Don't expect your loan servicer to play by the rules...until there is a real consequence of litigation
I can tell you from the frontlines of the foreclosure crisis, that the Obama administration's Home Affordable Modification Plan or HAMP is a large scale failure. Consider these facts from the ACORN and the Center for Responsible Lending:
-A family loses their home to foreclosure every 13 seconds.
-15 million homeowners owe more than their mortgages are worth.
-9 million foreclosures by the end of 2012 resulting in a $2 trillion loss in home property values in the United States. With millions of option ARMs and Alt-A loans scheduled to reset in the next few years, coupled with rising unemployment, the projected numbers are likely to only get worse.
"Mortgage servicing companies are key to addressing the foreclosure crisis because they occupy the unique niche of collecting payments and making decisions about foreclosures on behalf of investors who own pools of mortgage backed securites. Unfortunately, most workouts offered by servicers are not aff ordable to the homeowner, and many even fail to lower the monthly payment that led to the delinquency, thereby resulting in high re-default rates."
If you are reading this Blog, then chances are you have already failed in your attempts to get a loan modification. Consider the reasons why the HAMP program is not working:
Mortgage servicers remain severely understaffed and are not complying with the HAMP contracts they signed.
HAMP requires servicers to suspend all foreclosure activity until it canbe determined if a homeowner is eligible for a modification; instead, servicers are proceedingwith foreclosures before such determinations are made. In direct violation of the guidelines, some servicers also continue to
1) require homeowners to make large, up-front cash payments as a condition for being considered for a modification;
2) fail to apply the HAMP rules to all portfolios being serviced;
3) refuse to evaluate for HAMP modification those distressed homeowners currently paying on time;
4) base the affordability calculations on interest-only or option-arm minimum payments, when HAMP requires affordability to be based on the loan's principal interest, taxes and insurance; and
5) neglect to offer principal forbearance when interest rate reductions are not enough to make the loan affordable.
Source:
http://www.acorn.org/fileadmin/Fair_Housing/Reports/HAMP_WhitePaper3.pdf
Does this sound familiar? The HAMP contract is an agreement between the Treasury Department and the individual loan servicers. Currently, a borrower has no clear private cause of action or right to sue a servicer if they fail to play by the rules. Only the Treasury is in a contractual position to pressure the servicers into compliance and so far, that pressure has been quite mild. Its a classic case of the Fox watching the Chickens.
The HAMP program will never succeed unless the Obama administration creates a strong disincentive for the servicers that ignore the HAMP guidelines. The obvious solution is to create a private cause of action and enable borrowers who have been denied due process under the HAMP, to sue, to have their day in court, to seek justice. Let the law dawgs out, Mr. President!
Source: http://www.acorn.org/fileadmin/Fair_Housing/Reports/HAMP_WhitePaper3.pdf
