“We are constantly seeing problems with the way servicers are treating homeowners and not following the rules. I don’t understand why there hasn’t been a stronger policing from Treasury on servicers.”
Hon. Christy L. Romero, Special Inspector General of the Troubled Asset Relief Program, quoted in Gretchen Morgenson, “Fair Game / Slack Lifeline for Drowning Homeowners,” p. 1, col. 1 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, August 2, 2015).
To keep money flowing through as great a number of hands as possible, and to keep homeowners in their homes, loan modifications – “deals that reduce the costs of mortgages” -- became a popular potential solution to a large part of the Great Recession, which was caused in large part by practices involved in mortgage lending. Loan modifications thus became central to the Obama Administration’s Home Affordable Modification Program or “HAMP,” which was supposed to affect Four Million homeowners and the lenders and servicers that deal with their mortgages.
In an investigative report issued last week, the Office of the Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”) found that banks participating in HAMP rejected 72% of the applications for loan modifications. After some 6 years, the banks have agreed to loan modifications for 887,001 mortgagors-borrowers, not 4,000,000.
SIGTARP reported two big reasons for these results: HAMP is entirely voluntary for banks, and the banks which do participate are “on their own,” without any supervision or accountability.
Lawyers who represent borrowers who have alleged that their loan modification applications were wrongly denied, add a third reason, at least equally significant to the two reasons reported by the Special Inspector General:
Delaying a borrower’s loan modification request can be profitable for a bank; extra time for the bank means more interest and fees can be charged to the borrower, increasing the amount owed on the mortgage.
Gretchen Morgenson, “A Slack Lifeline for Homeowners,” New York Times, supra.
Instead of affordable modifications, banks are delivering more predatory practices, enabled instead of policed by the Federal Government. The business model of robbing the poor to give to the rich is very much alive.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015). All Rights Reserved.
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