Posts Tagged ‘investors’

HAMP: Borrowers Not Getting A Fair Shake From Servicers

A recent GAO report reveals what many critics of HAMP have long known  to be true: servicers are not treating borrowers fairly and uniformly when it comes to getting a HAMP loan modification.

The GAO found several areas of inconsistency that could result in inequitable treatment of similarly situated borrowers:

  • Because Treasury did not include guidelines for borrower solicitation into the HAMP program until after a year since its inception, servicer outreach to borrowers ranged from 31 days to more than 60 days into a delinquency. Similarly, there were no guidelines for borrower communication, resulting in long delays for responses to borrower applications and for information on the program.
  • Although part of the HAMP program was meant to reach out to borrowers before they fell behind on payments, no guidelines have been issued regarding what “imminent default” means. As a result, of the ten servicers surveyed, the GAO found all of them had 7 different criteria for determining “imminent default.”
  • Treasury has issued no guidelines for servicer internal quality assurance to ensure compliance with HAMP guidelines. Some servicers aren’t reviewing denials to ensure that they are just.
  • Treasury has not adequately made borrowers aware that the HOPE hotline may be used to raise complaints regarding how servicers are handling HAMP modifications.
  • Treasury has not established clear consequences for servicer non-compliance with HAMP guidelines.

I hate to sound like a broken record, here, but there is one major overriding reason why HAMP is not working out too well: it is a voluntary program with no teeth. Relying on servicers to help borrowers when the relationship between servicer and borrower is adversarial is like using a fox to guard the henhouse and being surprised when all the chickens are gone the next morning.

In a foreclosure situation, the interests of the borrower and the servicer are completely misaligned: the borrower needs payment relief to be able to stay in the home, or barring that, a way to sell the home and leave with a little money to start over somewhere else. The servicer on the other hand, primarily wants to make as much money as it can, and secondarily, it wants to ensure that the investor gets the best rate of return.

Prior to HAMP, loan modifications were rare and servicers, in general, were loathe to even discuss them. Loan modifications cost the servicer  money on the front end,  and result in a diminished rate of return for the investor. HAMP was supposed to address this issue by giving servicers and investors incentive payments to make modifications a more attractive option than outright foreclosure.

It hasn’t quite worked out that way. The incentive payments provided by HAMP remain a drop in the bucket as compared to what servicers can generate by foreclosing and considering that servicers and investors still view loan modifications as a last resort, they truly can’t be expected to willingly modify even a percentage of their portfolios.

Until the government forces banks to modify all delinquent loans, without concern for profits, either to the servicer or the investor,  the foreclosure crisis will continue to plague us and our economy will suffer the consequences.

Profiting From The Economic Collapse: Kondaur Capital


foreclosure sale

I originally found out about Kondaur Capital  when I read this article about how Wall Street is planning on creating securities of delinquent mortgages to sell to investors.  It made me curious about the company and so I did some digging around and what I found out isn’t pretty.

Kondaur  is a debt collector who specializes in purchasing delinquent mortgages on residential property.  There is apparently a market for “bad paper” because servicers and lenders are overwhelmed with delinquent mortgages right now. Some are willing to sell off some of the notes they hold for a few for pennies on the dollar in order to get them off their books.


A Truly Reprehensible Type Of Foreclosure

I know times are tough for local governments but I think that this goes too far. Basically,  some local governments are placing liens on homes for unpaid debts ranging from property taxes to utility services, and are then selling these liens off to private investors. Many of these debts can be for as little as $100. The private investors can then tack on all sorts of fees and interest to the original bill, making it almost impossible for the homeowner to pay it. The investor may then foreclose on the property.

This “tax sale” process can turn what is a relatively small debt into a staggeringly unaffordable one, especially for the people who end up in the trap: poor families who are struggling to pay their bills.

In the case of the woman interviewed for the story,  what got her into trouble was an unpaid water bill of $362. This number mushroomed into over $3600, most of it chock full of junk fees, among them $1,500 for the lawyer representing the investment firm having to respond to her requests for more time to come up with the money. Give me a break. That a judge approved all of these fees baffles me.

That this woman lost her home, bought and paid for long ago, because of an unpaid water bill is disgusting. That this process allows rich investors to swoop in like vultures circling above a dying animal and make a hefty profit off the pain and misery of the helpless is beyond reprehensible.

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