ProPublica

Journalism in the Public Interest

Cancel

Amid Foreclosure Questions, Govt Loan Mod Program Continues Struggles

New numbers show the administration’s mortgage modification program continues to struggle, while government officials say the banks’ flawed foreclosure practices should draw even more attention to their poor record in the handling of homeowners seeking modifications.

.

A house under foreclosure that is now bank-owned in the Spring Valley area of Las Vegas on Oct. 15, 2010. (Mark Ralston/AFP/Getty Images)

The banks' flawed foreclosure practices should draw even more attention to their poor record in the handling of homeowners seeking mortgage modifications, government officials say.

More evidence for that poor record came Monday, with the release of new data for the government's modification program, which aims to prevent foreclosures. We've updated our graphical rundown of the numbers, broken down by each bank or mortgage servicer participating in the program. Take a look.

While 496,000 homeowners have received a modification through the program, many more, 700,000, were initially accepted into the program on a trial basis only to be booted out later. As we showed last month, most have been disqualified despite making their trial payments.

The recent revelations that servicers filed false affidavits in foreclosure court filings should make mortgage servicers think twice about denying modification applications, Ohio Attorney General Richard Cordray told ProPublica. A group involving attorneys general from all 50 states launched an investigation of the filings earlier this month.

"[Servicers are] in some real trouble here, they face sanctions and other penalties, they need to get serious and start doing loan workouts and also cleaning up their formerly fraudulent practices," Cordray said. Servicers have done a poor job of handling modifications in part because they view foreclosing as less costly, he said. But that's only because they've been cutting corners, and they can't do that anymore. "That levels the incentives a little more," he added.

Click to our graphical rundown of the numbers for the government's modification program.

Click to our graphical rundown of the numbers for the government's modification program.

Speaking last week after a meeting with other federal agencies on the foreclosure issue, HUD Secretary Shaun Donovan redirected attention to how servicers were handling homeowners with loans insured by the Federal Housing Agency (FHA), part of HUD, before the point of foreclosure. (Almost 30 percent of all mortgages are now backed by the FHA, whose insurance program began during the Great Depression to help middle-income borrowers get loans.)

A department review of the largest servicers of FHA loans found that some were not "doing what they should be to help keep people in their homes," Donovan said on PBS's NewsHour. "It's not acceptable, for example, that even though we require them to, a servicer might never pick up the phone and reach out to a borrower to find out what problems there are, why they're late on their payment, or might not provide them with a modification, even if they're required to do that."

The review launched in May and was focused on the five largest servicers of FHA loans. But it will not be completed for two more months, and Donovan would not give specifics about which servicers had been violating the agency's rules. The five largest servicers of FHA loans are Bank of America, Wells Fargo, Chase, CitiMortgage and US Bank. The FHA has the power to levy sanctions against servicers.

As we've reported, servicers have also been breaking the rules of the administration's modification program (which are different from rules for FHA loans). The Treasury Department has yet to penalize a servicer, despite numerous threats. The Treasury doesn't have the same power over servicers that the FHA does, but it could withhold the financial incentives that are offered through the program for completed modifications.

I am also apply for Obama Program. I send my paper to Bank of America in Augest 2010 but I call and said take 30 to 60 days.

Everybody would have been MUCH better (except for the banks, but too bad for them) if they’d done what I proposed and wrote to MANY politicians to suggest. Maybe it still can be done:
“do the banks a favor” by taking those “toxic assets” off their hands but only pay them 25% of the price that it was last bought for.
Sell those houses to those who did NOT LIE on their applications but went on hard times for 50% of the last price PLUS an amount to have the buyers pay off their USURIOUS bank cards.
The banks would have “paid” for their gambling.
The people would be in houses they could afford so that amount of money would still be in circulation to help the economy.
The people wouldn’t be under bank card debt so they would have even more money to spend.
More money would have been spent.
That more money would have been flowing and being used to buy things, so companies wouldn’t have had to lay off employees.

How about they do it now? All those “problem foreclosures” be taken from the banks for that 25% I mentioned and go from there!

A few big issues preventing loan mods is this…

1. The PSA governs loan mods and in most (all) cases servicers must carry the cost. If they reduce the rate, that total reduction hit comes out of the servicers.  Thus the servicers have NEGATIVE ZERO incentive to even consider it.

2. DIRTY SECRET - these servicers are NOT reporting the losses. Management intentionally incurs losses, using the accounting rules to make their financial reports look better than the true condition of the company. Their incentive is compensation and their ability to gradually sell before the truth is known.

So, essentially, it goes like this first they defrauded the MBS investors, and then they defrauded the homeowners, then the taxpayers and now their shareholders. 

The New York Times examined some cases where BofA rejected short sale offers then foreclosed and auctioned the properties at a LOWER PRICE. 

That sure seems like a contradiction by any standard, doesn’t it?  Why would BofA reject the higher amount - then sell it at auction for less?
The reason is (DIRTY SECRET) that they are carrying the “assets” on their books at full value — the principal due according to the note (even if the asset belongs to someone else).  So if the principal due is $200,000 and they accept a short-sale at $100,000, they are required by the accounting rules to take the loss on their books. That means taking $100,000 off their balance sheet and taking a “one-time” write-off on their income statement of $100,000.  Investors and shareholders might forgive one or two, but if it became a regular thing, obviously it would raise questions.

However, if they foreclose and the property is sold to their own REO at $75,000, even though they increased their loss from $100,000 to $125,000, their books are unchanged.  There is no write-down of assets so there is no loss to report in income.  The choice is whether they take a loss of $100,000 on a short-sale or not report any loss at all. 

To be honest - this stuff is way above my head - but this little “Dirty-Secret” is WORTH exposing because it explains why there are so many nightmares by families complying with the lenders demands - believing their mod-docs will arrive shortly - all the while the LYING THIEVE lenders/servicers are setting them to take the hit anyway. 

AND YES our GOV knows this already too…  HOW CAN THIS BE LEGAL…?

Hi Stevor,

I admit it sounds right… However, there are several presumptions…
HOW do you know the borrowers lied on their loan apps?

Since the lenders broke the laws - waiving their rights to enforce their Power of Sale - why are they permitted to take what is NOT theirs? 

The Lenders have been PAID IN FULL already - several times - for EACH of the defaulted loans.

Strange isn’t it… they were paid in full - they already violated many laws - defrauded their investors and stockholders - and sold illegal loans to boot…?  Now those same families that were defrauded and induced to sign flawed loan docs that were designed by some of the best law firms in this country to benefit the lenders in every way conceivable…

Did these folks even have a clue as to what they signed?

David,
Thanks for your reply.
IF somebody actually LOOKS at the application and checks things out (instead of just “processing” it), then they ought to know if a lie was told.
Since the “lenders” (bankers) broke the laws (or didn’t care about it because they KNEW the public would be “on the hook” for the money, thanks to the Federal Reserve GANGSTERS), I think those banks ought to PAY through the nose for GAMBLING and thinking they could get away with it and having the public pick up the “tab”.

acmospecialists

Oct. 26, 2010, 5:07 p.m.

David, Great explanation the worse part is this are not the only things the Banksters are doing they are also collecting foreclosure insurance (AIG)  sometimes as much 30 to 1 when they Fraudclose on a house, Not to mention the Fraudclosures these Banksters have been committing (that we just funded about)  falsification of affidavits etc to Fraudclose, Property Rights, (the core of the American freedom)  are being terribly violated by these Banksters and their Business practices

All of these are crimes against the American People, The American Families, The Middle class,
and the pursuit of happiness

As I read more and more comments. Today was the first time I realized that not only is the banking issue a mess but Please help me to not panic when I have been told MY IDENTITY has been lost!!  My social security number,my home address,my phone number, where I bank, where I work, OKAY all I been told is it has been lost or misplaced and resubmit 6 or more times. I NOW am afraid that not only am I in fear of losing my home but….now My identity.

AdriAnne-If you really want to help yourself please listen and do what I tell you!
Number#1- Call the Attorney General of your state (look in phone book for number under State Offices) and tell them EVERYTHING about your situation.
#2 If you have a Legal Aid Society in your area call them also and tell them EVERYTHING. Some Legal Aid chapters are taking on clients for free due to they have received grants to help homeowners.
Please do these 2 things immediately. And good luck and May GOD bless all!

I believe this is HOW this program work.

The government is paying for these programs to call like 800 HOPE. Then these programs collect money from the government to hire people to answer the telephone and then these people peroting what you told them to the banks.
The result is your loan mod is denied.
What a waist. Some of these people on the telephone have no clue of what is NPV etc. I know I called.
It gets very annoying. This whole thing could be solved by the following way for those who fell out of the HAMP program.

1. Were you entered into a trial period?
2. Did you pay your trial payment on time?

If the answer is yes. On both questions, Than fine. This will be your mortgage payment for the next 30 years.
Case closed.

And let the banks eat the balance they screwed enough people already anyway.

And while this getting done start to enter people into the program who will want to keep their homes.

And one more thing.
When Bankers talking about ” THE MORAL THING TO DO.  In this morally bankrupt country I don’t know what are they talking about. when
They are the one who morally bankrupt this Country

The foreclosure Blues

Homeowners who are in foreclosure are all going out and buying a rope and a gun.
When they come to take their home they will decide which one to use the rope or the gun.
Because when people loose their homes their whole life with it….  is gone.

But don’t worry bankers on Wall Street doing fine ,
As long as they can get another home to foreclose on the line.
Bankers and Politicians say,  It is the moral thing to do
But they had to look the word up in a dictionary,
about morality.

They steel you blind, because the system is on their side.
Just sign your name here and you will pay us until you die.
Children are pulled from schools and lose their friends
But the bankers and politicians are making a lot of new friends.
Bankers in their fancy parties yell :  Screw the American Middle class

We are the bankers from Hell.

@Roy,
Thank you so much I will follow your advice.  I do not have a single person that can help me work through this process. So I am grateful for people like you.Illinois has such an issue with this that Our Attorney General is now going to file suit against the banks on behalf of the homeowners. Our Sheriff Tom Dart is asking for a Federal Investigation and has ceased to carry out any evictions until further notice. I will pray tonight before trying to get some sleep that I can get a start early tomorrow morning.

Barbara Ann Jackson

Oct. 27, 2010, 3:45 a.m.

Lenders are not required to know laws –ATTORNEYS are!  Often, attorneys are the ones who are making severe errors, and committing the very frauds that provide basis, defenses, and reasons to attempt negotiating mortgage contracts.  Attorneys /  foreclosure mills are often why foreclosures take so long to conclude.

Whether or not foreclosures become halted some moratorium, little is accomplished without addressing the elephant in the room –hiding in plain sight:  lenders’ lawyers!  And they should be held accountable for foreclosure improprieties and concealing malpractice against their lender-clients, as well as for committing Unfair Debt Collection Practices, extortion, and fraud against borrowers.  Some attorney conduct is appallingly egregious –and some irreparably harmful!

Discovery of their misconduct can begin by comparing blighted neighborhoods and foreclosure conveyances to non-existent lender companies; bankruptcy “Lift Stay” motions that “lack standing,” “proof of claims” different from ‘lift stays’ “movers”; and illegal property deeds. And, lawyer are wrong for injurious frauds, failing to “effect service” or failing at any substantive Civil Procedure requirement –not homeowners for refusing to cooperate with erroneous and fraudulent home confiscation.

Further, property owners seeking debt reorganization through Chapter 13 Bankruptcy are not to be blamed for contesting a false “proof of claim” or false “Lift Stay” motion. As such, countless foreclosure lawyers owe $$$$$$ to their clients for fatally botching foreclosure cases.

LSU finance professor, Joseph Mason travels the country, inter alia, masking foreclosure corruption and racketeering activities connected to judicial frauds, Wells Fargo, and Freddie Mac here in Louisiana. (*Thank you Senator David Vitter!!!*) But his statements make light of harm from lawyers’ fraudulent foreclosure activities, and misinforms about the filing of fraudulent court documents as being “overblown.” If the focus is on “quelling” fraudulent foreclosure filings and deliberate frauds instead of looking at critical facts and issues, concealment is a preferred route.

But, glossing over things is not appropriate for people who have been tortiously harmed by extortion and fraud –here in Louisiana or any place else! Refusal to even consider what those actions are, and who are the actors, exacerbates rather than extinguishes casualty. Even worse, the culprits who are most responsible for damages continue wreaking havoc.

Also, injurious acts by foreclosure lawyers, render them as well as their clients liable for damages. The half has not been told of outrageous, unfair collections, and privacy invasion associated with foreclosure! Lawyers know what they’ve done; they seek to have victims go away to avert exposure. Mortgage default causes foreclosure, but default doesn’t justify fraud and victimizing defaulted borrowers!

*Important FACTS about FORECLOSURE and MORTGAGE FRAUD
http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

*OPEN LETTER TO PRESIDENT OBAMA on Foreclosure Crisis (concerning Wells Fargo)
http://www.pr-inside.com/open-letter-to-president-obama-on-foreclosure-crisis-r1505916.html

To Gabor You mention the following1. “Were you entered into a trial period?
2. Did you pay your trial payment on time?
If the answer is yes. On both questions, Than fine. This will be your mortgage payment for the next 30 years.
Case closed.:”
The problem is many people paid their trial period sometimes even more than a year (it suppose to last only 3 months before you get the permanent modification) and then the Banksters denies the permanent modification so the real question is What to do when that happens?. Manny people have been complaining that the Banksters denied the Mod after the trial period and people don’t know what to do A good a professorial advise will help a lot of people does anybody knows what you should do when that happens?

People need to remember that banks don’t want properties back. They would much prefer the borrowers that signed the mortage to make the payments as agreed. Some of the comments I read suggest banks want to foreclose. In all reality…the borrower, the one that agreed to make the payment has defaulted or the big bad bank never would have started the foreclosure process to start with. Some of the $$ figures in the orders may be off but, a foreclosure is a foreclosure and…was started because payments were not being made. They don’t make money on foreclosing, in fact they’re taking a bath on 99.9 % of them.

David, What have you been smoking? The only “bath” they are taking is with our money (taxpayers). I suggest you do a little more research before making such ignorant assumptions.
This message was sent from a homeowner who (fortunately) IS current on their mortgage.

I’ve read hundreds of posts on our government sponsored Home Loan Modification Scam and nobody has bothered to warn people that once they are put on a trial payment, they better be prepared to pay when their modification is denied. The fees, late charges, and the amount of the reduction will become due at that time, and if you cannot pay you are in default. I am a single Mom of 3 teenagers, on my job for 30 years and in my home for 20. I have never in my life been late on a payment. The denial has ruined me!!! People, don’t fall for it!!!!!

People, Sandy is exactly correct. But you can get around that obstacle if you pay the same amount each month that you had been paying, during the trial period. Then when your permanent mod is awarded (if you’re one of the lucky ones), you can start paying the modified amount. That way they cannot get you for the arrears, penalties, interest and fees. Only thing is you will need to be sure and stay after them during the trial so it will not drag on for more than the stipulated 3 months (good luck with that). Sandy I am very sorry for your experience…just another example of bankers’ greed.

The banks make more money in a foreclosure than in a loan modification. They do not make anything, creat anything, manufacture anything, nor invent anything. They are filled with thieves like Wells Fargo to take your hard earned assets. Totally Immoral activity and no one, not one government agency looking out for the homeowner.
Wells Fargo, holds on to your house payment at will, does not apply your payments to your mortgage loan. Look at your credit report history on the Mortgage Wells Fargo services, they do NOT apply your mortgage payment to your loan. They hold on to it, to make money with lending out.
Lying to people and using deceitfull methods to put people at jeaprody in losing their homes.
Banks like Wells Fargo have only one mission if you apply for a Loan Modfication, to GET YOUR HOME away from you anyway they can.
Remember, they invent nothing, make nothing, create nothing (except think up scheme to take assets from the average man), Wells Fargo made $5 Billion in PROFIT while foreclosing thousands of homes.
We need a Bonnie and Clyde ” I rob banks” instead of banks robbing people.

Ahh yes, Wells Fargo…, always good to identify each of them.
————————————

From PBS’s Paul Solman - Please read
http://www.pbs.org/newshour/businessdesk/2010/10/your-mortgage-questions-answer.html

Here is an excerpt:

Max Gardner: The mortgage servicers certainly make more income on servicing mortgage loans that are in default than they do on performing loans. The standard servicing fee paid by a securitized mortgage trust for servicing a mortgage loan is 25 basis points based on the average outstanding principal balance. As a result, if the average balance on the loan was $200,000 then the servicer would receive $500 per year to service the loan (approximately $41.50 per month).

In most cases, the late charge, which the servicer gets to retain, is actually more than the fixed monthly servicing fees. These fixed servicing fees have been in place for more than 25 years. The financial incentive to put a loan in default is pretty obvious.

Ahh yes, Wells Fargo…, always good to identify each of them.
————————————
Please read
http://www.pbs.org/newshour/businessdesk/2010/10/your-mortgage-questions-answer.html

Here is an excerpt:

The mortgage servicers certainly make more income on servicing mortgage loans that are in default than they do on performing loans. The standard servicing fee paid by a securitized mortgage trust for servicing a mortgage loan is 25 basis points based on the average outstanding principal balance. As a result, if the average balance on the loan was $200,000 then the servicer would receive $500 per year to service the loan (approximately $41.50 per month).

In most cases, the late charge, which the servicer gets to retain, is actually more than the fixed monthly servicing fees. These fixed servicing fees have been in place for more than 25 years. The financial incentive to put a loan in default is pretty obvious.

Please read
http://www.pbs.org/newshour/businessdesk/2010/10/your-mortgage-questions-answer.html

Here is an excerpt:

The mortgage servicers certainly make more income on servicing mortgage loans that are in default than they do on performing loans. The standard servicing fee paid by a securitized mortgage trust for servicing a mortgage loan is 25 basis points based on the average outstanding principal balance. As a result, if the average balance on the loan was $200,000 then the servicer would receive $500 per year to service the loan (approximately $41.50 per month).

In most cases, the late charge, which the servicer gets to retain, is actually more than the fixed monthly servicing fees. These fixed servicing fees have been in place for more than 25 years. The financial incentive to put a loan in default is pretty obvious.

Please read
http://www.pbs.org/newshour/businessdesk/2010/10/your-mortgage-questions-answer.html

Here is an excerpt:

The mortgage servicers certainly make more income on servicing mortgage loans that are in default than they do on performing loans. The standard servicing fee paid by a securitized mortgage trust for servicing a mortgage loan is 25 basis points based on the average outstanding principal balance. As a result, if the average balance on the loan was $200,000 then the servicer would receive $500 per year to service the loan (approximately $41.50 per month).

In most cases, the late charge, which the servicer gets to retain, is actually more than the fixed monthly servicing fees. These fixed servicing fees have been in place for more than 25 years. The financial incentive to put a loan in default is pretty obvious.
—————————
Ahh, Wells Fargo—we all need to identify these organizations

Ray Willliams

Oct. 28, 2010, 8:56 a.m.

I assist borrowwers with getting their mortgages modified. Yesterday a person in Bank of America’s home retention stated that the borrower must apply for a loan modification at least 30 days prior to the foreclosure date. In addition the borrower was told that their was no program that the borrower qualifed for, even though the borrower financials show that there is $1,600 remaing after expenses.

The borrower was give totally inaccurate information and mis-informed.

In my experience working with servicers I have discovered that too many people in the servicing sector is uninformed about the HAMP guidelines and they have very little to no knowledge of mortgages or finances. They need to learn how to analyze sitiuations and common sense decisions.

sandy, appeal your denias ! FAST ! if you want you may e-mail me @ .(JavaScript must be enabled to view this email address)

acmodspecialists

Oct. 29, 2010, 10:55 p.m.

After reading this article an many others on pro-publica I got to one conclusion,  Banksters need to be a essentially and substantially more REGULATED, Let me just tell you in 3 phrases what i believe this country needs to do with these Bnaksters, REGULATE THEM, REGULATE THEM , REGULATE THEM ,
Yes REGULATE every single transaction, Foreclosure,  DCO’s,  Derivable s, Credit Cards, Bail out ‘s etc. REGULATION is the key, if the Banksters are regulated they can not extract and suck the money from this country and the middle class as they have been doing it for so long REGULATION ! REGULATION ! INTENSE REGULATION !
And finally,  Break up these Banksters yes that is right Break them in to pieces so none of them are worth more that a few Billions and this way they will never ever be TO BIG TO FAIL ever again

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

More »

Get Updates

Stay on top of what we’re working on by subscribing to our email digest.

optional

Our Hottest Stories

  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •