Posts Tagged ‘HAMP’

New Class Action Suits Could Create Precedent To Enforce HAMP Modification Agreements



By most measures, the Making Home Affordable Modification Program has had lackluster results in permanently averting foreclosures and dampening the effects of the foreclosure crisis. The main reason HAMP has been so ineffective is the fact that at its core, it remains a voluntary program on the part of mortgage loan servicers and lenders. In other words, HAMP has no teeth.  Servicers may choose to participate or not and even if they choose to participate,  nothing in the program language states that they must modify any loans.

Therefore, we have a situation where homeowners enter into trial modification agreements and comply with each and every condition of the agreement, only to have the servicer delay responding or continue to ask for more documents. All the while, the homeowner continues to make his or her trial payments. Worse, it is all too common for the borrower’s home to be foreclosed upon while the trial modification is pending, even though HAMP prohibits any foreclosure sale while the borrower is in a trial period plan.

Four class action suits, filed  by the Boston based non-profit  National Consumer Law Center, in the state of Massachusetts aim to give HAMP teeth it lacks. The lawsuits  claim that the trial plan is a contract that the servicers have breached by failing to modify the loan once all conditions have been met. The complaints go even further by suggesting that the signed agreement the servicers have with the U.S. Treasury represents a contract to mitigate the foreclosure crisis by offering assistance to homeowners at risk, and that by failing to modify enough loans, the servicers have breached that contract as well.

Should a judge rule in favor of the plaintiffs in these cases, a precedent will be established that renders both the trial plan and the agreement to join the HAMP program enforceable contracts.  This would mean that servicers would be required to give permanent modifications to those homeowners who comply with the terms of the trial plan, and furthermore,  be required to actually render assistance and prevent foreclosures per the HAMP agreement.

Bank of America Launches Its Earned Principle Reduction Program Under HAMP

Bank of America has started its program to reduce principle balances on some of the loans it services as part of  it’s participation in HAMP. 

The way it will work is that Bank of America would use principle reduction, ahead of interest rate reductions and term extensions, in order to bring the borrowers’ payments to 31% of their verified income.  The amount of principle reduced will be foreborn in an non-interest bearing account, and as the homeowner makes timely payments on his modified mortgage, he will earn forgiveness of the forebeared principle.

As of this writing, loans that are eligible for this earned principle reduction program are Pay-Option ARMs and two year hybrid ARMs originated by Countrywide before January 2009. The amount owed must exceed 20% of the property value and the mortgage must be 60 days or more delinquent.

Treasury has announced that it will implement a similar idea for HAMP later this year so that it may benefit a wider range of homeowners.

HAMP Loan Modification Program Results Continue To Be Underwhelming


The Treasury released its latest set of numbers today for the Home Affordable Modification Program (HAMP) through April, 2010.  According to the Treasury, 300,000 American homeowners have received permanent loan modifications under HAMP. This number has grown in recent months and that is good news. However, in light of the fact that foreclosures have continued at a rate that exceeds 300,000 for the 14th month and counting, the number of homeowners who have received help remains miniscule when compared to the number of homeowners who have lost their homes.


Sens Franken and Snowe Sponsor Amendment To Create Office of the Homeowner Advocate

Senator Franken, the junior senator from Minnesota, and Senator Olympia Snowe of main, along with several other senate colleagues have sponsored an amendment to the financial reform bill that would create the Office of the Homeowner Advocate.  This office would assist homeowners who believe that their servicer is dealing unfairly with them as they proceed through the HAMP loan modification process.

By now, it is no secret that applying for a HAMP modification is a complex process and is an uphill battle. Today, there is nowhere for homeowners who feel that they’ve been mistreated and denied unfairly by their mortgage servicers during the application process.  With the government working to stop attorneys from helping homeowners navigate through this complex, and yes, adversarial process, the Office of the Homeowner Advocate would be a welcome refuge.

Yet, creating a department within the government simply to deal with the concerns of homeowners trying to save their homes would be a drop in the bucket. There are non profit agencies like NACA out there that assist homeowners, but as we’ve seen, there is really not enough help to go around. Why not create a special license for attorneys who wish to assist homeowners through loan modifications? Getting such a license would cost a certain amount, and the attorney would have to be in good standing with the Bar in his state to apply.

I know that some proposals are in the works for such a license, but included in the terms of that license are caveats that any attorney who assists homeowners to get a loan modification can’t get paid unless and until their loan gets modified. Since the process can take anywhere from six months to a year and a half, how are such attorneys supposed to stay in business?

In closing, it is good that we may have an agency within the government that deals directly and solely with complaints about unfair treatment by mortgage servicers. However, the nature of the crisis requires that more help be made available, and soon.

Are You NPV Positive? Know If You Qualify For HAMP Before Applying

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Imagine if you could know whether or not your HAMP loan modification application will get approved into a permanent modification before you even went though the process to apply.  Not only would you save yourself the hassle of filling out the paperwork and sending in your documentation, you’ll save money by avoiding paying trial modification payments only to be told that you don’t qualify in the end.

The banks use what is called the NPV formula to evaluate the value of the cash flows generated by your loan in a foreclosure situation as opposed to a modification situation. If the cash flow generated from modification is greater, then you are NPV positive and your modification will be approved. If the value of a foreclosure is greater, then you will be denied.

The exact formula that lenders use is a secret. Only the servicers and the Treasury have access to it, and, well, the people who helped create it. Those folks have made it available to certain persons and entities and now, for a fee, you can get your own NPV evaluation and know whether or not you pass the NPV test.

To find out how to get your own NPV analysis, send an email to

I hate spam just as much as you do and I will never sell your email address to anyone else, nor will I use your email address to market anything else to you. The only other person who will see your email is the person who will do your NPV analysis. That’s it.

Geithner Chides Mortgage Servicers For Not Doing Enough To Help Families Avoid Foreclosure


Reuters reports today that Treasury Secretary Geithner is upset with mortgage servicers for their lagging efforts in helping troubled homeowners avoid foreclosure. He is also incensed to hear of servicers acting in bad faith by foreclosing on families who might have qualified for a HAMP modification, losing documents, and even guiding families away from help.

Secretary Geithner has vowed to get tough with servicers who are not in compliance with HAMP guidelines and “withhold incentives or demand their repayment” as a consequence of their non-compliance.

While it is good to hear that Treasury is beginning to take some action with recalcitrant servicers, I have to wonder if it will be enough. As with the entire HAMP program, this may be too little and too late to be of use to anyone.

Warren Report Finds Administration’s Foreclosure Mitigation Efforts Still Lagging Behind

The Congressional Oversight Panel, headed by Elizabeth Warren released its report regarding the state of the foreclosure crisis and the Administration’s efforts to address it yesterday. The report concluded that while the Treasury had made significant efforts to improve foreclosure mitigation programs like HAMP, its efforts are still not keeping pace with the scope of the crisis.

It found that 2.8 million homeowners received foreclosure notices in 2009 alone and one in four mortgages are underwater, meaning the home’s value is less than the mortgage. As for modifications, there have been 168,708 permanent modifications completed as of February 2010. What this comes out to is that for every family who received a permanent modification, ten families lost their homes.

The panel commends Treasury for the improvements to the program done to date, including addressing foreclosures due to unemployment and the negative equity (underwater mortgages) situation. At the same time it urges Treasury to act more quickly, since it is clear that current efforts are coming too late to help the majority of distressed homeowners.

The panel also expressed concerns that by continuing to offer the servicers and lenders more incentives in bits and pieces, that Treasury may be encouraging them to delay modifications in the hopes that larger incentives will be available later.

So, basically, Warren and the COP have found that the Administration’s efforts to stem the foreclosure crisis have been too little and too late given the magnitude of the crisis. To underscore that, let me leave you with one more number out of that report: currently, there are 6 million homeowners who are 60 days or more delinquent on their mortgages.

Short Sales vs. Foreclosures

As the foreclosure crisis continues largely unabated by the Making Home Affordable program, we are now seeing a push from the government for servicers and lenders to consider short sales. A short sale is where the property is sold for less than the balance of the mortgage note.

Pushing short sales is not an acceptable answer to the foreclosure crisis. No amount of coercing from the government, absent the force of law,  will get mortgage servicers to accept the kind of offers  a homeowner is likely to receive, especially in areas where home values have plummeted over 20%. 


Treasury Lowers Expectations For HAMP Program

More than a year after launching HAMP, only 210,000 families have received permanent modifications. This puts the program’s original goal of helping 4 million families far behind schedule and highlights the program’s weaknesses.

So what does the Treasury do? Instead of doing things to improve the program, such as giving it some actual teeth to force banks to cooperate and actually modify loans, the Treasury now says that when it made the original  projection of helping 4 million homeowners, it only meant that up to 4 million homeowners would be “offered” a modification, not that they’d actually receive  one.

The Treasury has revised its projections and claims that HAMP will help 1.5 to 2 million homeowners. It is now pushing the idea of other foreclosure abatement solutions such as short sales where the beleaguered homeowner sells his home for less than the value on the note and finds “more suitable” housing.

It seems the Treasury is adopting the stance of one banker who actually said that his bank only offers modifications. They don’t actually do them. Do we need any further evidence that Treasury Secretary Geithner is  in the pocket of the big banks? Of course, it is not him alone, it is  his entire department. Who, there, is actually looking out for the well-being of the American people who have long been bamboozled by Wall Street and Big Finance?

Black Homeowners 50% Less Likely To Receive A Permanent HAMP Modification, Survey Reveals

foreclosure1 In what is already an under-performing program, a recent NCRC survey discovered yet another disturbing flaw in the Obama Administration’s loan modification program: black homeowners were 50% less likely than white homeowners to receive a permanent loan modification.

Reasons why this might be happening (aside from discriminatory practices) could be unemployment. The black unemployment rate has jumped to 15.8 percent while the national average is 9.7%.

In recent months, the Administration has come to realize that defaults due to unemployment or underemployment are rising and is at last moving on programs to assist the unemployed stay in their homes. This aid will take the form of forbearance plans that would either reduce the unemployed borrower’s mortgage payments to no more than 31% of their income, or wipe out the payments entirely for a period of no less than three months.  Some borrowers could receive six months of relief under this program.

While it is clear that black borrowers aren’t getting a fair shake, according to the survey, it is also apparent that not everyone who qualifies for a modification is getting one, regardless of race. There is currently plenty of carrot for lenders and servicers, but no stick to go with it, to force the banks to “do the right thing.”

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