Tweet
So Ezra stepped out and pretty sharply criticized HAMP. To him I say welcome. But because he has a Beltway audience, the Treasury Department got right angry and dialed him up and pleaded their case. Let’s take a look.
• The “But We Did Something!” Argument: Phyllis Caldwell offers:
Phyllis Caldwell: You have to think about HAMP in the context of who it was supposed to help and why. It set a framework for evaluating mortgage modifications that moved the industry to a standard modification able to reduce payments and gave more than a million homeowners immediate relief through trial modifications that had the potential to become permanent. So what it set out to do worked. What has been disappointing were the number of people who qualified for modifications. Some of them were not who the program was meant to serve. They were already paying less than 31 percent of income on their mortgage or they could not verify the income they said they had or they could not keep up with payments during the trial period.
Just because we said we’d help 4 million people, and we’ve ended up with only 10% of them getting a permanent modification, that’s not our fault. It’s those damn people! They were the wrong kind!
Basically they say that HAMP cannot help people who have fallen off in their mortgages due to unemployment, and was designed for subprime buyers who were scammed in the marketplace or ended up with big rate resets. They’re implicitly saying that HAMP was designed for a housing market in March 2009 and not October 2010. But if that were the case, they wouldn’t be 90% off their expected totals.
Also, if HAMP wasn’t set up to address unemployment or negative equity, since those are the major problems, maybe something should be created to do that. HAMP has spent under 1% of its $50 billion dollar allotment through TARP, it’s not like there isn’t any money laying around.
• The “I Know Nothing, I See Nothing” Argument: Caldwell then states that nobody was hurt by the tragic design of the program:
Q: A criticism of HAMP is that its three-month trial period ended up hurting a lot of people. They got their payments lowered for a few months and then their bank just left them hanging, or they got kicked out, and now they had to pay the difference, or they’d been holding on in a community with no jobs for longer than they needed to.
PC: There are instances of that. It’s important to remember that the focus was for people who wanted to stay in their homes and there may have been some cases where people believed or hoped that their circumstances would change and so they stayed in the trial hoping their circumstances would change but they didn’t. But it’s not fair to say they are worse off than they were because of HAMP. They owed what they would’ve owed anyway.
Actually, it’s almost criminal to say that people aren’t worse off because of HAMP. They simply are. I’ve chronicled people who made every payment they’ve been asked to and still lost their home. I’ve talked to people who had their trial modification stretched out and then ended up with both a bad credit report because the reduced payment read as a default, and a lump sum owed at the end of the trial after getting cancelled without a viable reason from the servicer. I’ve talked to people who lost their homes basically because they missed a single document. There aren’t “instances,” it seems to be a feature of the program. The servicers have little motivation to help people, deal with confusing rules and in the end don’t fulfill their obligation to keep people out of foreclosure or provide a valid reason for foreclosing.
• The “We Can’t Help Deadbeats” Argument: Steven Adamske says:
SA: There’s a moral hazard in this issue as well. Your editors and people in your industry would be salivating for the Lexus owning and beachfront property types who would get help if we opened the program further. We have to go for a middle ground where we get the people deserving of help so there’s no accusation of free lunches. The challenge is figuring out how to scale a program so you’re doing enough and trying to address the problem without doing so much that you create a big moral hazard problem and use taxpayer money unwisely. That’s why we only paid out funds when there was success. That helped us be responsible. So we still think it was properly designed, given the need to scale it in that way.
There were a record number of foreclosures last month. And a record in the third quarter. Before that a record in the second quarter. Do you think this obsession with “free lunches” is really working out on the central issue of preventing foreclosures? If you think you’ve properly designed and scaled this program in the midst of historic numbers of foreclosures and evictions, you… well, you’d have to be a flak for the program, I guess.
• The “Our Hands Are Tied” Argument: Caldwell then says that it’s up to the investors to allow modifications to the loans, so, sorry, people:
PC: When we talk about HAMP or mortgage modification, it’s important to know that only 15 percent are owned by banks. The rest are Fannie, Freddie and investors. People see it as the banks not modifying, but it’s really banks and servicers working on behalf of investors. And then we need to include the effect HAMP has had on the industry in creating a model for reducing payments on mortgages. Before HAMP, only a third of modifications were reducing payments. Now it’s above 70 percent.
Mark Paustenbach: And you know why the program was voluntary, right? We didn’t have the authority to unilaterally open up these contracts and change them. That would’ve been illegal. So we needed a program where we could get the servicers to participate and agree to do the modifications voluntarily.
That’s just completely untrue. In a situation of principal reductions, that’s possibly the case, but about .01% of HAMP mods, about 400 out of 400,000, reduced principal. Most of them changed the terms of the loan or reduced the interest, which is totally in the purview of the servicers, aka the banks. By the way, we’re nearing a point in the foreclosure/title mess where the investors would be THRILLED to get a modification and lose 20-30% of the principal of the loan, over a foreclosure that loses 70%, or absolutely nothing because the title is unclear.
• The “Effect on the Industry” Argument: This is alluded to above. It’s the idea that the industry has a standard model now for reducing payments on mortgages that they didn’t have before. First of all, to the extent that they do, it’s probably as much a result of the efforts of NACA, as HAMP. Second, the terms of private alternative modifications are largely unknown and opaque, so it’s hard to call them a model, but what we do know is that the terms are worse than HAMP. They don’t have to be over the life of the loan, and they certainly don’t reduce principal. Indeed, from what I know of the alternative mods, they look like ARMs that will recast in 3-5 years, and we can go through this whole damn thing again.
Caldwell tries to finesse this here:
PC: Remember that private mortgage modification has changed a lot in part because of HAMP. It set a framework for that. Within the HAMP program, over 1.3 million have had a chance at modification. But when you look beyond HAMP at the private mortgage modification industry, modifications continue to exceed foreclosure sales on a 2:1 basis. Modifications have worked. But they can’t stop foreclosures totally because there are some people for whom it’s not avoidable. So the number of people eligible for a HAMP modification was less than we thought at the beginning, but a lot of people have been helped, and we’ve moved the modification industry from being somewhat predatory to stable and helpful.
Note “foreclosure sales” in that statement, not “foreclosures.” This completely discounts the fact of shadow inventory, and the holding back of foreclosed homes from the market. It’s fun with math.
• The “Cramdown Wasn’t Feasible” Argument: Adamske says that “When you talk about forced bankruptcy modifications [like cramdown], it failed in Congress. It wasn’t politically feasible.” Maybe the President should have mentioned that when he took it out of TARP and then out of the stimulus, after promising it for years.
All in all, this is an absurd set of justifications. It ignores the very real design flaws in HAMP, it tries to excuse the voluntary nature of the system, it neglects the fact that the incentives for modification in the program are completely upside-down, and it shades the truth (at best) on the statistics. Meanwhile, the unchecked rate of foreclosures are a lead weight on the economy. Don’t break your arm patting yourselves on the back, guys.
43 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
I think what the picture is missing, is the story told to me by my bankruptcy attorney. He said, “you have to stop thinking of bankers as reasonable people. They are following the business model of the corner drug dealer and loan shark. They do not want to modify loans to preserve more of their assets. They want to make you an example. They want to let everyone know what happens someone doesn’t pay up. Instead of cutting the addict or gambler a break and cutting their losses…they kill them,…in a very public way. They mutilate a body and leave it in a public place for all of their customers to see. Then suddenly the addict and gamblers find the money they thought they didn’t have. They rob a liquor store, or mug a street walker. Anything to pay the local drug dealer. Suddenly no one asks for a break. This is the bankers business model. All of these disastrous “Loan Modification attempt” stories just work to their benefit. Fewer and fewer people even apply for one.”
I know I didn’t. I figured it was a waste of time.
Anyway it seems to sum up their behavior pretty well. The drug dealer rarely respects his clientele, nor worries about their well being. They certainly are willing to break a few laws to maintain their domain.
These guys are common criminals. I wish the police would arrest them, but aparentely they are on the take.
This is an excellent point.
Remember American Gangster? It came out in the last year or two. Denzel Washington played Frank Lucas. Remember when Frank and his boys were hanging out in the diner? And Frank looks outside and sees a guy that owes him money? Remember what Frank did, in broad daylight? And what was the reaction to all his buddies when he came back in the diner? That’s the same thing you are saying, basically.
Perfect explanation.
Agree. Been saying these people are crooks for years. Apt comparison. No one I know was helped by HAMP. They all ran into the same b.s. Crock of crap. The pols are in on it, too, and like the shadowy “Mr. Big’s” who sometimes squat behind the criminal empire, that’s what the pols do behind junk like this.
Great post. Factish as all get out and very illuminating. Needs to be widely read. I just couldn’t find the funny part, unless we mean to say that it generates those high, hysterical, halloween-y laughs emitted by the character about to get run through by an ancient bloody sword or such like.
Another Obamanible RENEGE! I Weep.
Great rant, David. The truth is that HAMP was designed for the benefit of the bankers, not for the benefit of the homeowners. When I first read about how the program would work, I knew immediately that it was geared toward preventing homeowners who hadn’t lost their jobs from abandoning over-priced homes in which they basically had no equity. It was never about re-writing terms for those who had lost jobs, suffered pay cuts, had a medical emergency or, for other reasons, needed help being able to afford to stay in their homes. When it became clear that most borrowers were not going to give up food, their car, their health insurance, the occasional pair of new shoes, or other necessities of life just to pay off a price-inflated house, then the PR war began trying to paint these former homeowners as greedy and immoral. Problem is, compared to the bankers who were getting their chestnuts pulled out of the fire with no quid pro quo, the former homeowners look like decent, regular folk, and not a portrait of the scum the bankers and media try to paint.
For the benefit of people who aren’t familiar with HAMP, you might want to spell out the acronym on first reference. If you’re going to purport yourself to be a journalist, don’t you think you ought to write like one? AP style is spelling out the words in an acronym on first reference.
Being a journalist means you know these things. Get with it or give it up.
There’s this thing called teh google.
And there’s this thing called common courtesy.
also to Dearie:
Sorry, that cuts no ice. Either you’re a journalist and you know this stuff, you’re you’re an ignorant poser. Just because Google exists is no excuse to blow off the basic tenets of good writing and the fact you used that as an excuse for for the OP means you’re in favor of the dumbing down of America. Are ya sure you want to take such an ignorant position?
Good writing = credibility. Bad writing = you are a stupid shit.
Quite true, except many conservatives that I know (and that we see blogging here) only want the “moral hazard” to be bourne by the homeowners, who are viewed by some as immoral, greedy scum who aren’t hard working enough to live up to their “responsibilities.” These same conservatives have no notion of a similar moral hazard for the banks or mortgage industry at all. They are blameless victims of horrible “small people” who simply refuse to “honor their loans.”
It’s quite something else, but I hear this and read it far too often for comfort.
No one I know helped by HAMP also.But the thing that galls me is the fact that every month many,many,many families are being hurt by the WH’s corporate policies & the so called “libruls” on MSNBC won’t even cover this story.
Like I have been saying for many months now…Those in the media on cable TV who profess a liberal identity are contemptible…..they are cheerleaders for the WH & corporations ,the pretense that perhaps the biggest mortgage fraud on ordinary Americans didn’t happen or isn’t happening ought to open your eyes….they don’t care about your welfare,they shill for corporations.
I did see Ratigan cover the fraud on ordinary Americans today…and note he sees himself as a libertarian….but the dyed in the wool libruls on the network nada,nothing,zilch that’s what they think of us.
Don’t let the door hit ya on the ass when you leave to look for a site that is up to your standards.
Being needlessly rude isn’t attractive. You have every right to ask questions, but hurling out attacking and hostile epitaphs is unnecessary. Making suggestions is fine; being nasty is not.
He’s only written a jillion articles on the subject, this being the jillionth. Thus, term previously introduced.
And, AP violates their own alleged style guide – Sep 30, 2010.
You didn’t explain your term “OP.”
So are you credible?
Yeah, I hear ya. Well I watch MSNBC less and less these days for similar reasons. To be fair, sometimes Rachel Maddow & Keith Olberman still have insightful and well-researched programs. I would rather drive a spike through my eye than watch sneeringly condescending vapid Lawrence O’Donnell, and Tweety ain’t much better.
Recall that MSNBC is owned by GE, so, again to be fair, there’s only so much that’s going to be said or promulgated on a station owned by a very rightwing corporation. Just the way it is.
HAMP was set up to remove the “moral hazard” from the banks and mortgage industry. The stories that one hears about what “small people” went through are disgusting beyond measure. I have mainly only seen information about here on this blog, although I’m sure some other blogs have covered it, too.
After reading about HAMP, I thought it was designed to give the appearance of doing something without actually doing anything. There was nothing in what I read to suggest it had real substance. There’s something depraved about putting out an offer to desperate people that you know won’t do anything for them.
You hit it, bittersweet. The bankers are criminals, with criminal minds and intent. And actions, as we are saying over and over again. People (fewer now) look at their nice suits and “well-spoken” manner and high salaries and assume they’re ethical and moral and professional when they’re none of those things. It is always ONLY about the money.
It’s a pity we don’t have a White House or Congress willing to act on this egregious criminality. Maybe because their hands are not exactly clean either. It’s all too goddamned depressing.
HAMP was really a special purpose vehicle – to bolster the “Extend and Pretend” meme.
Excuse me…..there are civil ways of making one’s criticisms known and then there is downright rudeness. I happen to agree with your assessment of style. I do NOT agree with your tone.
Isn’t O’Donnell the worst? He really should just have one of those hourlong programs that blowhard religiosos have, to spout his smug “I’m in the know” bullshit as a monologue. I’ve never liked him, but my dislike was cemented recently when he framed social security as an “entitlement program” that “will have to be dealt with.” What is the point of having Democrats at all if they say the same things Republicans do, and in the case of Congress and the White House, act the same way too.
It was set up so that the Great Pretender, Obama, could wag his finger at all the serfs and say: “Lo, Behold! See what wonders I have done just for you!” And a band of angels would sing sweetly in the background…
And who unleashed Ezra? Beltway BoyWonder never goes off the DC message.
Lawrence O’Donnell is a democrat?
I never liked him much, but he really jumped the shark a couple of months ago when MSNBC had a “trial show.” That was shortly after Alan Simpson made the ridiculous and nasty remark about social security and tits:
http://www.cbsnews.com/8301-503544_162-20014698-503544.html
O’Donnell interviewed Ashley Carsen about this and was about as rude, condescending and sexist as possible. He treated Carsen like she was his defective teenage daughter or something. It was quite something to behold. O’Donnell next interviewed Ezra Klein about the same issue, but was more respectful of Klein, I guess because Klein has similar plumbing equipment.
http://amormundi.blogspot.com/2010/08/lawrence-odonnell-was-asshole-last.html
That did it for me. There was *nothing* about that show that remotely held my interest, and it was clear that O’Donnell is another NeoCon in Democratic drag brought forth by the GE PTB to shill out NeoCon talking points but pretend somehow that they’re “liberal.”
BAH. If I see O’Donnell’s nasty mug on the tv, I click the channel immediately.
O’Donnell is condescending to Klein as well, just not as much as LoDo’s dripping with condescension to any female who has the misery to sit across from his ugly mug. Talk about bad karma… ick.
While Geithner defends HAMP, Holder insists on vigorously prosecuting the possession of HEMP, should prop 19 pass in California.
Prosecuting Financial fraud, apparently, not so much.
I wasn’t referring to the O’Donnel piece. I mean the piece DDay references in this post, where Ezra DEFIES beltway hoo ha.
I just read about that elsewhere.
I wonder who doesn’t want any competition?
Thank you for that reminder about GE.
I purposely watched the NBC nightly news to see how the coverage of the foreclosure issue would be handled.
It wasn’t.
Only a very few words about Mozilla copping a deal.
Third world legal system meet third world MSM.
Sad to say you are correcto.what we have are propaganda outlet for the DEM party(MSNBC)& propaganda outlet for the GOP(FoxNews).
The whole rationalization is pure, unadulterated Bullshit. The Administration’s whole negotiating philosophy seems to be, “Hope for a head-shot by aiming for the belt-buckle, then claim a Bull’s Eye when we hit them in the foot.”
Even Nixon at his worst wasn’t as duplicitous as this crew because he never passed himself off as anything other than what he was.
DING DING! When I read the press release I KNEW that what it was. When Obama said in Arizona that this would help people, I wasn’t confident at all.
Since they gave him so much money during his campaign, there was no reason to twist their arms. After all, look at the Robo-Foreclosure Gate, you think anybody knows who own’s what? The Banks sure as hell don’t know and don’t care they just want the property back so they can sell it again and keep home prices up.
What home prices need to do is fall to the level of people can afford them. That will make Fannie and Freddie’s already worthless paper even more worthless. Now its possible that the Banks will be forced to take back those assets and then we’ll see just how far Big Business has a hold on our country.
The public will not tolerate another Bail Out.
What was the moral hazard of bailing out the financial institutions that blew up the world economy at 100 cents on the dollar, and keeping the same banking structure as existed before?
Oh right, there’s no moral hazard there, it absolutely had to be done…
They’re not “on the take”, they’re part of the crew!
The states actually took the lead in mortgage modifications. Much time and effort was put into these programs. The results: Within a year 60% of these mortgages were back in default. No matter how you change the loan the people will continue to default. It is a total waste of time and energy. More effort should go into getting these people out of their homes…and to get real buyers in.
Good point.
By the way, I publish a local online newspaper out here in the middle of the desert and I really need someone with serious AP certified proofreading skills to keep me in line. I can’t pay you anything, but evidently you will give your proofreading advice for free anyways.
One thing though…I’d appreciate it if you would be a bit nicer to me when you catch anything that doesn’t meet strict AP style requirements than you were to the person who wrote this post.
Rudeness = you’re a stupid shit.
David, I will, however, ask
who the fuck is Phyllis Caldwell?
“Just because we said we’d help 4 million people, and we’ve ended up with only 10% of them getting a permanent modification, that’s not our fault. It’s those damn people! They were the wrong kind!”
Same for the millions who don’t deserve a living wage, real access to health care, etc. Apparently, most Americans are the “wrong kind” aka the undeserving, unclean, uncouth, unworthy, …Look Away, Look Away, Look Away Dixieland.
Making Homes Affordable may be a program with good intentions, but we have not experienced any positive aspects of this federal program. Although banks have been bailed out with federal tax dollars, more American families are losing their homes. The people I know used to have good paying jobs and they were average middle class families- no boats, luxury items, etc.. They lost jobs and did not expect to be unemployed beyond the safety net they had established. The banks are using these programs as a empty promise of hope before they jump into a foreclosure on many homes.
As a hard working family of six, we have run into unexpected financial difficulties during the last three years. In over twenty years of marriage, my husband had never been out of work in the automotive industry. We were able to live a good life. There were no faraway vacations or new cars, but keeping a roof over our heads, feeding our children, and being able to go out to dinner once in while, kept us happy. We could not spend frivolously,nor did we have any desire to do so.
Fast forward: My husband gets laid off three times- each lay off is longer than the one before. He finally takes a position paying 50% less than the previous employment position. Health care costs have doubled. After plowing through emergency savings to keep the mortgage up to date, we began to live on credit cards – hoping things would improve. They still have not!
Now, we would appreciate a loan modification. We bring in 2,700 dollars a month, our fixed expenses are 2,800 dollars a month. We pay our expenses and literally spend zero on any not necessary items.
Yet, after filling out exhaustive paper work on FOUR separate occasions, there seems to always be a reason to delay or deny the process. The last round (after 18 months of applying), we were told that two 7 month stints of unemployment do not qualify for the program under government order. Isn’t this who the program is for? We have one home for our four children. It is our only asset. We have never been in financial distress before. My husband’s job is paying 50% of what he made when we qualified for this loan. We would be more than willing to sell the home and move somewhere less expensive, but after an exhaustive search, that doesn’t look promising. There are many homes for sale here -all well below the price they were bought for… We are hanging on by a thread. My husband is very depressed at this point.
Wells Fargo is somehow using this program for their own benefit, because it is not benefiting the people who need help.
All we are asking for is a a simple interest rate reduction and a forgiveness of mounting late fees. This program needs to take a more serious tone with banks who needed to take tarp money.