(LoanSafe.org) – While I realize there is intense pressure to find anything remotely positive about the modification numbers and then report the heck out of it, I have lamented for three years now that if we would just be honest with people and tell them that they don’t qualify and that what they’re asking for isn’t even in their best interest, or the banks for that matter, then many of these poor folks that were offered false hope only to lose their home a year later, would be healing by now.
One of the most frustrating experiences I have had to deal with is to have certain well known non-profit agencies speak negatively about me because I keep wanting to explain the business to them and they get insulted. They see me as a threat to their cash flow and their ability to get money from the large banks, municipalities and HUD, who funds their modification programs regardless of whether or not anyone actually gets any permanent help.
I assure all who are reading this that if you told the HUD Approved Counselors that they would only receive funding if in fact the people they claim to help, actually performed in their modification for three years or longer, all of the feel good speeches and measures by these folks (Trust me, the majority are great, but I know you know who you are because you’ve proven that you read my Blog in an effort to point out how I refuse to follow your direction) would cease over night.
They would stop offering false hope, pat themselves on the back and brag about helping thousands and thousands of homeowners. Why? BECAUSE IF THEY HELPED EVEN HALF AS MANY AS THEY CLAIM TO HELP, THE PERMANENT MODIFICATION NUMBERS WOULDN’T BE SO DISMAL.
They hate it when I talk like this. Privately, many will say that they agree with me, but when I ask them if they will come out and say so in public, suddenly there seems to be a need to change the subject and run to an appointment that they are always late for.
I am told that non-profit counselors need to focus solely on home preservation. Really? How’s that working out for you so far? According to 100% of the reports, not so good.
I am told that I need to focus on teaching only what they want me to teach and do so at a 5th grade level because you, the public, are too ignorant in their eyes to understand the critical issues you’re having to face. I am told I can only teach the positive benefits of attempting a modification and that they you must attempt said modification through their organization structure. I would rather not.
It’s a racket.
I listened to one top executive with a nationwide non-profit express that they had helped 60,000 homeowners. This was about a year and a half ago. At that same time there was only about three thousand folks who had received a modification. I wanted to ask; helped them do what? All I do know is that they continue to get tax payer money answering phone calls from the government’s hot line and don’t seem to realize that if someone has a 64% overall debt ratio (as reported by HAMP) after a modification and traditional underwriting that served our Country well for over 60 years tells us that with high loan to value loans this number should not exceed 36%, than it doesn’t take a rocket scientist to figure out that the modification you just congratulated yourself for getting for that borrower is a financial death sentence. You get additional funding, you pat yourself on the back and then move on to the next poor sole who wants to keep their home.
I abhor the fact that no one is willing to tell these poor folks the truth. The truth is that in most cases, the modification payment is not going to be sustainable.
The Emperor has no clothes; it’s as simple as that.
Imagine being in their shoes as a counselor, you’re excited that based on traditional underwriting you just put someone into a loan ( a modification in this scenario) that virtually guarantees failure. The Attorney General’s office is locking up private practitioners for doing the EXACT SAME THING.
It’s not right. It’s not moral. You don’t offer someone false hope. You sit them down and go over their budget and explain how traditional underwriting works. You explain that based on empirical evidence that since they do not have enough income coming in anymore (In many cases they never had enough income coming in), they’re better off bowing out gracefully, with their head held high and rent for a while.
By offering tough love and the truth, based on traditional Fannie Mae & Freddie Mac Underwriting, the HUD (FHA) 4155 Underwriting manual, VA Underwriting, USDA Rural Underwriting and EVERY OTHER UNDERWRITING MANUAL EVER CREATED PRIOR TO SUB-PRIME AND STATED INCOME, that they are asking to keep a loan that they do not qualify for and are only postponing the inevitable, by offering tough love, the truth, we can begin to heal these poor folks earlier.
I didn’t create the underwriting or the statistical data that proves why the ratios were created in the first place, but to reward people and agencies with tax dollars, who get paid salaries regardless of the outcome of your modification attempt, is just wrong.
Look, if you want to fight to keep your home and you believe you’ll be okay with getting a modification in which you owe 400k on a home that has a market value of 275K, than fight. Get connected with; www.chworks.org which is one of the best counseling agencies out there, with one of the best performance records I’ve ever heard of and make sure you submit a modification package that makes sense. Tell them Chris Sorensen from HELP sent you.
However, for many of you, if you are willing to face the cold hard fact that you would be better off getting a fresh start, than please don’t listen to someone who tries to convince you that you should ALWAYS try for a modification.
I can assure you, the banks would much rather you not attempt a modification that you have little chance of keeping long term. It wastes time and resources.
I have met far too many struggling homeowners who obviously qualify for a modification and would probably receive help if we didn’t have so many people asking for help who fit the description above. In my humble opinion, all of us would be better served if more of the counselors took the attitude that putting someone into a modification with a back end ration of over 45% is just plain wrong.
There is far too much historical evidence to prove what I am lamenting about here is the truth. There is no point in getting upset or arguing with me on this, that is, unless you have an agenda. Sadly, I have met Directors and Executive Directors of a few non-profits and they in fact do have an agenda. Funding for their organization, at all cost.
Okay, thank you for reading; I will consider this my personal therapy for the day.
Here is how Barclay’s basically said the same thing in a much more politically correct manner:
In its June report on the Home Affordable Modification Program (HAMP), the U.S. Department of Housing and Urban Development and the U.S. Treasury Department may have understated the redefault rates of loans that have been modified, according to research from Barclays Capital.
In a July 21 intra-day commentary on residential credit, Barclays analysts Sandeep Bordia and Jasraj Vaidya write that while they believe overall redefaults from HAMP will be better than those from prior modifications, “we find that the data as reported…are misleading and fail to capture the full magnitude of redefaults from these modifications.”
The federal report showed that almost 6% of permanent modifications were 60+ days delinquent at the six-month mark, while fewer than 2% of permanent modifications were 90+ days delinquent. A caveat, as pointed out by Bordia and Vaidya, can be located in a footnote in the report, which states, “a HAMP permanent modification is canceled for nonpayment if it is more than 90 days delinquent.” The analysts interpret the footnote to mean that 90+ day delinquent loans are removed from the percentage of delinquent numbers reported.
“Removing 90+ [day delinquent] permanent mods from the delinquency calculation and basing the calculation only on successful modifications makes the redefault rates look too low,” Bordia and Vaidya write.
The analysts additionally say that their base case expectation of approximately a 60% lifetime redefault rate on HAMP modifications is still adequate.
Original Post: http://www.help.freehomeownershiphelp.org/?p=936