Bridge to HAMP forbearance plan would fatten loan servicers at the expense of the tax payers...even more.
Commentary from the frontlines: Follow the money! There is inherent conflict of interest between what is good for a loan servicer and what is good for the loan's owner or investor (typically a mortgage backed security trust). Loan servicer's usually only make .25-.50 percent of the revenue that they process on behalf of an investor when a loan is performing. However, when a loan goes into default, servicer's make a killing. Loan servicers profit from the late fees, BPOs, foreclosure costs, attorney fees, forced placed insurance and all the other excessive fees.
Payments received from borrowers during a trial mod or forbearance plan are put in a "suspense account". Suspense funds earn interest for the loan servicers. Those funds are used to pay off the accrued servicer fees first and foremost. Generally, investors get paid after the loan servicer. So as not to disturb the cash flow to the servicers, MBA proposes that the government make special loans to servicers so they can pay themselves and also let their investor's share in the foreclosure crisis gravy train. The proposal would effectively double the time that servicer's can milk a property in foreclosure, in addition to the HAMP plan, and allows investor's to further delay recognizing the true losses on their books.
Of course, as with the HAMP plan, evaluation of borrowers would be under the supervision of the loan servicers.
the fox is watchin' the unemployed chickens too?
Proposal details: http://www.mortgagebankers.org/files/News/InternalResource/71954_BridgetoHAMP.pdf
"The Mortgage Bankers Association (MBA) has put forth a concept for a new forbearance program that would allow borrowers who've lost their jobs to remain in their homes while they seek new employment. According to the proposed program, loan servicers would reduce the borrower's mortgage payment for up to nine months while the homeowner looks for employment."
"Under MBA's proposal, borrowers would be initially evaluated for the forbearance program using a model that assumes the borrower will be reemployed within nine months and earning 75 percent of their previous salary. The borrower would be reevaluated as to employment and income status every three months for a total forbearance of nine months. Once new employment is secured, the program would serve as a "bridge" for the borrower to be considered for a modification under the administration's Home Affordable Modification Program (HAMP)."
"MBA suggests that some participating servicers would need access to special loans through Treasury so they could continue to advance payments to investors during the extended forbearance period. The trade group also noted that the program would need to be voluntary and flexible due to financial accounting considerations, in particular whether or not lenders would have to classify the forbearance as a troubled debt restructuring (TDR). MBA created this program through a special task force of its members, and consulted with Fannie Mae and Freddie Mac on the design. Last week, MBA representatives met with officials from the White House, the Treasury Department, and HUD to present the proposal."
"Last Friday, President Obama announced a new initiative to provide $1.5 billion to housing finance agencies in especially hard-hit states for them to develop their own loss mitigation programs, with one particular area of focus being assistance for unemployed homeowners. MBA's proposal though, puts the unemployment issue on the national stage, and although participation by servicers would be voluntary, the program would be coupled with federal HAMP efforts. Nationwide, MBA said in a letter to Treasury Secretary Timothy Geithner, "Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent."
