America is in the sixth year of the foreclosure crisis. Last month, a total of 5,562,000 home loans were delinquent or in foreclosure. There doesn’t seem to be any end in sight.
Banks and lenders were supposed to have given troubled homeowners modification loans but they have failed miserably. In one study released last week, it showed over 800,000 homeowners should have gotten home modifications, but were instead, foreclosed on. Truth is, that figure of 800,000 is more likely around 4 million.
When the loan programs were put into place to help the homeowners, the banks and lenders were completely disorganized and did not have the personnel to handle the loan applications. Some banks were a little better than others and had better trained staff. The study found that Bank of America in particular was extremely slow in modifying loans. Bank of America was the largest of all the servicers when the Home Affordable Modification Program (HAMP) was launched- but only approved loan modifications around half the rate of other banks.
But there’s more to not having the trained staff to handle the loans – after all, it has been three years.
Homeowners applying for help are constantly asked to resend paperwork an average of six times. The banks ‘lose’ paperwork or say they never received the paperwork and/or documents needed to make the loan. Loans are denied without rationalization. Banks are denying homeowner applicants even though they appear to qualify.
The sad truth and the real problem is that HAMP was set up making it more profitable for the mortgage service companies (banks and lenders) to stretch out payments and then foreclose on the homeowner instead of giving them a quick, permanent modification.
These servicers were allowed to charge late fees and other charges while the borrower was in a “trial modification”. Homeowners could be completely up-to-date with their loans during the trial period and still accrue these charges. Later, the fees were supposed to be waived if the modification was approved. However, it was more profitable for the bank to deny the loan. The bank could keep these fees if the modification was denied and the house sold through foreclosure.
No wonder, the servicers “accidentally-on-purpose” lost documents and paperwork. The longer they extend the modification process, the more penalties they charge.
Banks would also tell homeowners to skip two or three payments so the homeowner would ‘qualify’ for the HAMP. Skipping the payments only incurred more late fees, penalties and charges – and they’d foreclose on the house anyway and when they did foreclose, it would be very quick (read the “Dual-Track” article under this blog’s August Archives).
So, who’s in charge? The Treasury is. In the beginning, they dragged their heels in getting the largest mortgage servicers to participate, especially Fannie Mae and Freddie Mac, the government-owned mortgage giants. Other banks were slow to get on this gravy train too.
The Treasury initially set aside $700 billion for the Troubled Asset Relief Program (TARP) to fund HAMP. More than 500 banks received money.
Neil Barofsky, former Special Inspector General, overseeing TARP did turn his office into a financial law enforcement agency with 27 vehicles (with sirens and lights) and 45 investigators empowered to carry guns and badges and make arrests. They’re currently engaged in ongoing investigations of fraud.
Inspector General Eric Thorson of the U.S. Department of the Treasury was originally responsible for TARP. He expressed concerns about overseeing the complex program and called oversight of TARP a “mess” although he later clarified “mess” was his description of the difficulty his office had.
There is $50 billion sitting there to help the homeowner, and will be “available to the troubled homeowner” up until 2017. Whether that money sees its way to the homeowner is very questionable.
The homeowners have been lost in this bureaucratic nightmare. The deprived homeowners who are struggling to keep their homes are the real losers in this money game.
I will be writing more about the modification programs in my next article.
Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.