2011’s Defining Issue; 2012’s Most Important Fight

Intelligent analysis from Robert Reich, commentator on NPR’s Marketplace.

“Wall Street got bailed out,
but homeowners caught in the fierce downdraft caused by the Street’s excesses have got almost nothing.”

No kidding.

“Government is doing less of the things most of us want it to do — providing good public schools and affordable access to college, improving our roads and bridges and water systems, and maintaining safety nets to catch average people who fall — and more of the things big corporations, Wall Street, and the wealthy want it to do.”

That’s not what we pay taxes for, is it?
Certainly not what we have in mind when we elect people to represent our communities in Congress.

“If we want to get our democracy back
we’ve got to get big money out of politics.”


Why Your Mortgage Mod Was Really Denied

“Three years after the foreclosure crisis began, the process to apply for a loan modification remains a bureaucratic nightmare that is complicating
the housing recovery …”

An excellent Reuters article detailing the ongoing dysfunction of the mortgage modification programs does a pretty good job of describing the nonsense the banks put people through in what should be a relatively simple, straightforward process. Here’s what one homeowner went through when seeking a loan modification after her adjustable-rate mortgage payment went up, but before she had even missed a payment:

“First she provided documents without getting any response,”

“… then she was denied by her servicer for not providing documents it never actually asked for.”

“One part of the bank appealed that decision and approved her for a trial modification,”

while “another part denied her again – twice – providing two new reasons in part based on inaccurate calculations.”

Then, when contacted by a third party,”a bank spokesman said she was unable to qualify under “imminent default provisions,” a third reason.”

Later the bank begins to start to threaten her, sending a letter stating it is going to “accelerate foreclosure proceedings, despite her perfect payment record and the letter itself saying the bank owed her $281.01.”

Yikes! If you’re not involved in this process with a bank, I think it’s very hard to fathom the breadth and depth of the banks’ perfidy —  the ridiculous lengths to which they will go to justify a denial and the sheer number of lies they tell to support these trumped-up denials.

I’ve gotten fake denials — twice told I had violated the terms of a trial modification I was never in and once denied like the woman above for not sending documents that I was never asked to send. Those are all about confusing and frustrating people, discouraging people from pursuing a modification. I know at least one person who believed a denial letter that actually had nothing to do with her case and gave up, letting her bank foreclose without a fight.

The Reuters reporters documented another disturbing tendency of the banks: falsifying numbers in order to engineer a loan mod denial.

One homeowner’s loan servicer “overvalued his house by more than $100,000 in rejecting a modification.”

“Once he was able to convince [the bank] of that mistake, it rejected him again, dropping his monthly income by almost $4,000 … even though his actual income had not changed.”

Another common practice among mortgage servicers that seems unbelievable if you haven’t experienced it themselves. Most reasonable, honest people can’t begin to imagine the kind of systemic deceit being practiced by these big mortgage servicer banks.

The bank employees ask customers to provide reams of documents detailing their income and expenses and then ignore all that information and just make up numbers? Surely not! That’s surely not legal … moral … ethical … possible? How can it be allowed to happen?

Good question, but it does happen frequently. My financial information was faked  in at least two of the reviews of my mortgage loan for modification. Both times my income and expense figures — which I reported very honestly based on actual numbers that are backed up by bank statements and copies of actual checks and bills — were falsified.

Why? So that the figures fed into the secret computer program that determines HAMP eligibility would generate a denial. Why else?

I have to say my favorite part of the Reuters piece was the bit about the top-secret investor requirements that borrowers don’t meet. Talk about a lack of accountability and transparency in a system.

“More than two years after he first applied for a modification, the bank told him there was an investor restriction on the loan, which meant it couldn’t modify it.”

“That investor agreement was public.”

“But after confronting the bank with that agreement, which did not include any such restriction, the bank told him there was a previously undisclosed secret document that included the restriction.”

Did you catch that? “A previously undisclosed secret document.”

How is a homeowner supposed to fight undisclosed secret documents (which may or may not exist, just like the proof that banks actually own the debt on all the mortgages that have been securitized over the years.)?

The big mortgage servicers that tanked the economy in 2008 and whose actions continue to thwart any meaningful recovery took billions of dollars in bailouts from the American people. One of the only conditions of getting access to all that cash was that they had to agree to take part in the government’s “home preservation” programs such as the Home Affordable Mortgage Program (HAMP).

And HAMP has all sorts of guidelines that establish eligibility and create a process banks agreed to follow when dealing with their customers who are in financial difficulty as a result of the very same economic crisis the banks caused.

In addition, if your mortgage was sold off to or securitized, banks or so-called government-supported enterprises or entities like Freddie Mac or Fannie Mae, your mortgage servicer has contractually agreed to abide by a series of guidelines set by these “investors.”

Via the internet, people have access to both the HAMP guidelines and some of the servicing guidelines their banks are supposed to follow. Except the banks don’t follow them. And, for the most part, nobody seems to care.

Well, turns out it doesn’t really matter. Because they’re actually stringing you along and lying to you and denying your loan mod because they’re required to follow the requirements of some shadowy unknown entity as decreed in undisclosed secret documents.

Well, that explains it. If you don’t send documents you weren’t asked to send and you don’t comply with every provision of the undisclosed secret requirements, you aren’t going to get your mortgage modification. Now you know.




Big Banks are Too Big to Serve Their Purpose. Move Your Money.

One of the largest problems with the big banks’ “systems” for evaluating mortgage loans for modification is the sheer volume of loans to be reviewed. No, I’m not buying in to their nonsense spin that they’re doing the best they can; it’s just that the silly homeowners won’t cooperate by sending the proper paperwork.

And I certainly haven’t changed my mind about all the delaying tactics being an intentional strategy to either drive people away without a mod or drive people deeper into debt so that a mod becomes impossible. Those are deliberate systems put into place by the big banks to manipulate the intent of modification programs like HAMP and to scam their customers.

But, even if the banks were honestly trying to help borrowers retain their homes, there are two big roadblocks.

First, the vast majority of homeowners aren’t really the big banks’ borrowers. Most of those mortgage loans originated by Wells Fargo, Chase, Bank of America and their cronies weren’t retained by the institutions that wrote the loans.

If you bought your home during the frenzy of the recent real-estate bubble, your loan was most likely bundled into a mortgage-backed security and sold on before the ink was dry on your purchase agreement. The riskier the loan (those creatively structured sub-prime loans), the quicker it was securitized.

If you bought your home before the real-estate bubble and weren’t a sub-prime borrower, your loan was sold on, as well. That’s because, at least in the early days of securitization when there were still regulations and standards in place, each bundle of loans had to include a certain percentage of high-quality “performing” loans along with the riskier junk loans.

So, suddenly, the company that once bore the risk for the performance of your loan was no longer in that position, no longer had a stake in ensuring you could pay off the loan. Instead, the big banks became loan servicers, which means they make more money (in the form of fees charged to the investor) when something goes wrong with the loan than when you’re just going along making your payment every month. That means foreclosure is more profitable to them than restructuring your loan so you can keep paying.

How ridiculous is that? Talk about a business plan that is not sustainable. It’s all about making those record profits and obscene bonuses in the short term, no matter the long-term cost to the economy or the bank itself.

The second problem keeping the big banks from properly reviewing mortgage holders for loan restructuring is sheer volume. More than 2.5 million home loans have gone into foreclosure in the past two years. That’s a lot of paperwork, even if the banks weren’t playing the “we didn’t get your documents; send them again” game.

What that means is that whether your mortgage qualifies for a modification isn’t decided based on the judgement of an experienced mortgage loan professional. Whether or not you qualify depends on how a bank employee (or contractor) interprets those income and expense numbers you send over and over and which figures he or she decides to input into a computer program that decides whether you qualify.

For the most part these people parsing your financials don’t have much experience or training. And they are highly incentivized by the banks to find ways to ensure you don’t qualify. But even if they were experienced, honest people trying to actually help homeowners avoid foreclosure, the system is doomed to failure. When computers instead of human beings decide the fate of mortgage-holders, of course the numbers of foreclosures will grow.

Again, the sheer size of the big banks sets up a lender/borrower relationship that benefits neither party in the long run – another unsustainable business model.

The real problem here is that the banks have become too big to provide the services they were created to provide. It’s not “too big to fail.” It’s truly “too big to succeed.” Banks with no connection to their customers, writing loans they don’t intend to own long-term, is a recipe for financial disaster. Add on the billions they made bundling all kinds of questionably created mortgages into big-dollar securities and the billions they derive from their loan-servicing subsidiaries and you can see that the big loser here is the consumer, the person the bank is supposed to be serving.

Runaway greed, short-term thinking and the impersonalization of banking services have brought down the largest economy in the world. The big banks have made themselves too big to sustain, too big to do the job they were created to do.

So what can you do about this? It’s actually pretty simple. Stop doing business with a bank to whom you are just a number. Move your money to a local/regional bank or credit union and start establishing a relationship with the people who handle your financial affairs. When it’s time to finance a house loan, a car loan or any other loan, you’ll be working with an institution that is going to own that loan for the duration and that won’t.

A banker with whom a customer has done business over the years can take into consideration the borrower’s full financial picture. Has the person been a loyal customer for many years, always managed his or her finances responsibly, paid off other debts fully and in a timely manner? Is the current hardship a temporary situation caused by circumstances beyond the borrower’s control? If the answer to those questions is “yes,” an experienced financial-services professional is likely to see that customer as a good risk and work to restructure a loan to the long-term benefit of all parties.

On the other hand, if the customer has a history of overdrafts, late payments and general poor financial management, perhaps that person doesn’t get a loan in the first place. Disappointing for the customer, but surely a much more responsible way to do business. A sustainable way to do business. A bank serving its customers the way banks are supposed to.

Invest in Main Street, not Wall Street. Move Your Money!

Related Links:
Move Your Money, Change the System
Moving money: deposits rise at local banks

Just in Case You Think the Banks Will Ever Start Dealing Fairly With Mortgage Mods …

… think again!

Nearly three years ago, California Congresswoman Maxine Waters was filmed by ABC News getting the run-around while trying to help her constituents negotiate with their banks to restructure their mortgage loans.

Here’s the story, which aired on Nightline in January 2009. It certainly shows that nothing much has changed since then …

I initiated my ongoing quest for a mortgage loan modification in March 2010 and what Rep. Waters went through looks absolutely familiar to me. Wells Fargo strung me along for seven months before denying me both for HAMP and for their “in-house” mortgage mods. And they’ve been playing similar games ever since, both with me and with my legal counsel.

Waters was one of many members of Congress who appealed directly to Treasury Secretary Tim Geithner in 2011 for specific changes to HAMP, including adding an independent review process for homeowners denied modifications under the program. Of course, that hasn’t happened, as I well know from my experiences of having Wells Fargo fabricate both income and expense figures during at least two of my HAMP reviews.

So … if you’re playing the delay game with your bank while not paying your mortgage so you can save up some $$ to re-settle, more power to ya.

But if you’re hanging on, depleting your savings scraping up money to keep paying while waiting for the Obama administration, regulators, Congress, Treasury or the attorneys general to take some real action to make the banks start dealing with homeowners in good faith … you might want to consider that nothing much substantive has been done to benefit average Americans in the past three years while millions of good, honest, hard-working people lost their homes.

“… if you have a set of rules for which compliance is completely voluntary and no meaningful consequences for those who violate them, having all the audits and reviews in the world are not going to make a bit of difference. It’s why the program has been a colossal failure.”   
~Neil Barofsky, former special inspector general for the Troubled Asset Relief Program (TARP), the bank bailout that provided the money for HAMP

I hope you will make the best choices for yourself and your family and won’t get bogged down in false hopes and “should-have-beens.” Certainly nothing is going to change on the political front until after the 2012 election. (And it’s unlikely it’ll change for the better afterward, either, regardless whether the current impotent administration comes back or one of the GOP’s seemingly endless supply of wingnuts wins.)

From the Headlines … TV Series Tells Story of Our Frustration With the Financial Sector

In case you missed it, the NBC series “Harry’s Law” had an interesting storyline this week about a woman who was driven to rob the bank where she had been a customer for 20 years. The bank had given her a questionable mortgage loan and then foreclosed on her home.

I applaud the writers of the series for bringing this issue into focus in prime time and for presenting the woman whose bank drove her to lawlessness as an ordinary, middle-aged, middle-class mother who simply bought a home for her family.No matter how the banks try to spin those of us caught up in their economic morass as “deadbeats” and “lazy people who just want a free house,” we who are involved in the fight against foreclosure know that’s not true.

I hope a few viewers of this excellent series saw in the woman on trial a person they could relate to, a single mother who lost her job and didn’t know where to turn.

Like many, many people who are being victimized by their own banks, she was sold a sub-prime loan by a banking professional she knew and trusted. And that same bank manager unapologetically took her home when circumstances beyond her control destroyed her finances.

And the closing arguments by the two lawyers were just great. The prosecutor sounds a dire warning about how many people have been driven to the brink of anarchy by the current state of the U.S. economy. And the defense attorney speaks for all of us who wonder why the banksters who put us all in economic crisis just merrily collect their bonuses without any recourse. It’s a great scene.

Who was I rooting for? Well, I’ll just remind you that this country was founded on anarchy, on people standing up and saying to a repressive government, “No! I will not sit still and allow you to tax me and cheat me and pretend you’re doing it all for my benefit.”

“When a government acts to betray the interests of its constituents, civil disobedience isn’t just a right, but a duty.” ~Tommy Jefferson