SIGTARP: Banks Fail Miserably at HAMP, Treasury Does Pretty Much Nothing

The most recent quarterly report from the special inspector general of the Troubled Asset Relief Program (SIGTARP) shows the terrible truth that taxpayer-bailed-out banks have rejected nearly three-quarters of applications for a government-backed and much-touted mortgage loan re-structuring program.

The third-quarter report for fiscal year 2015, released in July, shows that the banks turned down 72 percent of those seeking foreclosure through the Home Affordable Modification Program (HAMP). That figure certainly comes as no surprise to those of us who have been fighting a maddening battle with our banks’ “loss mitigation” departments, which seem to be on a mission to increase that denial rate instead of help homeowners restructure their loans in the face of ongoing economic challenges often not of their own making.

When the Making Home Affordable initiative was launched in early 2009, it was supposed to help up to 9 million homeowners keep their homes. HAMP itself was supposed to help 3 million to 4 million homeowners by extending their loan terms, decreasing their interest rates and reducing principal. (The first two sometimes happened; the third, not so much.)

In spite of having its drop-dead date extended three times, most recently through December 2016, HAMP has utterly failed to meet this goal. U.S. Treasury Department statistics kept since January 2009 – about seven months after President Obama announced HAMP’s launch – show of 5.7 million homeowners who applied for mortgage relief through the department’s “cornerstone” mortgage relief program, more than 4 million were rejected as of April 2015.

tarpgraphicAnd SIGTARP reports that an April 2015 Treasury survey of banks that service mortgage loans shows as many as 5.8 million HAMP applications were denied in total.

Odd, isn’t it, that those statistics don’t show up headlined in Treasury’s press archive? Nothing but sweetness and light there. Not unlike the department’s most recent quarterly report on Making Home Affordable, the umbrella under which HAMP operates. The headline tells such a positive tale: More than 2.3 Million Homeowner Assistance Actions have taken place under Making Home Affordable (MHA) programs. Nary a mention of those 5.8 million denied HAMP applications. Can’t you feel your head spin?

My state, Arizona, which was consistently counted among the top three “hardest-hit” foreclosure states, had a 68 percent denial rate. Of just over 172,000 applications, fewer than 55,000 homeowners were granted “trial” modifications – assigned a three-month reduced payment plan that, if successfully completed, was supposed to lead to a permanent modification.

That in spite of being granted an extra $125 million federal allocation from the Hardest Hit Fund intended 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.” (Sadly, the program proved just another farce.)

Three of the top seven servicers participating in MHA, Citi, Chase and Bank of America, all had staggering HAMP trial plan denial rates – above 80 percent. My servicer, Wells Fargo, did better with “only” 60 percent denial.

Note that for the first quarter of 2015, the Treasury Department’s mortgage servicing survey found that Chase and BofA needed only “minor improvement” and Citi and Wells Fargo needed “moderate improvement” in their compliance with the quite specific HAMP servicing standards supposedly administered by the department. Such a gift for understatement those Treasury officials have. Not, however, a gift for ensuring that banks act to make programs like HAMP actually work for the people they’re supposed to serve.

According to the SIGTARP quarterly report:

“Congress created SIGTARP to prevent vulnerabilities for fraud, waste, and abuse in TARP, improve TARP’s efficiency and effectiveness, and enforce the law where fraud has seeped in.

“SIGTARP’s 176 recommendations are designed to protect TARP programs and dollars. But they can only provide that protection if Treasury implements them. Treasury, however, has failed to implement 104 of SIGTARP’s 176 recommendations, losing opportunities to make a difference.”

Later in the report, this conclusion that will come as no surprise to anyone who has tried to secure a loan mod: “Some of SIGTARP’s most significant unimplemented recommendations to Treasury address problems in HAMP …”

The HAMP guidelines, most of which have been in place since shortly after the MHA programs were launched in early 2008, were reiterated four years later as detailed standards specified in the much-touted National Mortgage Settlement. But, Treasury seems to deliberately avoid making the MHA programs work effectively an efficiently, a fact that clearly frustrates current TARP Special Investigator General Christy Romero as much as it did the first SIGTARP, Neil Barofksy. Plenty of American homeowners – and former homeowners – know just how you feel, Ms. Romero.

No wonder I’m seeing an up-tick in traffic on my blog, website and facebook page. I’ve heard from people in their fifth year of fighting the bank and no matter how much paperwork they submit or how much research they have done to confirm that they do, indeed, meet the publish criteria for a HAMP mod, the bank keeps faking reasons to refuse.

Not surprising that people are seeking outlets to tell their stories, if only to confirm that they 1) aren’t losing their minds and 2) aren’t the only ones being totally jerked around by huge corporations that should operate with some level of professionalism and ethics

Consider this post on a seemingly inactive foreclosure prevention company’s site. The original complaint against Wells Fargo was posted in February 2008. Scroll down and you’ll find 112 comments posted over four-and-a-half years – an eternity in Web time. You’ll see most of those 112 posters tell similar tales: either same story, same bank or same story, different bank.

The the two SIGs have been reporting many of the same things we’ve all been saying since 2008, and doing it in clear, readable documents backed up with clear statistical analysis illustrated with informative graphics. So it’s not as if anyone who wanted to understand the problems and get sensible advice on effective fixes doesn’t have access to the necessary information.

The truth remains: the big banks have no intention of dealing fairly with distressed homeowners seeking to restructure their mortgage loans and nobody with the power to stop the banks has any intention of changing this.

Resources:

In Case You Thought the Mortgage Mod Process Had Improved

While I was clearing out some old news items to make way for my website’s more up-to-date and topical News page, I ran across this February 2011 clip from MSNBC’s now-defunct The Dylan Ratigan Show.

Listening to Ratigan and his guests describe the way banks were scamming homeowners with HAMP trial modifications, it struck me that I’m reading about some of the same practices from commenters to my blog posts in 2015.

This PBS NewsHour segment I dug up from October 2010 also tells a story familiar to my readers, including homeowners’ reports of spending endless hours on the phone, sending paperwork over and over, dual-tracking and multiple (and often unresponsive) assigned contact people.

“You get put under a lot of stress, trying to get help. And it’s not there.”

Wow! The more things change, the more the big banks have been screwing over honest, hard-working people for years with the collusion of the Obama administration, Congress, the courts and every regulatory agency that’s supposed to look out for consumers.

And, while we’re on the subject, this headline from intrepid (and prescient) blogger Martin Andelman might just be my favorite:

THE JURY IS IN: Obama’s Foreclosure Program Run by Morons… and Trial Modifications are the Biggest Loan Mod Scam Ever

If I knew then what I know now – and what Martin Andelman correctly predicted – I would have saved myself a whole lot of work and anguish and walked away with a bigger bank account and a smaller waistline. (That stress eating while sending out your 90th set of loan mod docs really adds up!)

Well, the morons are still in charge and thanks to the way campaigns are financed now, they will continue to be. And trial mortgage loan modifications are still a big scam.

I’ve found a few other information gems I had forgotten about – including updated facts and figures from sites I haven’t looked at in years – that I’ll be sharing in the coming weeks.

Timmy G’s Version of Recent History

If you’re a big fan of revisionist history and want to read more government spin on the financial crisis that triggered a multi-billion-dollar foreclosure frenzy, ex-Treasury Secretary Timothy Geithner’s new book is just the thing for you. Here are some excerpts as reported by the Wall Street Journal.

On a silver-bullet for the foreclosure crisis:
“Housing was an impossibly complex issue that didn’t lend itself to simple solutions, and the limitations of our housing programs were a lot 
easier to identify than they were to fix. We were under intense pressure to improve these programs—not only from our many critics, but from the President, who was deeply unsatisfied with our early results, and constantly pushed us to do better… We were dissatisfied and frustrated, too. Some of our programs were stumbling out of the gate. Others weren’t ambitious enough. We would keep looking for ways to expand their power, reach, and effectiveness throughout the president’s first term.

“If there had been a game-changing housing plan that could have provided much more relief, we would have embraced it. We had some of the nation’s best progressive talent working on housing. We also had powerful incentives to throw everything we had at the problem; the press was killing us and so were our political allies… We tried to do what we could within the constraints we faced. It wasn’t enough. But it was more than most people realized.”

On the shortcomings of the Home Affordable Modification Program, or HAMP, the administration’s primary mortgage-relief campaign:
“We ended up requiring a mountain of paperwork for permanent relief, in part to appease critics such as [Neil] Barofsky, [the special inspector general for the $700 billion Troubled Asset Relief Program] who warned that the limited safeguards in our initial proposal were an invitation to fraud; we decided that in this case he had a point. But Larry [Summers, the director of the White House National Economic Council] warned that we were so worried about “false positives,” providing aid to the underserving, that we would allow too many “false negatives,” denying aid to the deserving. He had a point as well….

“By [late 2009], it was clear that HAMP’s reliance on the broken infrastructure of the mortgage servicing industry was a serious problem. This was probably unavoidable; we didn’t have the authority to start up a new government agency or hire thousands of loan specialists ourselves, and even if we’d been able to get the authority from Congress, it would have been a long and messy process. But the servicers, many of them owned by the banks, had little experience modifying loans, and nowhere near the capacity or the resources they would need to modify millions of loans. They had been completely unprepared for the housing crisis, and had laid off staff in droves after the bubble popped.

Now we were asking them to conduct a challenging and time-consuming form of triage, and they were terrible at it—slow to hire, slow to figure out how to provide relief, just slow. In fairness, many of the borrowers they were supposed to track down were hard to find and harder to engage; homeowners also struggled to find every required document. But many times incompetent servicers found ways to lose those documents multiple times….”
_________________________________________________________

What a load of crap former Treasury Secretary Timothy Geithner is spewing in his newly released book. No surprise he’s trying to re-write history: millions of Americans lost their homes completely unnecessarily because of his inability (unwillingness?) to make his Wall Street cronies at the big banks follow the very specific guidelines for modifying mortgages that were supposed to drive the Home Affordable Mortgage Program (HAMP).

HAMP wasn’t a perfect program by any means, but if it had been implemented in any meaningful way a whole lot of people would have kept their homes. All Geithner’s department and the other agencies tasked with oversight had to do was bring the banks to heel and get them to comply with the guidelines of the program, something that should have been within his power (for all he protested it was not). The “carrot” built in to the federal program was miniscule – small amounts of money offered for banks who followed the guidelines and completed what should have been fairly straightforward re-structuring of mortgage loans. (Lower the payments by decreasing the interest rate for a few years, extend the term of the loan and add a balloon payment on the end. Pretty standard stuff.) But the “stick” should have been huge: comply with the guidelines or don’t get bailed out. Fail. Simple as that.

But over and over Geithner and the other regulators failed to act in the interest of the American people and instead caved and waffled and,
eventually after years of blatant lies and fraud, negotiated some anemic and highly ineffective “punitive” settlements.

It’s not as if Geithner didn’t know the banks were running a big scam in the name of HAMP. How many letters do you suppose the Treasury Department got from homeowners detailing the now-familiar story of people trying for months and, eventually, years just to get the banks to
acknowledge that the proper paperwork had been submitted for review. I played the paperwork game with Wells Fargo for two years, sending the same forms over and over and waiting nearly eight months for one of the modification reviews to be complete (even though the HAMP guidelines specified the review take no longer than 30 days.)

I didn’t write to the Treasury Department, but a letter I wrote to President Obama in November 2010 got routed there in July 2011, presumably because Treasury was supposed to be overseeing HAMP. This referred me to a division of Fannie Mae (then tasked with administering the modification program) called the HAMP Solution Center, which resulted in a fake “investigation” of my allegations against loan services Wells Fargo and “investor” Freddie Mac. The staff of the Solution Center asked me no questions and gathered no data or facts other than my initial letter. I’m quite convinced that all they did was ask Freddie Mac whether Wells Fargo had done what it was supposed to in my case. (Or at least they said they asked; I got copies of no such correspondence.) Big surprise, Wells Fargo reported that it had complied in every way with the program and said the delays were all my fault because I just kept failing to send them paperwork on time (Big LIE!) and I didn’t qualify for HAMP (LIE!). The Solution Center took that as read and blew me off, as subsequently did the Treasury Department. The message to my bank: just keep on lying and cheating and we’ll just go on looking the other way.

Bankster apologist Geithner talks about the “broken infrastructure” of the mortgage servicing industry as if the poor banks just didn’t have the
resources to process all those re-structuring requests. But the same banks managed to originate all those mortgages – even at the height of the home-buying frenzy – without whining about being overwhelmed and under-staffed. Re-structuring those existing loans shouldn’t have required nearly as complicated a system as the origination. (If you’ve ever bought property, you know all the paperwork and logistics involved.) To modify a mortgage per the HAMP program guidelines all they really had to do was verify income eligibility, something institutions tasked with loaning money have been doing as long as there have been such institutions.

Create a system, teach the system to staffers assigned to the task, publicize the exact steps applicants need to follow and get on with
business. That’s assuming, of course, that you honestly intend to re-structure these loans. However, I know for certain that the big banks
never, ever intended to comply with HAMP. How do I know this? Simple. The banks never designed nor shared such a system. You could scour the websites of these big banks for weeks and still not find anything as simple as a checklist for what documents needed to be submitted before a HAMP review could commence and what the timeline for said review would be. And if you called your loan-servicer bank and spoke with one of the (mostly) polite but completely useless customer service people to whom your call was routed, they couldn’t tell you this information, either. (Nor were they allowed to tell you who was doing the review or how to contact that person or pretty much anything else of substance that a company engaged in honest business would openly provide.)

What the banks did instead was develop a system to string along their borrowers, to generate who-knows-how-many millions in “servicing”
fees while also extorting more money out of homeowners with a scam known as a “trial modification.” And in a grand stroke of coincidence, each and every one of the big banks seemed to come up with many of the exact same strategies for this, the best known of which was (and still is) the endless paperwork game. Send the same paperwork over and over and over and be told it’s lost or wrong or, my personal favorite, “stale.” On sites like HissingKitty and RipoffReport you can read thousands of accounts from homeowners seeking loan mods from Wells Fargo, Chase, Bank of America, Citi and all the little subsidiaries and the stories pretty much follow the same line. Loan mod scam with concurrent foreclosure process (the deadly “dual track“) proceeding with the force of a freight train and nothing – not logic, not the law, not ethics or morals or compassion or even the fact that the person being persecuted didn’t hold a mortgage – could stop the engine.

Pure chance or do you think the banks got together and conspired to create a system to thwart the mortgage loan re-structuring program and defraud millions of homeowners out of their property? I for one believe they gleefully shared their stalling strategies as they developed, including that extremely expedient forgery system that became known as “robo-signing.”

And all of this happened on Geithner’s watch and with Geithner’s full knowledge. Anyone with a brain realizes this. To the banksters that
makes him a hero, part of the mechanism that yielded them six-figure bonus checks while the average American was struggling to stay above
water. To those of us who were lied to and jerked around by those banksters, he’s one of the evil conspirators, someone who could have
stopped the foreclosure feeding frenzy and did not.

I’m not saying it was his decision to chose inaction over doing anything substantial to turn the tide of foreclosures. I firmly believe the fault for
that lies with the Obama administration, which either implicitly or explicity blocked every agency that could have prevented the big fee-crazy
mortgage servicers from raping and pillaging millions of homeowners. But with his close relationship to the Wall Street fat cats, it’s easy to imagine his natural inclination led to favoring the corporate cash grab over the little guys defending their homes.

So of course he’s out there hawking his revisionist history and disparaging anyone still calling for justice for the millions Americans who had the rug pulled out from under them by a financial crisis not of their making and who lost homes not because there wasn’t a “silver bullet” to stop
foreclosures but because men like Timothy Geithner conspired against them with the very people who did cause the crisis and who were
getting rich off its fallout.

   

It’s 2014 and the Banks Still Can’t Modify a Mortgage?

Think the foreclosure crisis has ended and banks are back on the straight and narrow after years of cheating and lying to customers? Judging from the searches that bring readers to this blog, that’s just not the case.

Seems people are still being strung along in fake mortgage modification reviews and offered false trial mods that lead to nowhere. I’m also seeing more searches for information about forbearances, which is just another scam to extract a bit more money out of homeowners before the foreclosure process grinds to a finish.

So, to review for those of you who haven’t been paying attention and still think that there’s nothing wrong with the way big banks have done business in the wake of the financial crisis and  the government really did all it could to help mitigate the foreclosure problems, here are a few interesting points:

1) In addition to their overweening greed causing the financial crisis, it also fed the foreclosure feeding frenzy that followed. 

“All those arrows point in the same direction – the HAMP failure, the foreclosure nightmare that people experience, the court decisions, the realtors’ short sale experiences. They all point to a huge bank bureaucracy that is incompetent, that is tormenting people, that is doing great damage to the investors.”

“HAMP would be more successful
were it not for “massive servicer noncompliance.”

~National Consumer Law Center

2) The Obama Administration did nothing to help beset homeowners ride out the financial crisis and everything to throw them to the wolves – namely the big banks.

“When President Obama delivered his speech in Arizona in February, 2009, nowhere in the speech did he come close to implying that this plan was intended to help the banks and servicers get more money out of homeowners before taking their homes. What he said was, ‘This will enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure.’ It wasn’t followed by, ‘…for a couple of months.'”

~Government Tactic: Help Banks by Lying to Homeowners

3) Homeowners who were bled dry by the fake loan modification process and then offered meager relief are not to blame for the number of HAMP re-defaults. The banks set them up so they could make even more money “servicing” a second foreclosure process.

“… the majority of HAMP participants received
monthly mortgage reductions of less than 10 percent,
and 39 percent of them saw monthly reductions of less than 5 percent. When you’re struggling — which in the post-crash economy was and still is very common — every little bit certainly helps,
but a 5 percent or less reduction in your mortgage payment
is just that: a little bit.” 

~HAMP-Strung: Mortgage Modification Program
Seeing Too Many Redefaults

 4) Yes, it’s all still going on FIVE YEARS after President Obama promised help to millions of Americans being hounded into foreclosure by banks. In spite of much-publicized “punitive” settlements paid by all the big banks.

“A new report says homeowners trying to avoid foreclosure
must wait too long for their loan modification applications
to be reviewed by some of the nation’s top mortgage servicers.
Such delays can plunge borrowers deeper in debt.”

Mortgage Modifications Still Taking Banks Too Long, Report Says

5) THE BANKS LIE!

“The simple fact is that the nation’s biggest banks have practiced to perfection how to lose files and documentation. Simply put, no one is holding the banks accountable for submitted information.
Just exactly how many times can one lose their homework and get away with it? The question really is that simple.”

Terrifying Tales of Mortgage Loan Modifications Gone Wrong

We’re Still Waiting, Mr. President

Where’s my justice, Mr. President? Two years ago in your State of the Union address you promised to crack down on the banksters who created the financial crisis and played games with mortgage holders.

Watch Video Here 

I’ve been searching, but I can’t find any mention of any actions taken by your financial crimes unit, which turned out not to be a new organization but instead a division of the Financial Fraud Enforcement Task Force, which already wasn’t doing much. (Oh, and tough-talking NY AG Eric Schneiderman turned out not to be THE leader of the unit but one of a group. Because group leadership is always so efficient at getting things done.)

Have you, yet again, promised a program that sounded good in a speech but was never meant to do a darn thing for the average American? Well, Mr. President, I for one won’t ever again hold out even a teeny bit of hope that you or your administration intends to bring any of the banksters to justice.

Meanwhile, Schneiderman is back to focusing on his own state trying to right some wrongs in the financial sector. Do those of us lied to and cheated by our banks have to move to New York to get some justice, Mr. President?

Good News for Homeowners Cheated by Wells Fargo With Bogus Trial Loan Mods

Yippee! All the homeowners Wells Fargo blatantly cheated with their bait-and-switch trial mortgage modifications finally have a legal leg to stand on.

The 9th U.S. Circuit Court of Appeals (whose decision is law in several  western states hard hit by foreclosure, such as California, Arizona and Nevada) said “Wells Fargo was required under the federal Home Affordable Modification Program to offer loan modifications to borrowers who demonstrated their eligibility during a trial period.”(Reuters article)

Nice that some part of the legal system has called out the bank on its the obvious game playing, requiring people to complete a trial modification plan to show ability to pay the lesser loan amount and then making up some fake reason to deny the permanent mod. The banks have raked in millions of dollars with this strategy, never intending to re-structure the loan but still giving people hope and getting them to pay money that was never credited toward their mortgage loans.

Way to call a fraud a fraud, 9th Circuit! And bravo to homeowners Phillip Corvello and Jeffrey and Karen Lucia Phillip Corvello whose lawsuit led to the ruling. From Reuters again:

Both the unsigned majority opinion and a concurring opinion by Circuit Judge John T. Noonan faulted Wells Fargo’s drafting of the trial period plan, saying that to rule in the bank’s favor would render the benefits for borrowers illusory.

“No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him,” Noonan wrote. “‘Heads I win, tails you lose’ is a fraudulent coin toss.”

If you completed a trial mortgage modification and then were denied a permanent mod, you can sue the b@$t@rd$!!

(Oh, and by the way. Guessing Wells Fargo wasn’t the only one gaming the HAMP program in this way. The other big banks seem to have coincidentally jerked mortgage holders around in exactly the same ways.)

Moral Hazards of Mortgage Modification

I don’t know a thing about this law firm and I’m not recommending you do business with it, but there are some real truths and a load of informative links here.

Moral Hazard: Missing Ethics in HAMP Mortgage Modification Program

The 2008 bailout of the American financial industry was based on a law enacted by Congress, Emergency Economic Stabilization Act of 2008 (TARP).   Under rushed and pressured emergency conditions, Congress passed the legislation with very little understanding of why the economy was crashing.  There was a sense that the housing boom had something to do with the urgent need for a bailout, so provisions were added that required the bailout trickle down to millions of American homeowners who were given suspect mortgages.  The spectacularly failed mortgage modification program now known as HAMP is part of this law.  HAMP was authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008, which was later amended by 7002 of the American Recovery and Reinvestment Act of 2009.

Because no help was actually extended, most do not realize that the bailout law demanded real relief to the American people not just the financial industry.  To this day, the funds earmarked to help hardest hit families have largely gone unspent.  Programs, presented as a last hope and help, like HAMP, are now being exposed as a way for banks to deplete savings, 401k, and other assets from millions of families.  HAMP leaves families worse off more often than not, owing more, trapped in a home with higher mortgage debt and worse loan terms in the long run.  Sheila Bair, before she stepped down as the chairman of the FDIC, was an outspoken critic of chain of title problems caused by mortgage banking fraud and other foreclosure fraud tactics.  She even called for a Superfund to help American families who have saddled with unsustainable, fraudulent, toxic mortgages.

Bair’s new book, “Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself,” explains that HAMP was intended to cheat borrowers, to string them along and drain their savings and eventually foreclose on their homes.  This truth is even more strongly echoed in Neil Barofsky’s recent book, “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.”  In Barofsky’s book, he explains how it dawned on him that the post-bailout goal of the U.S. Treasury was to allow banks to take dwindling wealth of American families while offering false promises of loan modifications all in a continued effort to increase the banks’ health and value.  Barofsky’s realization came to him during a contentious conversation he had with Tim Geithner, the Secretary of the Treasury, when Geithner expressed satisfaction that HAMP was allowing banks to coast gently down after the financial crisis instead of crashing since the American families “foamed the runway” for the banks.  Later, Geithner blocked attempts to use TARP funds to help families cover legal costs to defend against fraudulent foreclosures.

Often modifications do more harm than good.  Many programs are actually designed that way.  Please do not sign another contract with the same financial industry players that caused so much misery without having a lawyer on your side, protecting your interests.

Want more truth about how homeowners were set up by Wall Street and our so-called representatives in government? Here’s Sheila Bair recently on The Diane Rehm Show.

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.

Justice … or Just Another Scam?

In State of the Union, Obama Stands Up for Homeowners  Or does he?

Yes, on the surface it seems like President Obama’s announcement in last week’s State of the Union speech of a new financial crimes unit means homeowners fighting the big banks’ foreclosure feeding frenzy will finally see some justice.

I hope it is so. But I have to say I’m a doubter. Why? Well, the administration’s past actions and, more notably, inactions.

For one, back in 2009 Obama created a Financial Fraud Enforcement Task Force, which has managed to do some good investigating the pooling and securitization of mortgage securities by big banks, but doesn’t seem to have been too interested in aiding consumers cheated by bogus mortgage mod claims.

No big surprise there. The administration doesn’t seem to care what happens to homeowners, as evidenced by its much-touted HAMP program that was supposed to provide $50 billion to help 4 million homeowners keep their homes.

The program is a failure and a farce because it requires that those same banks whose unmitigated greed caused the foreclosure crisis in the first place will voluntarily comply with a toothless set of guidelines to help people refinance and restructure their mortgage loans. Instead the banks deliberately lie and cheat and string people along, then swoop in and foreclose. And neither the Obama administration nor Congress nor Attorney General Eric Holder nor any of the agencies that are supposed to oversee and regulate the banking industry has done a darn thing to stop the banks or help homeowners in any real way.

None of the executives involved in predatory lending practices or shady securitization schemes has gone to trial, let alone to jail. Nobody with any power to prosecute seems to cares that banks blatantly forged untold thousands of foreclosure documents, so why would the banks stop lying to people about pretty much every aspect of the so-called “home preservation” process?

And where is the political will to go after the fat cats, especially in an election year, when Wall Street and the banking sector provide billions in campaign contributions? We live in a time when the 30 of the country’s largest corporations (including my nemesis Wells Fargo) spend more on lobbyists than they pay in taxes and 25 of the 100 highest-paid CEOs make more money than their companies pay in federal income taxes.

Much as I admire New York Attorney General Eric Schneiderman, who has been tapped to head the new financial fraud squad, I don’t think he and a small task force will make much headway against all those dollars.

And speaking of will, where has the will been for the past three years as foreclosures reached record numbers and the customers of all the big mortgage servicers complained about the remarkably similar games being played to delay and deny their requests for mortgage relief? The president didn’t mention any new laws being needed for his task force to go after financial fraud; in fact, laws already exist. They just seem to have been ignored at all levels, from AG Holder right down to municipal courts and community law enforcement.

So, I do hold out a teeny bit of hope that at least some token justice will be doled out by this task force, though I’m not as enthusiastic as Rolling Stone reporter Matt Taibbi, who gleefully predicts that if the task force is for real we could see “half the luminaries on Wall Street doing prison time.”

I’m much more confident in Florida consumer lawyer Matt Wiedner’s analysis of the reasons why Obama’s announcement is just more propaganda designed to fool average Americans into thinking they and their issues mean anything at all to our so-called democratic leaders.

“The reason is quite simple….the banks and Wall Street are throwing hundreds of millions in bribes (campaign contributions) to shut up and buy off every bit of our government.

“Our government, at all levels, is entirely captive to corporations who do not exist to serve or protect The People.  They exist with one singular purpose in mind…maximize shareholder profits.

“So with that as background, I state that the President’s recently announced Financial Fraud Enforcement Task Force is nothing but theater. A farce. A cruel joke being played on Americans who think something will be done to protect them.”

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