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Foreclosure Defense Florida

Can’t Get a Mortgage Modification? Here’s Why….

In a July 2009 report, the United States Government Accounting Office (GAO) issued an analysis and report detailing problems with the Home Affordable Modification Program, a program operated by the Department of Treasury under the Troubled Asset Relief Program (TARP), the HAMP program represents the US government’s primary response to the residential mortgage crisis.   The program is an abysmal failure and will continue to be so for the foreeable future.

The full text of the report can be found here at The report is   a real hoot of a read because it details how $50 billion dollars of taxpayer money is being tossed around to the very companies that caused all this mess in the first place with little or no control over the money or how that money will be spent or accounted for.   The 68 page report is a case study in government incompetence and private industry opportunisim.   Rather that bother with all the details, just read the conclusion found at the end of the report which sums up the problems with the program:

Our analysis found weaknesses with the design and monitoring plans for the counseling feature of the first-lien modification program and the rationale for the HPDP program and with Treasury’s estimate of the number of borrowers that might be helped under the first-lien modification program. Furthermore, we identified weaknesses with HAMP’s management infrastructure and found that the development of some processes and internal controls was behind schedule.

Finally, we are concerned that Treasury is not fully vetting servicers with which they contract to make modifications. One of Treasury’s stated goals is to complete initial modifications quickly. But, unlike other TARP programs, such as the Capital Purchase Program, HAMP expenditures””which are projected to be up to $50 billion””are not investments that will be partially or fully repaid but expenditures that, once made, will not be recouped.

In plain language, the report admits US taxpayers are pumping billions of dollars to the mortgage lenders that caused the problems with residential real estate with no way to manage or account for that money.

Who benefits from the 50 billion in taxpayer dollars?

As of July 14, 2009, 27 servicers had executed HAMP servicer participation agreements with Fannie Mae, the HAMP
administrator. Almost $19 billion of the TARP funds had been obligated to these servicers as of July 14, 2009 (The list is a who’s who of the lenders that caused this mess in   the first place.)

Do normal citizens benefit from the program?

According to Treasury, participating servicers report that as of July 20, 2009 they had extended over 354,115 trial modification offers to borrowers and 180,305 trial modifications had begun. (So of the millons of homeowners in trouble, less than 200,000 have actually recieved benefits from the $50 billion taxpayers are pumping into the program.)

How many homeowners are in trouble that could/should be helped?

Using a variety of data sources constituting roughly 50.3   million loans nationwide, program officials project over
10 million borrowers (meet the qualifying terms in the HAMP guidelines and) are likely at risk of default/foreclosure. (S0 10 million are in trouble and 200,000 have been offered any assistance.)

Using limited data on these borrowers’   current debt-to-income ratios, Treasury projects about 80 percent
(8.4 million) of these borrowers have debt-to-income ratios greater than 31 percent, and thus are likely to have
unaffordable loans. (That’s 8.4 million homes that can’t be saved under this, the only government program.)

Using information from their simplified net present value (NPV) test model to determine borrowers whose loans
would benefit from modification, Treasury projects about 70 percent (3.9 million) of these borrowers would likely pass the test and be offered the 90-day loan modification trial.   (Don’t quite get the GAO math, but sounds like 3.9 million might benefit from some program…problem is, by their own numbers they have not been offered assistance.)

(Keep in mind that both the estimates provided above do not take into account the dramatic increase in unemployment which likely were not factored into those estimates.)

The US Government is going to toss out billions of dollars to servicers, but we know they’re in absolute chaos and turmoil and unable to handle their existing work, much less the work invovlved in restructuring loans.

Servicers are required to fulfill extensive program requirements, which for some servicers will necessitate increasing staffing and updating data collection systems.   However, Treasury and its financial agents are not consistently assessing the ability of prospective HAMP servicers to meet distinct HAMP requirements and guidelines during the program admittance process. In November 2008, the federal banking regulators stated that banking organizations needed to ensure that their servicers were sufficiently funded and staffed to work with borrowers to avoid
preventable foreclosures while implementing effective risk mitigation measures. However, in its March 2009 report, COP noted that servicers were generally understaffed, lacked the capacity to handle the pre-HAMP demand for loan workout requests, and had no apparent ability to handle a greater volume of loan modifications, such as that expected to be generated under HAMP.

Virtually every one of my customers who has attempted to obtain a modification has reported they cannot get any information out of their lender or servicer.   They mail or fax info many times, but this information is lost and must be resent.   Even when it is recieved, the lender or servicer cannot make a decision.   The GAO report confirms that the reason for this is gross incompetence and complete inability of the lenders to handle the task of modification…..billions of your money gone to waste.

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