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:

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.