So consumer advocates and attorneys were trying to warn the administration about problems with mortgage foreclosure problems, especially in HAMP (Homeowners Affordable Modification Program). Nothing happened:
Consumer advocates and lawyers warned federal officials in recent years that the U.S. foreclosure system was designed to seize people's homes as fast as possible, often without regard to the rights of homeowners.
But the officials said they could take only limited action to address the danger. In part, this was because they wanted lenders' help carrying out federal programs to modify mortgages that had fallen into default or were poised to do so.
New concerns about improper practices - such as those involving faked documents or "robo-signers" who signed tens of thousands of documents without reviewing them - have prompted the mortgage servicing arms of the country's largest banks to freeze millions of foreclosures. As momentum builds for a national moratorium, the administration has begun assessing the potential impact, examining the threat it could pose for the ailing housing market and the wider financial system.
There is no evidence so far that the specific abuses made public in the past few weeks were known to government officials. Nor is it clear whether they were aware that the process of the selling and reselling of mortgages among financial firms - which became extremely common and highly profitable during the housing boom - was raising legal questions about who actually owned the loans and had the right to foreclose if they want bad.
But government officials were told repeatedly that the mortgage servicing industry was deeply troubled, according to administration officials, consumer advocates, housing lawyers and congressional aides.
HAMP continues to be a program with poor results. But in light of recent events, this December 2009 business story suddenly makes a lot more sense:
Bank of America (BAC) has a crummy record of helping homeowners revise their mortgages, which would help stem the tide of foreclosures sweeping across the U.S. Of the company’s roughly 158,000 customers who have started a “trial modification” under the federal Home Affordable Modification Program, only 58 have been able to get their mortgages permanently changed.
Why the microscopic batting average? Here’s B of A’s alibi: It’s gotcrummy customers. The company says that more of its borrowers are ineligible for HAMP than other banks’ clientele. Another excuse is that many B of A customers are no good at paperwork.
Hah, hah! Pretty ironic, don't ya think?
Of course, if so many B of A patrons are feckless deadbeats, it raises the question of how they got a loan in the first place. But never mind all that — logic should never interfere with the buck being passed.
Only in August, B of A home loans division president Barbara Desoer sounded more conciliatory in conceding that the company was partly to blame for its sluggish work with homeowners. B of A “must improve our processes for reaching those in need,” she noted.
Maybe it's this simple. Because they'd sliced and diced so many mortgages, they couldn't find the paperwork. Maybe they could only modify the relative handful of mortgages that had a clear, documented title.
Stay tuned.
UPDATE: Marcy makes a great point. Remember cramdown?
