Yesterday, the U.S. Treasury released it’s Making Home Affordable Program Servicer Performance Report. Interestingly, the report didn’t actually say how well the loan mods were performing. [Thanks L!]
Good news that more than 650,000 borrowers have been put into trial mods, no news that we have no idea how successful those mods are now five months after the program really got cooking.
It’s coming, that’s what the folks at Treasury say.
I have a strong suspicion that if the program were meeting with any success at all, the data would have been a lot more forthcoming.
That doesn’t seem to be the only omission either. A class action lawsuit was dismissed in Minneapolis yesterday by a group of homeowners fighting foreclosure after their loan mods were rejected. The homeowners claim that they weren’t given proper notice, nor were they informed that they had the right to appeal.
The judge ruled that loan modifications were not an entitlement nor were there "due process" qualifications. The attorney for the homeowners said that the Treasury was making changes however:
Treasury now requires that loan servicing companies collect data on denials, provide written notices of denials within 10 days, halt foreclosures when homeowners challenge denials and provide homeowners with some of the data that went into servicer’s decisions.
So the Treasury not only doesn’t know [or isn't saying] the performance rate of loans in the trial period, it didn’t even bother to ask lenders how many borrowers were being rejected? How could anyone adequately assess the value of the program without knowing the percentage of successful modifications or the percentage of applicants that were even allowed into the program? Additionally you would think that a breakdown as to WHY borrowers were being rejected would be useful- especially if this data could be compared between lending institutions.
There is a scene in movie The Sound of Music where the Nazis discover the Von Trapp family attempting to escape in the middle of the night. The officer tells Captain Von Trapp, So Captain- we have not asked you where you are going, and you have not asked us why we are here. Captain Von Trapp responds Apparently we are both suffering from an appalling lack of curiosity.
The Treasury seems to be suffering from the same thing– an appalling lack of curiosity. Either that, or an appalling unwillingness to share what they know.
Twist- What the banks are doing is putting them into “trial mods” recouping 3-6 months worth of “trial mod” payments and then denying them for no reason what so ever. Even when the borrower made every trial payment right on time. They are doing it to recoup some of the legal fees in the foreclosure process that the bank has and will be paying. If anybody is blind to this scheme they are a fool. Only 1,700 actual modifications finalized in the nation. You thought we saw a real estate crash in 2008, just wait to all of these foreclosures hit the market. People need to remember the bank is the servicer in most instances and not the one with actual skin in the game. That is usually Freddie/Fannie unless its a jumbo and or a private investor. Banks actually make money on the foreclosure process from fees etc. Making home affordable should be called “Making Foreclosure Affordable” for you bank
simplelife -
I was astonished at your key assertion, but I’ve found a source in the MSM.
“Obama’s offer to banks not helping many consumers”, by Chris Serres, Star Tribune (Minneapolis MN), November 10, 2009.
Would you like to consider expanding on your comment a bit and possibly submitting it for consideration as a post under your own suggested title “Making Foreclosure Affordable”? I suspect one of us might eventually do the same, but I’d like to offer you first refusal
first i’ve heard of this too!!! we all knew the prgram was unsuccessful, but i had NO IDEA it was this unsuccessful, or that these mods were only on a trial basis. although, i suspect there are really 2 different programs goin on here…the gov’t one and the voluntary one by the lenders??? i have a few clients that were able to get mods (ING has been the BEST to work with) well over a year ago and they are still in place. but this was with a foreign bank and was done by them (ING) voluntarily.
AZSaluki-
According to the report, there were 386,865 trial mods at the end of September. Now of course many of those would not have completed the three month trial, but there were 143,276 trial mods in place at the end of June.
Any way you look at it, the program is the failure we assumed it would be.
I’m not surprised that private mods would have a higher success rate. In a voluntary program the lender would be doing it because they genuinely wanted to keep borrowers in their home. If SimpleLife is right, this program is another opportunity for lenders to milk the system.
What a surprise.
Much of the data suggests that modifications of any kind are experiencing high redefault rates. However, I am willing to concede the Treasury’s assertion that we won’t have a clearer picture until about January. The mod program(s) have been a morphing project, and any recent monthly data is going to be an apple to oranges comparison. I still suspect that you are correct in assuming failure.
The better options appear to be what Wells Fargo is doing by keeping borrowers in their houses via low interest only modifications (essentially renting the house to the borrower). But this, like most modifications, only kicks the can down the road. It does spread out the pain though.
Extend and Pretend should be printed on all new dollars, it is our national policy. Of course the numbers are bad. I thuink Diana Olick had some commensts about this today (its pretty poor on the mod numbers) but i do not have it handy.
GYSC -
We had this one up earlier, but it’s been spun clear off Doom’s sidebar.
“Shadow Inventory Dwarfs Loan Mods”, by Diana Olick, CNBC, November 10, 2009.