortgage Servicing Model to Change to Encourage Mortgage Modifications

    1 By on January 18, 2011

    In a joint statement to the Federal Housing Finance Agency (FHFA), Secretary of the Treasury Timothy Geithner and Secretary of the Department of Housing and Urban Development Shaun Donovan called for revisions to the way that mortgage servicers are compensated, calling the current system “broken”.  They said:

    “The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure”.

    The current compensation system has failed to properly align servicer, lender, and borrower incentives in order to encourage all involved parties to push toward mortgage modifications.  Government efforts to stem foreclosures have been lackluster at best.  The government’s flagship foreclosure prevention plan, the Home Affordable Modification Program (HAMP), has been criticized for its general ineffectiveness, yielding only about 500,000 permanent modifications, far fewer than the 3 to 4 million modifications originally expected.

    The Congressional Oversight Panel and the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) have both been highly critical of the failings of HAMP in reports to Congress.  Part of the failure is due at least in part to the inability to properly align servicer incentives.

    Fannie Mae and Freddie Mac were put under FHFA conservatorship in 2008 in order to prevent their insolvency.  FHFA has directed Fannie and Freddie to develop a new system of servicer compensation that would allow for more mortgage modifications.  Edward DeMarco, director of the FHFA commented:

    “As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions.  The goal of this join initiative is to explore alternative models for single-family mortgage servicing compensation that better address the needs of borrowers, servicers, originators, investors, and guarantors”.

    No specific alternatives have been proposed.  The FHFA is expected to listen to feedback from regulators, consumer advocates, trade groups, and housing industry experts in order to formulate alternate servicing compensation.  No changes are expected until at least mid-2012.

    Category: Mortgage Rates

  10. Tim Geithner Weighs In On HAMP, Foreclosures

    By on December 17, 2010

    Earlier this week the Congressional Oversight Committee lambasted the Treasury Department and its foreclosure prevention programs, specifically the Home Affordable Modification Program.

    I think the U.S. Treasury would be markedly more awesome if it had a money bin to swim in.

    Among other things, the report said:

    “Treasury’s reluctance to acknowledge HAMP’s shortcomings has had real consequences.  Absent a dramatic and unexpected increase in HAMP enrollment, many billions of dollars set aside for foreclousre mitigation may well be left unused.  As a result, and untold number of borrowers may go without help – all because Treasury failed to acknowledge HAMP’s shortcomings in time”.

    and

    “Treasury has refused to specify meaningful goals to measure HAMP’s progress.  Treasury has also failed to hold loan servicers accountable when they have repeatedly lost borrower paperwork or refused to perform loan modifications”.

    Needless to say, Treasury took some umbrage at this verbal thrashing, and yesterday, Tim Geithner, Secretary of the Treasury issued a response.  Geithner claimed that HAMP “has helped to catalyze the market to provide millions of loan modifications”. I suppose this is sort of true.  HAMP has issued in the neighborhood of 1.4 million temporary mortgage modifications, and about 516,000 permanent modifications. We could debate the efficacy of these modifications, but let’s give Treasury the benefit of the doubt, because working with lenders, borrowers, and servicers to bring about mortgage modifications is not an easy task.

    Continue Reading…

    Category: Mortgage Rates

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