I have a weekly newsletter that I am getting out to about 500 folks in a certain industry. I am sending out the "plea" to sign the petition but since these folks are not seeing a related news article and may have no idea what a HAMP (not HEMP) is I dd a much longer report for the less aware:
This is not directly related to the industry but could affect you or friends that may be struggling with mortgage payments and thought the Home Affordability Modification Program (HAMP) would help. Info on HAMP is on
Making Home Affordable - Home and many other sites.
I encourage folks to sign a petition if you are willing:
Desperate Home Owners Petition Congress For Help
PETITION TO THE U.S. GOVERNMENT FROM AMERICAN HOMEOWNERS | Petition2Congress |
Background
The HAMP program is very good for what it was designed to do. Basically if qualified it adjusts your 1st mortgage payment to 31% of gross income to help the ongoing foreclosure crisis. You also have to pass a Net Present Value Test which compares the benefit to the mortgage holder (investor) of modification vs foreclosure. This test is usually not the prime problem, especially in AZ where many are far underwater. Sadly it does not help the unemployed since you have to qualify income wise but for those that have enough verifiable income 1st mortgages can be modified down to 2% interest and a 40-year term.
The HAMP program is already fully funded from TARP funding. The funds only go to servicers and investors as incentives after the final modifications are done. "Servicers are the banks you pay each month but usually they do not actually own the loan. The loans are usually owned by an investor perhaps in a securitized mortgage pool.
Why HAMP is failing in its goals
It is the servicers implementation that is the problem of why HAMP is not working. Treasury is trying to "shame" servicers to do more modifications by monthly reporting, but there is no enforcement power in the law for servicers to follow the many Treasury/HAMP Directives.
Servicers make more money by foreclosing than they get from the Treasury incentives. Servicers that have received TARP funding are required to participate as are all that service loans for Fannie Mae and Freddie Mac who own or guarantee most first mortgages in the U.S. Most major banks participate, however reluctantly. There is also a FHA-HAMP.
"We believe all servicers must do more to reach struggling homeowners faster," Treasury spokeswoman Meg Reilly said."
REACHING homeowners is NOT THE ISSUE. It is easy to get on trials but they often are required for 6 months instead of 3 per the HAMP directives. The issue is being able to get final modifications as often the directives are not followed and additional requirements are being imposed by servicers and lenders.
Most servicers, and Fannie and Freddie as investors are backlogged for many months since there is to much "reaching"
going on to get more in the pipeline they can't process. But the servicers can brag about how many modifications they have started - these are only trials not the actual permanent modifications. It is getting the final modifications approved that is the huge problem.
Many servicers are finding any excuse they can to foreclose instead of modify because the servicers make more money by foreclosing. It is the investor (often Fannie or Freddie i.e. taxpayers) that lose. The servicers get fees for foreclosing, managing the property owned and reselling it .
Many lawyers, consumer groups and recently a Congressional Oversight Committee has pointed out the servicer problems.
Instead of doing more for desperate homeowners who should qualify for the HAMP program, new money is being allocated for tax credits for new buyers instead of fixing HAMP for the millions with families in crisis trying to save their homes.
It is common to have to resend the same documents many times as the servicers either intentionally lose them or are just too overwhelmed. Than they claim in the media, that they aren't getting the documents that have been mailed or faxed repeatedly.
There is a huge amount of documentation needed first to get confirmed on the trial and then another set that is about the same thing again only this time notarized. And both sets are often lost by the servicers. Plus they often toss in more hard or impossible to meet requirements not needed under the HAMP directives.
If you are denied a final modification after typically 5-6 months paying the 31% trial rate, often for reasons not part of the requirements, they can foreclose and sell your home immediately with no further notice. That power to foreclose and sell is even in the Trial Agreement document you have to sign.
What is a good program is a total disaster because of these problems. Started a few days ago, over 1000 folks have used the petition to try and have Congress get the message and address these issues.
This same petition idea might be used for our industry if the time is right to raise the right issues.
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