On April 20th, 2010 the Treasury Department released its latest HAMP – Making Home Affordable Program Servicer Performance Report.
The report shows that more than 1.1 million homeowners have been placed into the HAMP trial payment phase of the plan. Of those only 227,000 have been made permanent.
The stated goals of the program are to reach 3 -4 million homeowners by the end of 2012. With regards to the trial period it appears that lenders are making some headway. But when it comes to making the modifications permanent many critics complain that lenders are pulling out all the stops to prevent these trial modifications from being etched in stone.
A quick look at the program might highlight the reasons for the disparity between trial modifications and permanent modifications.
If one does the math here it could be astounding or revealing – You Decide.
Imagine a lender decides to send out 150,000 trial modifications at $1,500 a pop = $225,000,000.00
(this is only an example for illustration purposes)
The lender decides that this would best be done on loans under 175,000 that are at 6.0% and 30 days delinquent. (monthly payments on these loans is approx. $1,050 per month)
This means the average loan in this group is approx. $1,050 in arrears multiply this by 150,000 loans = $157,500,000 in arrears
$225,000,000.00 from Uncle Sam – $157,500,000.00 in arrears = lender is now $67,500,000.00 in the black with no strings attached!!
It gets better – FOR THE LENDER.
These lenders do not forgive the arrears- THEY CAPITALIZE THEM = PLUS $157,500,000.00 added to the back end of these loans and back to balance sheet
$157,000,000.00 + $67,500,000.00 = $225,000,000.00 in the black. THE LENDER has now profited $225,000,000.00 and they haven’t made a single permanent modification.
And if that’s not enough – HERE ARE THE GINSU KNIVES –
The lender strings these borrowers along making “trial” payments for 8 months (in direct conflict with HAMP guidelines) the reduced payments at a 2% rate would be $650.00 a reduction in payments of $400 ($1,050 – $650 = $400)
The “trial” payments are actually forbearance payments, meaning that each month the borrower makes the reduced payment he/she goes into the hole by $400 plus late fees we’ll call that $30 for a total in arrears of $430 per month. Multiply that by the 8 months they are strung along and the borrower is now in arrears at the end of 8 months an additional $3,440. In other words the lender profits by keeping the borrower in the trial period.
The lender now capitalizes these arrears $3,440 times 150,000 loans = $516,000,000.00 more into the black they go.
add that to their prior profits —-
$516,000,000.00 + $225,000,000.00 = $741,000,000.00 ahead of the game BEFORE they have even permanently modified a single loan.
Now they tell these folks that they don’t qualify for HAMP because of, NPV results, investor guidelines, too much income, too little income and so on. Sometimes they deny these folks with no explanation at all.
They offer them a traditional in house modification that lowers the rate to 5% and reduces the payment by a minuscule $110 per month but is a lifeline non-the-less that brings them current, let’s them keep their home, and lowers their payment.
Since these loans are now at a market rate if the borrower makes on-time payments for the next 6 months they can be packaged and sold as “performing” loans in securitized portfolios on the secondary mortgage markets.
That’s right they can now sell off the portfolio which now has an asset value boosted by capitalized arrears for more than they could have prior to modification.
OR – they can push the borrower to a short sale under the new (April 15th, 2010) HAFA program where the government will re-imburse them for their loss for being “willing” to sell the property in a short sale. What loss/ loan value do you think they will submit to the government when looking for re-imbursement? The inflated one with capitalized arrears perhaps?
Is this a win-win?
The banks love it, and some in the government put lipstick on the pig and claim they have a HAMP and/or HAFA program to “help” distressed borrowers.
For an example of the way people are being treated by the big lenders look at the story of Steve Alparone from Pittsburg CA who after 1 1/2 years of trying to get help from Wells Fargo is at the end of his rope.
Mr. Alparone contaced me and with his permission I am airing his story.
Please help me keep my home.
I have a mortgage serviced by Americas Servicing Company (Wells Fargo). ASC services mortgage loans held by investors who hold the notes of “toxic” mortgages.
My mortgage falls into the toxic category, since the value fell from $650,000 to $180,000 during the mortgage meltdown.
In December 2008, due to several financial setbacks I approached ASC for a loan modification.
I followed up regularly with ASC to get a status but the reply was that I should wait for the decision
and I would be notified. In March 2009 I was notified by phone that I would not be eligible for a modification due to insufficient income.
My payments by that time had ballooned to $4400 dollars per month at 9.25%.
In June of 2009, I hired a company to assist me in securing a modification with ASC.
This is a brief time line of some of the events that have occurred. The following are from a
communications log, kept by the company (CS) assisting with my mortgage modification:
Dec 2008 – Submitted Modification paperwork to ASC
Mar 2009 – Notified by ASC that our modification was rejected
Mar 2009 Met with Local HUD approved Mortgage Delinquency agency – Pacific Community Services, submitted new Paperwork
Apr 2009 Pacific Community Services burns down (with my documents)
Apr 2009 – Contacted Local attorney (will refer to as CS to assist with modification resubmission)
June 30: CS spoke with Danielle – ASC Loss Mitigation. ASC Requested new paperwork and application resent.
July 12:(CS spoke with Karen – ASC) CS faxed “Package” for phone interview
July 14:(CS spoke with Karen – ASC) Additional paperwork sent to Loss Mitigation
July 20:(spoke with Danielle) CS faxed requested Tax form 4506 ASC
July 23:(CS spoke with Vince – ASC) Financial worksheet requested by ASC and Faxed by CS
Jully 29: (CS Spoke with Johnny – ASC) Per Johnny, “No more docs needed”, sent for review
Aug 4: (Spoke with Lisa then transferred to Tishara) ASC Needs CS to send additional pay stubs and to resend hardship letter.
Aug 5: CS Faxed Attorneys credentials to ASC
Aug 10: (CS Spoke with Wendy – ASC) Preapproved for HAM program and should receive packet in 5-7 business days
Aug 25: I received Foreclosure notice from ASC Attorney NDEx
Aug 17: (CS Spoke with Shanda – ASC) File was closed by PJHopkins for no apparent reason. File being resent to LM for another review
Aug 24: (CS Spoke with Emmy – ASC) Denied HAM program on 8/22
Aug 26: (CS Spoke with Kristina – ASC) No New Update on other available programs
Aug 28: (CS Spoke with ?? – ASC) No new Update on other available programs
Sep 3: (CS Spoke with ?? – ASC) No new Update on other available programs
Sep 8: (CS Spoke with Micaela – ASC) Application still active, but should be resubmitted as it can’t be located at ASC
– Assigned to Negotiator 8/26.
Need to update paperwork originally sent in June.
It was suggested that a new application be submitted as the original is now missing.
Sep 10: (CS spoke with Stacy – ASC) ‘There seems to be some confusion. Notes in account indicate that the process needs to
be restarted as PJ Hopkins has closed the file/application. No reason stated.
Sept 29 (CS Spoke with David, Collections – ASC) Per David Application has been approved.
Needs addition financial paperwork to verify affordable payment.
Sept 29 (CS Spoke with Stacy – ASC) File was closed by PJHopkins for no apparent reason. File being resent to LM for another review
Sept 29 (CS Spoke with David, Collections – ASC) Per David, the loan was approved per his “system”.
Although not in writing, per David first payment under new terms should be Oct 11, 2009 via Western Union.
“Package” to be sent out by ASC.
Oct 2 – I sent first modified payment of $1944.26 to ASC via Western Union.
Oct 13: (CS Spoke with ?? – ASC) Package sent out but not received by borrower (Alparone). Final “package” was sent (mistakenly?) to the
ASC Attorney NDEx in Addison Texas.
New “Package” to be sent out to borrower.
Oct 19: (CS Spoke with Dale, Loss Mitigation – ASC)
Oct 19: (CS Spoke with Debbie, Collections – ASC)
Oct 19: (CS Spoke with Ashley – ASC) “Package” to be sent “soon”
Oct 26: (CS Spoke with Dale – ASC) They are working on file and will send “package”
Oct 26 – I sent second modified payment of $1944.26 to ASC via Western Union.
Oct 27: (CS Spoke with Jeff – ASC) Second payment confirmed received. Still working on “package” to be sent out – over a month after they made believe they “sent” it.
Nov 4: (CS Spoke with Jeff – ASC) ASC Can no longer find the approval in the “system”.
Nov 5: ASC confirms to CS that the Trustee Sale will not go forward. How about the hefty fees they are accumulating, no worries those will be “capitalized”.
Nov 8? ASC indicates to CS that I have a $419 car payment that affects status of my application.
I pull all three credit reports and let CS know that no such car payment exists in reality, nor in credit reports.
Nov 19 (CS Spoke with Matthew – ASC) Matthew tells CS that the file is again closed. Matthew leaves message with
manager Stephanie, that this needs follow up. No follow up.
Nov 20 (CS Spoke with Mira – ASC) Mira tells CS that I am indeed in the HAM program and should continue making payments.
Nov 27 – I sent third modified payment of $1944.26 to ASC via Western Union. 3 months later and still no “package” Maybe they gave it to Kevin Costner for the re-make of his movie The Postman and he is now wandering from colony to colony making deliveries on horseback?
Nov 29 (CS Spoke with Andrew – ASC) Confirmed third payment received. ASC needs hardship letter resent (4th time),Financial
worksheet, pay stubs, etc, etc….
Dec 7 2009 – I continue to wait on the “package” that was supposedly sent out in August.
I wonder how much more paperwork I am going to have to resend
I’ve made three payments under what I understand to be the HAMP program, which I understand to be the trial period, but I don’t know if I’m really in the HAMP program.
I continue to wonder how long this can go on. As long as they can pull this and get away with it while “capitalizing” the arrears that are being run up?
I am determined to keep my house. But in the last year I have become very disillusioned by the lack of follow through by ASC. Imagine not knowing if the house you’ve lived in for 13 years, the house that you thought you’d retire in, the house that is the anchor for your family, is going to be pulled out from under you. I’ve been going through this for 12 agonizing months and I am not giving up. I would like to know that there is a tunnel in the distance, let alone a light at the end of it.
The reader is left to wonder what will Wells fargo do to Mr. Alparone at the end of the day.
Well wonder no-more, as of the printing of this article Mr. Alparone has been placed into yet another HAMP trial period – with more trial payments, more arrears to be capitailzed, more legal fees to acrue and be capitailized, you get the picture.
As long as lenders are allowed to continue this type of behavior un-checked it will continue. Readers who are going through similar circumstances should contact their elected officials, local problem solver reporters, and the national media.