Sherrod Brown (D-OH) has sent a letter to four top banks (Bank of America, Citi, JP Morgan Chase and Wells Fargo) asking them – begging, really – to cooperate with the HAMP (Home Affordable Modification Program) and help homeowners avoid foreclosures. Brown identified a number of problems with how banks and servicers are using the HAMP program, including:

• Having their mortgages put in arrears while they are enrolled in HAMP trial modifications, so that they are hit with late penalties and past due amounts that have accrued over the course of the trial period when their applications for permanent modifications are rejected;
• Being placed in trial HAMP modifications while simultaneously being subjected to the foreclosure process;
• Being asked to repeatedly complete and resend the same information for their HAMP application;
• Receiving contradictory answers to their questions when they call to ask for assistance;
• Failing to receive responses to their requests for information concerning the status, progress, and disposition of their HAMP applications and HAFA (Home Affordable Foreclosure Alternatives) requests;
• Being subjected to a long, drawn-out HAFA short-sale process; and
• Being denied permanent HAMP modifications after making all the trial payments.

This is the picture of a total bureaucratic disaster. It’s bad enough that the program is run this poorly, but the end results are up to the discretion of the lenders, which means they can basically screw over the applicants with impunity They really appear to be taking trial payments just to extract a little more money out of the borrowers before foreclosing on them. And all that leaders like Sherrod Brown have at their disposal are sternly-worded letters. Presumably Treasury could force changes if they wanted, through their leverage over the industry, but they haven’t as yet.

The only thing I’ve seen Treasury do to respond to the failures of HAMP are little tweaks here and there, and a “conference” on the future of housing finance scheduled for August 17. The move away from policies encouraging homeownership beyond a sustainable level is fine, but clearly that does nothing for their failed program today.

The HAFA program, which facilitates short sales of foreclosed or about-to-be-foreclosed properties, sounds even worse. Basically, you have the bank, unwilling to write down mortgages for struggling borrowers, willing to take big losses in short sales, because they can sell them to investors who can turn them around and make a huge profit later. Only investors could hold these properties through the down market and stay afloat to sell them at a profit later. This is a program to facilitate cut-rate speculation.

Incidentally, at the very same time we were doing our foreclosure program at the Rio, next door in the convention hall was the event described in the picture you see at right. It’s an investor bonanza.

As I’ve now said repeatedly, these failed programs and giveaways to bankers and investors really damage the concept of the Democratic Party as on the side of the people. Some states have instituted foreclosure mediation programs that are doing a far better job than the federal government of providing some help and even securing modifications. But unless these are scaled upward, the lack of a credible foreclosure mitigation program threatens not only economic recovery but the entire concept of good government.