Part I of this series, Part II, Part III.
Before I launch into today’s installment of the portrait of HAMP failure, one happy note. The online investigative outfit ProPublica has been chronicling HAMP stories as well, and Chris Hayes picked up the plight of one, Suzanna Wertheim of California, and profiled her on the Rachel Maddow Show. As a result of that exposure, her bank set her up with a loan modification. It’s amazing what a little exposure can do. So let’s get to it.
Today’s story comes from Jane Powell of Oakland, California. If you find it familiar, maybe you’ve been reading the Berkeley Daily Planet; Jane has been thoroughly documenting her travails with HAMP in a series of articles there which began back in May. She also offered a Cliff’s Notes version here at FDL.
Let me try and boil it down as best I can. Jane, an author of six books and a home restoration consultant, purchased a 1905 Jesse Matteson Arts and Crafts home in Oakland, “an important historic house that I pretty much waited my whole life to own,” for $495,000 back in 2002. She gave a 20% down payment and then refinanced into a fixed-rate loan in 2006 for 6.375%. The house’s approximate value today, according to a search on Zillow.com, is $309,000. Jane also took out a $146,000 home equity line of credit, mainly to pay health insurance that costs upwards of $17,000 a year.
In 2008, the economy crashed, and Jane’s business went south, with her income basically cut in half. She took a part-time job in retail, rented out parts of the spacious home, tightened her budget and basically did what you would expect of someone trying to keep things together after an economic shock. But it wasn’t enough, and she would need more help with her expenses and to keep the cherished home. So she began the loan modification process in October 2009, through NACA, the Neighborhood Assistance Corporation of America. They handled the process with her lender, GMAC. As Jane writes:
After attending the requisite introductory meeting (last October), I first had to fill out a whole bunch of forms online, detailing my income and expenses and so forth. One of the required forms is called a Hardship Affidavit, where there is a whole page of boxes to check off, various reasons why you can’t afford your mortgage payment anymore- essentially asking the lender to take pity on you because your income went down, or you had to take time off to care for your aging parents, or you got cancer, or whatever. There were (number) boxes in total, and I was able to check off nearly all of them. Then on another page you get to explain in more detail why your life totally sucks. By the end of it you feel like a contestant on the old game show Queen For A Day. (For those too young to remember, three women contestants would come on the show and relate their tale of woe- whoever was the most pathetic won a washing machine or something…)
To say the process is not set up for people with multiple income sources would be an understatement- I have writing income, royalties, consulting income, book sales, rental income (I rent out rooms in my house), and a part-time retail job.
This has characterized the frustrating process for Jane and so many others trapped in HAMP – she has had to painstakingly document every scrap of financial information she has. Profit and Loss statements given to GMAC were denied. Online forms had to be supplemented by hard copies of the same sent by fax. Collated bank statements were requested, and basically every single scrap of documentation from your entire life.
Initially, GMAC offered Jane a three-month forbearance (a suspension of payments for three months), which she turned down. They summarily rejected her application and told her to continue paying her $2600 monthly payment (presumably until she hit the default stage; this whole time she has remained current on the payments by dipping into savings). They also told her that any change in income would result in her having to restart the paperwork process all over again, jumping through the exact same hoops.
In July she attended the NACA “Save the Dream” event in Washington, DC, where borrowers and lenders meet face-to-face for a potential workout of the loan. 30,000 people went to DC for this.
There was a good deal of waiting. The GMAC representative was nice enough, but couldn’t really do anything except send my file to someone at Fannie Mae (the investor). Although the affordable 31% payment would have been $1147, she said it was unlikely they would go for it, because the 2%/ 40 year term extension wouldn’t be enough to get there, and they were unlikely to take $100K off my loan, even as a balloon payment. (Yeah, I’d be able to pay that off when I’m 84, using my non-existent Social Security, courtesy of Pete Peterson.) She said maybe they could go to 38% of my income- more like $1800. Well, it ain’t great but it’s damn sight better than the $2600 I’m paying now. She said it would take about a week to get an answer- apparently they do respond a little faster to requests that come from these events.
Of course, the initial approval would be for a temporary modification, not a permanent one. And we know how the trial payments don’t read as payments on the loan, and put the borrower into delinquency, and if the permanent mod isn’t approved, the borrower has ruined credit, owes back payments and penalties and fees, and faces foreclosure if they aren’t paid immediately.
Since the NACA event, Jane has had three more requests for paperwork. She had to supply rental agreements for all her tenants, personal letters from the tenants about their rental agreements, additional bank statements including the rental income, and updated profit and loss statements. From an email:
I’ve been working on this since last October and I haven’t even been offered a temporary modification yet. I’m well aware it will ruin my credit if I get one. My FICO score was 818 when I took out this loan, and I am not the one that crashed the economy. I got a part-time job, I cut out every expense I could think of, I’m dipping into what’s left of the money I inherited from my father to keep up the payments ($2600 a month).I used my HELOC to pay for my health insurance ($17,000 a year- thanks Obama for that lovely single payer health care…) If this were any other house I would walk away, but it’s an important historic house that I pretty much waited my whole life to own, and I’m not giving up on it. Oh, and by the way, I have cancer-apparently even that doesn’t get you any leeway from the bank.
Jane closed her story by telling me, “I spend every day fighting off despair- I’m exhausted from the whole ordeal, but I’m too stubborn to give up.”
She’s spent 10 months waiting for just a trial modification, and the banks have used every request they could for more paperwork to finalize things. And GMAC has not been sanctioned in any way for this behavior from Treasury or any federal regulator. Homeowners are falling into a terrible trap.
I want to tell more of these stories. If you or someone you know has experience with the HAMP program of any kind, please contact me at david-dot-dayen-at-gmail-dot-com.




26 Comments

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It is stories like Jane’s that cause me to feel something I have never felt before in my political life. I feel defiled by this administration and by all its works and pomps. There is a mixture here of treachery with pure grartuitous evil that is ungodly.
I am a bankruptcy attorney in IN and I hear cases like this every single day. HAMP is a fraud on the public. I have a new anagram for HAMP: “Homeowners Are My Prisoners.”
I have had clients successfully do workouts with local banks, but they ignore the HAMP altogether. It is another corporate hand out to the banks and they are resisting any loan modifications, that I can see, but are collecting fees for taking the applications. Shameful.
I can’t put into words the contempt I have for this president.
Seems like you do so regularly.
Same here.
Sorry, Rahm.
a new anagram for HAMP: “Homeowners Are My Prisoners.”
That’s good. We could have a contest.
I hope you reserve some anger for members of congress too,particularly the Dems.
Funny how no Democratic congressman/woman has challenged the WH on this fraud of a program.
They all seem complicit in the fraud that has been unleashed on homeowners.
Oh, yeah!
It’s becoming more and more apparent that HAMP, like every other initiative from Obama, is just another transfer of wealth from “the little people” to Corporate America. It’s doing precisely what it was designed to do, give the banks more time and money to absorb the Massive Fail of their toxic balance sheets. They sold this program like they sold Obama on the campaign trail, a “Yes We Can! help you save your house…just not for you but for our friends the Banksters.”
I really hope the Repubs take over Congress and are crazy enough to impeach the SOB. I won’t waste any time trying to defend Obama just because he’s a Democrat. Maybe it will distract him so much that he can’t kill off SS, like it did Clinton. And if they force him out of office, it could keep him off the lecture circuit so he wouldn’t be able to earn those million dollar speaking fees he’s obviously lusting after. It would be schaedenfreude indeed if he was forced to rely on social security for his retirement.
This is what I don’t understand: if the lender has made an offer to modify the loan, and the borrower accepts the offer, why is this not a new contract? Clearly, the penalty for failing to follow the modification might be go back into default. But what I don’t get is how the borrower is compelled to make partial payments and receive nothing in return for this.
There’s no other way to say this. This is a fucking travesty.
Government officials come up with $14,000,000,000,000 in cash, loans, and backstops in a matter of days to throw at a completely unreformed financial sector, but they can’t come up with the paltry sums to help out home owners who are more than willing to play by a new set of rules and restrictions.
Seriously, fuck this country. Fuck it right in the ear. I’m calling in the morning to check on my Canadian residence application.
HAMP is a banking lobby stall tactic. A true real estate market bubble correction might force the shadow banking industry to pay off sizeable bets made at the Casino.
A friend of mine who considered and rejected a modification because he said he wasn’t going to pay the bank to foreclose on him.
I still don’t understand how “trial payments” don’t “read” as payments, and end up leading to foreclosure. Not to mention ruined credit.
Travesty, indeed.
I really hoped we’d stop living in a Kafka novel when W was gone.
I didn’t know that and I actually made a trial payment. one.
Thanks, David, for telling my story. Maybe I need to go on Rachel Maddow. Or make a YouTube video. Or something.
I think that if you trace HAMP to the source you will find this was an invention of the bureaucrats at the Treasury who fooled both the public (and probably Obama, perhaps the new Secretary) and even the banksters. If you read the implementing instructions it becomes clear this is a maze that few can find an ‘approved’ entry to or exit from. Just the ‘dictionary’ was 136 lines with 10 cells on an Excel spreadsheet (190kb). I was looking at the fifth revision.
HAMP did forestall a few foreclosures, but it took jumping through hoops. Only a small sum went to the service folks and the rules were changed quarterly. On the banks side they wanted it to work as it could put off the loss while it was in HAMP. It was badly implemented because it was like that pea and shell game. I got a headache reading through all the ‘rules’ and categories and realized this lacked a hard and fast rule. It was ‘optional’ for the bank and the borrower.
It is fair to blame the banksters for most of the failure, but the Treasury was most at fault and those folks who created it are the crats who are not swept away with a changed administration. These critters do either retire or seek jobs with those who must figure out the rules.
I’m giving Obama and maybe even Timothy a pass on this one.. they had a lot on the plate and let the crats do the chores. Congress is who I’ll blame.. they should have never raised the lending limits that Fannie and Freddie could provide as that’s what sent this bubble aloft. People have to have jobs that pay enough to pay these loans. They did not and even as we see from this tale.. people have tried and can’t due to a host of issues.. but folks… a $2,600@ payment is only part of home ownership. You need a net income of $10,000@ month to service such a debt. Clearly a lot of folks were to blame.
‘Wanting’ this house is not planning so as to afford it. People acted imprudently and now we’re ALL going to pay and pay and pay. The lawyers and banksters never pay, which is why they need to be REGULATED. That is worth getting angry over. Home ownership was never (after maintenance, taxes and insurance) going to appreciate more than 1-2% a year.. if you maintain and update. The whole idea of buying houses that will eat your income to the extent these folks have was NUTS.
Yes it was also a stall tactic, but that’s not a bad thing given the mess we’re all in. Congress are who we need to rail on. Fannie and Freddy need to go away. Local banking isolated from the ‘products’ is what we need back. They worked and worked with the borrower. Today the investors are detached and suckers too.
His Royal Majesty’s courtiers usually blame the blue dogs and the filibuster for all their problems. As Atrios says (and he seems to be linking to fdl more often)this is the administration’s baby. They have FULL control over it. There is ZERO excuse.
Same thing with 2 vacant seats on the Fed. Recess Appointments are fully within the power of the WH. And yet…. nothing.
No, Geithner knew what was going on. Remember, he came from Wall Street.
What on earth is Obama or the Dem’s suppose to do?
If you listen to the last 3 Oversite Committee’s the Dems are screming to get the banks to do the mods if qualified which they mostly refuse to do. The R’s want it to fail.
There is no HAMP law, it was forced on banks as part of TARP.
Obama and Treasury sent in the swat teams in 2009, it was item #2 on the White House meeting with bankers with them promising to do better. Treasury required monthly reports to try and shame the banks. What more can Obama/Admin do? R’s block anything substantially good in the Senate and want the economy to tank so they can falsely blame the D’s.
The mortgage servicers have turned HAMP which is quite good if the rules were followed, into a huge money maker for the banks by sucking what little money homeowners have left before throwing them out of their homes.
Banks as servicers make huge profits by extending and foreclosing. Taxpayers that take the loss since about 85% of 1sts are GSE insured. Services have made an estimated $4 billion by not following the directives giving struggling homeowners the false hope of a modification, collecting the trial payments for three to eighteen months, and foreclosing with the addition of late fees, fines, back payments, and foreclosure costs passed on to the homeowner.
We deal much more with the short sale process which is the other side HAMP. I continue to believe that the reason these banks stall so long with foreclosure via HAMP/short sale time frames is because they would be financially insolvent if they had to write down to the true value of these houses. Getting a short sale approved has been a nightmare over the last 2 years. We literally have several thousand every month that contact us to start the process and a very very small percent have actually been approved. Most are still waiting to hear from the bank. Offers can take 9 months to be negotiated. We are seeing Fall 2008 properties close now. The process does not work for traditional buyers because they won’t wait a year to see if the bank will approve their offer. That leaves only investors who need to buy at 20-30% discounts in order to make a profit. That drags down house prices. The process is basically impossible based on the stats. We have 3000 Realtors all over the country who are screaming for a better system.
Jane is the perfect shortsale candidate. She made a bad investment and some bad decisions, she purchased a half million dollar dream house with 20% down, quickly refinanced at a high fixed rate (by today’s standards) and presumeably pulled all potential equity (including her down payment out)and then some by taking out $150K in a second loan (no idea what rate she pays on that)and using high healthcare costs as the only reason for extracting $150K. Come on $150K has got to be close to what she made in an entire year. Her income has now been cut in half to around 75K or 80K and her solution is to get a retail job? That isn’t going to make up the lost $80K in income. Honestly, the math doesn’t work in this situation. She likely still cannot afford this house even if they cut her debt in half.
So if I read this correctly, she now has outstanding balances of ~$495K+$146K=$511K on a house worth $309K and she now makes 50% less money then before. Because she has no skin left in the game, no money on the table. How can she possible refinance the combined $511K by only putting up potentially $309K in value. She now needs a combined 165% loan to current value. The expectation is that the HELOC, her second lean holder, should completely let her off the hook for the $146 as a complete write-off (In a foreclosure they get nothing so they will have to take a hit either way)and further her first mortgage not only has to drop to 2% for five years but extend to 40 years and have a non-interest bearing $100K balloon, which presumably might also be forgiven. The second lien was her bad move on top an unfortunate timing with her home price. and the bank that facillitated that bad move should have to eat it. With respect to her first lien why does it appear you are expecting a bank to finance $495K with an income of only $75K. The HAMP program uses a Net present value calc designed by the US TREASURY to determine if a mod is plausible. If so, don’t keep her waiting. If not, let her off the hook with a shortsale and MOVE ON.
You clearly know little about California real estate- when I bought the house, half a million was an average price here in the Bay Area. I don’t think I made bad decisions- I refinanced into a fixed rate from an ARM, when rates were relatively low (my rate was a percentage point higher because I’m self-employed). I didn’t use the whole $150K on healthcare- I also used it to pay my property taxes and the medical bills that weren’t covered by my health insurance. Are you suggesting a woman with cancer should go without health insurance, when the retail cost of ONE treatment is $55,000? Or do you think I should just die and decrease the surplus population? (BTW, the interest rate on the HELOC is 2.24%)The HELOC may have been a bad move, but what the hell was I supposed to do?
As to my taking a retail job, perhaps you haven’t heard, but THERE ARE NO JOBS! I was lucky to get this job, which pays a dollar more per hour than my last retail job, which was in 1988!
Actually I’m only expecting the bank to finance $394,000 (what I currently owe) on my current income. Why? Because they crashed the f#*king economy- not me. They’re why the house is only worth $309,000- it’s not because of anything I did or had any control over. So, yes, they should eat it.
I am not selling my house in a short sale. I see no reason to play by the rules in a game that is rigged. And don’t give me that crap about my moral obligation to pay my debts-I quit buying that line years ago.
Wake up and smell the coffee
HAMP was not designed to help homeowners. It was designed to forestall foreclosures to help the banks.
H/T Calculated Risk :
The Calculated Risk link for the post above.