Home Affordability Modification Program failing horribly

There are two basic problems with HAMP: 1) Treasury can’t serve two masters, and 2) nobody’s come up with a big enough carrot to move the donkey.

In re 1, it’s the Treasury department which is in charge of HAMP (which is partially being funded by TARP). In dealing with the HAMP program, Treasury’s goal is to help homeowners keep their homes. But one of Treasury’s other jobs — one of its biggest jobs — is making sure the banking system doesn’t fail, like it did back in the great depression.

Keeping homeowners in their homes means finding a way to cut down their monthly payments — an in order for that to happen, somebody’s got to lose money, namely the banks. But Treasury can’t force the banks to accept too many losses — they’re already weak and if the lose more money they might fail and have to get bailed out, and we know how much taxpayers _love_ bailing out banks.

Confronted with this problem, what Treasury and the Obama administration have done is basically made HAMP an all-carrot, no-stick program: HAMP offers different fees and sweeteners and kickbacks that are supposed to tempt the bank into offering a mod — we’re talking a few grand per loan, or maybe a couple percent of interest. But for the most part, banks don’t _have_ to cut the homeowner’s monthly payment. If the bank looks at your application and figures that you’re gonna have trouble paying even if they do cut you some slack, they don’t have to offer a mod.

Of course, the biggest stick of all is foreclosure itself — Treasury probably figured banks know they’ll lose money in a foreclosure, so they’d be willing to step up if they smoothed out the process and, like I said, provided a few carrots. But the carrots just aren’t big enough for a lot of these loans — the homeowners just have way too much debt overall for a cut of a couple hundred bucks in the monthly payment to make a difference. And since nobody’s pushing the banks too hard, that’s mostly what they’ve been offering. Not to mention the fact that most banks are completely overwhelmed with the volume of troubled loans — there’s tons of Kafka-eqse bullshit going on where the end up foreclosing just because hey, mods are Department X and foreclosures are Department Y….

But if you really want to know about it, google Elizabeth Warren’s March Congressional Oversight Report. It’s pretty readable, for a government study. And it think HAMP is crap…

this bailout is b.s. the only people who kept the money were the banks and the bailout money is so the bank doesn’t have to fire sale the property and take as large as loss as they normally would in a foreclosure. there are the loan servicing companies that are handling the loans and there are the attorneys that represent the banks. the loan servicing company offers a discount on the property for a fee. the attorney representing the note holder says it’s a scam. so, you don’t pay the fee to the loan servicing company for the large discount, the loan servicing company contacts the attorney and the attorney forecloses. who wins? the loan servicing company does if the homeowner pays the fee. the attorney who forces the issue by convincing the borrower they are being scammed by the loan servicing company. in my part of the country, the foreclosures are being discounted only 10% off the regular price. that in itself, tells it all.