Treasury Dept. Throws Homeowners to the Wolves, Makes Bankers Rich

Just in case there’s still anyone out there who thinks that the government’s “home preservation” program HAMP (the Home Affordable Modification Program) was actually intended to help Americans devastated by the bank-induced economic crash and subsequent foreclosure feeding frenzy, here’s the real scoop from the man tasked with overseeing the bailout program TARP (Troubled Asset Relief Program).

From a Huffington Post article about the recent book released by Neil Barofsky, former special inspector general for TARP:

In response to homeowner complaints about mortgage servicers, Treasury “demonstrated no interest in taking even the most modest steps to punish them,” Barofsky writes. “That was unconscionable, given the pain being inflicted on so many home owners.”

In a meeting with [Treasury Secretary Timothy] Geithner — this one involving fewer f-bombs than others — Barofsky says he finally realized the root of the Treasury Department’s apparent lack of interest in helping homeowners: They apparently had another goal in mind.

At the meeting, Elizabeth Warren, then chair of a congressional oversight panel established in 2008 to oversee the bailouts, questioned Geithner about HAMP’s ability to help homeowners — not the last time she would grill him.

“In defense of the program, Geithner finally blurted out, ‘We estimate that they can handle ten million foreclosures, over time,’ referring to the banks. ‘This program will help foam the runway for them.'”

To Barofsky it seemed that Geithner saw HAMP mainly as a way to stretch out the foreclosure process, giving banks time to recover from the crisis without having to be hit with a wave of foreclosures all at once.

“Helping the banks, not home owners, did in fact seem to be Treasury’s biggest concern,” Barofsky writes. “HAMP was not separate from the bank bailouts; it was an essential part of them.”

So, according to the man in the know, HAMP was supposed to create a soft landing (“foam the runway”) for banks that have gotten rich from making millions of risky and fraudulent mortgage loans.

What I’d like to know is, why didn’t the U.S. government pay any attention to creating a soft landing for the millions of Americans whose lives, livelihoods, retirement savings and households were devastated through no fault of their own? Why hasn’t  the Dept. of Justice prosecuted a single bank exec. in the wake of mortgage loan fraud, robo-signing, securitization irregularities?

Oh, yeah. Most of us can’t afford to buy ourselves a senator, representative or a president like the big banks have done and are doing.

By the way, it seems Goldman Sachs and cronies have chosen to enthrone Romney this time, so no doubt see absolutely no need for the little people to waste time and effort voting. No worries, then, if you lost your house to an iffy foreclosure process and had to move, but forgot to update your voter registration. Wells Fargo, B of A, Chase, Citi and friends will take care of choosing a government that will keep providing them a soft place to land.

Loan Servicers Continue to Play Dumb, Ignore AG Settlement Rules

Six months after the long-awaited state attorneys generals’ settlement with (sell-out to?) the big mortgage loan servicers, the status quo seems unchanged for homeowners fighting to fend off the ongoing foreclosure feeding frenzy.

For those of us who have been dealing with the banks’ nonsense for years, the faint hope that someone in power finally fought for the banks to deal with borrowers in good faith has proven in vain according to Peter S. Goodman’s recent Huffington Post article featuring the travails of one New York homeowner.

“… the $25 billion foreclosure settlement the Obama administration and state attorneys general struck in February with the nation’s five largest mortgage companies -– servicers, in industry parlance … resolved complaints of unlawful foreclosure practices, detailed standards mortgage companies must meet or face fines up to $1 million per initial violation: Servicers must approve or deny loan modification applications within 30 days of receiving them, and must also provide distressed borrowers with a single contact person to discuss their cases in a bid to eliminate confusion.

President Barack Obama touted the “landmark settlement” as a curative, asserting that it would “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake.”

Despite the approach of an early-October deadline by which servicers must fully comply with the new standards, those who defend and process foreclosure cases say little improvement has emerged.

“We’re not seeing any changes in servicer behavior,” says Megan Faux, director of the foreclosure prevention project at South Brooklyn Legal Services, a legal aid firm that represents poor people confronting foreclosure in New York City. “We’re still seeing huge delays, improper denials of modification, very few principal reductions. None of their practices are really changing.”

Katie Diaz’s experience might be the story of any of us. She’s a hard-working middle class person caught up in an economic downturn that she didn’t cause and couldn’t have foreseen. When her household income changed, she did the right thing by getting in touch with her bank for assistance. What she got instead is all too familiar to anyone trying to get a loan mod: her bank “losing” paperwork, keeping people on hold for hours before providing conflicting information, denying loan mods with the excuse the homeowner didn’t send paperwork it turns out the bank never requested. As I read, I just kept thinking “been there, done that.”

“Diaz, 52, is here for a settlement conference, a face-to-face meeting of lender and borrower mandated under the foreclosure process in New York state. As soon as she sits down at the wooden conference table, an attorney representing Bank of America confirms that she is under review for a loan modification. A few minutes later, the bank lawyer corrects himself: Her case has been closed, he says, because she supposedly never sent required documents. Fifteen minutes after that, he corrects himself again: Her file was never reviewed, because her paperwork has been sitting in the wrong office inside Bank of America.”

Same BS, different lender. Same excuses, different state. Same incompetence, different homeowner. Same. Same. Same.

Goodman’s article marks the first time I have seen a mainstream reporter raise a point that I have written about before:

  • Is it credible that the banks are merely horrifically incompetent after several years not to have developed efficient systems to deal with mortgage mod review?
  • Or are the banks purposely playing a game of delay and deny with borrowers seeking mortgage help?

“Ever since the beginning of the foreclosure crisis, as stories of bureaucratic dysfunction have become legion, those who represent distressed homeowners have argued over the cause of this grief. Are the servicers merely disorganized, trying but failing to manage a mountain of paperwork? Or is something more malevolent at work, a kind of strategic incompetence in which they have devoted inadequate staff to problems they have no real incentive to fix quickly, while profiting from extra fees they accrue from the foreclosure process?”

Just how many years should it take for the banks to get their $#!+ together? They seem to have had long enough to get together and share info. on how to thwart homeowners modification quests. But not long enough to find one person among their thousands of employees who can design a system for handling financial paperwork and calculate a loan re-structure? Really?

As for malevolence, watch this excellent video created by a homeowner whose bank won’t review his application for a mod until he proves he’s dead. Really. Dead.

Is anyone going to enforce the settlement requirements? I suspect not.

Call to organizations to oversee enforcement of the foreclosure fraud settlement


Only 3% of $$ Has Helped Hardest Hit Homeowners

So, it isn’t just Arizona that is failing homeowners who could use the help that was supposed to be provided by the Hardest Hit Fund programs. According to last week’s quarterly report by the special inspector general of the TARP bailout program, nationwide only three percent of the money allocated to help ease the foreclosure crisis in the most affected states has made its way to homeowners.

Seems more states than mine designed programs that exclude so many people from qualifying that the program money sits instead of helping people stay in their homes.

“In its audit report “Factors Affecting Implementation of the Hardest Hit Fund Program,” released April 12, 2012, SIGTARP reviewed Treasury’s administration of the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (“HHF”). Under HHF, TARP dollars are meant to fund “innovative measures” developed by 19 state housing finance agencies (“HFAs”). SIGTARP found that after two years, HHF has experienced significant delay in providing help to homeowners due to several factors, including a lack of comprehensive planning by Treasury and a delay and limitation in participation in the program by large servicers, and the GSEs Fannie Mae and Freddie Mac. In its audit, SIGTARP reported that as of December 31, 2011, the latest data then available, HHF had spent only $217.4 million to provide assistance to 30,640 homeowners — approximately 3% of the TARP funds allocated to HHF and approximately 7% of the minimum number of homeowners the state HFAs estimate helping over the life of the program.”
~ Office of the Special Inspector General for the Troubled Asset Relief Program Quarterly Report to Congress
July 25, 2012

As of the end of June 2012, Arizona’s Save Our Home AZ program has helped just 703 people, most in the area of the program aimed at aiding unemployed homeowners. The nearly-two-year-old program administered by the Arizona Dept. of Housing has provided just eight principal-reduction loan modifications and assisted homeowners with only nine second-mortgage settlements and 11 short sales.

The program is Arizona’s method to distribute its $125 million federal allocation from the Hardest Hit Fund aimed at the 10 states hardest hit by foreclosures. The stated intention is to “provide assistance of up to $50,000 to qualified homeowners to create an affordable and sustainable mortgage payment through a permanent principal reduction modification.”

Update 7/6/2012:
Hardest Hit Fund Tapped Most By Oregon For States’ Shares
The other 17 states in the program could use a jolt of what Oregon housing officials have been drinking.