So here’s a major breakthrough in the foreclosure crisis and in particular the failed HAMP program. It doesn’t mean anything’s going to happen, but it means a significant chunk of the majority caucus in the Senate wants a radical overhaul of HAMP.
Sen. Robert Menendez organized a total of 18 Democratic Senators in writing a letter to Treasury Secretary Tim Geithner, slamming HAMP and calling for very significant changes to the program, to try and make it functional again. The Senators signing the letter include both Senators from New York, home of the major banks and financial institutions involved in the foreclosure crisis, as well as:
Robert Menendez (D-NJ), Al Franken (D-MN), Patrick Leahy (D-VT), Sherrod Brown (D-OH), Kirsten Gillibrand (D-NY), Debbie Stabenow (D-MI), Bernard Sanders (I-VT), Frank Lautenberg (D-NJ), Daniel Akaka (D-HI), Carl Levin (D-MI), Tom Udall (D-NM), Sheldon Whitehouse (D-RI), Benjamin Cardin (D-MD), Mark Begich (D-AK), Maria Cantwell (D-WA), Jeanne Shaheen (D-NH), Charles Schumer (D-NY), Jeff Merkley (D-OR).
To me, the letter reads like these Senators have had it. Had it from hearing from constituents who tell them horror stories, had it with the Treasury’s cloying comments that HAMP is successful, had it with the failure that is dragging down liberalism and the entire Democratic Party. They seem particularly exercised that Treasury has done absolutely nothing to enforce existing law under the program.
The “robo-signing” is directly attributable to banks and servicers not doing proper due diligence, which is inexcusable when dealing with a matter as monumental as the seizure of a family’s home. But the more important point is that if many banks and servicers are not handling even basic foreclosure procedures correctly, it is likely that many are also not correctly evaluating homeowners for mortgage modifications. We ask that the Treasury Department hold banks and servicers accountable with a significantly more thorough review process than Treasury has implemented thus far. For example, too often the mortgage modification appeals process consists of the government simply repeating the unsupported assertions of banks and mortgage servicers about homeowners not being eligible for a modification.
While some progress has been made, it is clear that the Home Affordable Modification Program is neither working as well as intended nor reaching the desired number of homeowners.
The letter contrasts the claims of as much as 7-9 million borrowers using HAMP for modifications, with the reality of just 495,000 permanent mods and 729,000 rejections. They also note that just 1% of the money allocated for HAMP has been spent, 18 months after the program was instituted. And they add, “it is even more sobering to continually hear from constituents who owe more than their house is worth and can’t get a mortgage modification or refinance from their bank. Countless constituents tell us stories of being stonewalled by banks for very long periods of time; of not being told the reasons for the rejection of their modification request; of significant delays caused by banks losing paperwork; or of trial modifications cancelled with no rationale. We cannot let this continue.”
Here are the steps that they want Treasury to take immediately. Importantly, Treasury would not need legislation to take any of these steps; they could implement all of it without having to go through Congress.
1) Actually enforce the program. There have been no sanctions for any servicer who violates HAMP. You cannot expect the servicers to correct their mistakes if they have no good reason to do so.
2) Create an Office of the Homeowner Advocate. This is something Al Franken’s been working on for some time. It would create a legitimate appeals process for HAMP, with an independent advocate who can mediate disputes and take complaints. It’s no different from having a consumer advocate at CFPB watching over the banks.
3) Automatic conversion. This is very simple: “If a homeowner successfully completes a trial modification, they should be automatically extended a permanent modification.” Treasury could just mandate that. It would end this horror of people waiting a year or more to hear about their modifications, would cancel red tape, and would add some much-needed fairness to the system.
4) Revise eligibility standards: The Senators want unemployment insurance included in the income test when determining eligibility. They also want widows and surviving children, who may not be on the mortgage note but who stand to inherit the mortgage to be able to get a modification.
5) More transparency: Homeowners should be able to see all the documents surrounding their modification, and the denial claims made.
6) Net Present Value: Treasury has come up with this Net Present Value test to determine eligibility for a modification, but has never made it public. They promise to release it by February 2011, but the Senators want it out in the public now, so homeowners can see why under the formula they have been denied modifications.
None of these would require any Congressional action, but the Senators make clear that Treasury hasn’t asked them to take any action to improve the program, either. They cite a recent meeting between Tim Geithner and homeowner advocates, where Geithner said “there are legislative guidelines that can hinder [Treasury] on doing anything.” The Senators don’t buy it, and ask for legislative suggestions from the Treasury Secretary.
The bottom line is this: these Senators are pissed off. They want to see some changes immediately. Servicers are abusing their constituents and this represents an obstacle to their continued employment, to say nothing of them actually possibly caring about this abuse.
This is one of a couple developments today. The Federal Reserve has called for a new round of stress tests, just a day after the Congressional Oversight Panel called for this. At least some element of the ruling class has begun to take these problems seriously. Now’s the time to push even more, so the abusers don’t get away with this behavior.




12 Comments

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While welcome, I don’t feel like these are major changes. Cramdown would be a major change.
Also, make the modification a permanent 30 year, fixed rate mortgage based on current market value, not the original inflated value. It would help those underwater on their mortgages.
3 things:
Did the above-listed Senators just realize what a failure HAMP was in the last few days?
Is there no irony in the abysmal messaging/tactics/strategy of Democrats, and the above-listed Senators in particular, that a failed HAMP would, you know, harm their majority (and Democrats chances overall) in the midterms?
When will Democrats at all levels of DC take that determined walk up the hill and poke the President about his team(s)?
Thanks, David. Fingers crossed.
Hope you are not holding your breath folks….It’s another letter from the Democrats…
If they can’t govern on behalf of the people it won’t bother me none if they are all out on their asses in 2012.
Before you do anything, get the thing that claims you should pay them for your loan to send you proof. They can’t and won’t. They can’t because they don’t have the notes any more, they destroyed them. They won’t because it is an admission of guilt.
Ask SEIU how that “Show us the note” is going. Has anyone seen their note yet?
No.
Through the bums out in the street…let them eat cake…
Almost all home buyers have equity down to bring from their first home…the pool of qualified home buyers is shrinking rapidly as the home values continue spiraling down underwater.
There may not be a recovery ever from this jobless recovery and European Union is facing an earthquake of bond defaults forcing the magic equities markets down.
Let’s face it the Bloated Financial sector has broken this economic model while a new one is not on the horizon so they are kicking the can down the road. P.S. China is fighting high inflation. And the Fed is QEing the bond market. Good thing our base economy is alive and well for a while longer.
The Patheticrats to the rescue
Excellent comment, excellent. Who is going to do the modifying if no one knows who has the Note. Which MBS will step up to the plate and tell us they are in the real estate business.
What ordinary person knows what HAMP means? Liberals and Democrats need to come up with ways to reference their accomplishments without making it them sound like “just another government program.”
I mean I’m all for the DREAM act too, but how are people who don’t hang out on political blogs supposed to know what it is and support it.
And don’t even get me started on the “Economic Stimulus.” How about calling it the ” Jobs and Tax Cut Act?” DUH! HELLO!
Where the HE$$ is your Senator? Feinstein the Corporatist? Boxer? Reid?
We expect the Rethugs, but why not the above three among others? Get rid of the corporatist democrats!
My Senators Feinstein and Boxer are not even on the list! I expect the Corporatist Feinstein to bug out, but what about Boxer?!!
If your Senator is not on the list ask them why not! Too busy working on making Obama a better Republican?
big brother @6
“…the pool of qualified home buyers is shrinking rapidly as the home values continue shrinking down…”
an interesting observation.
is it not the case that “move up” home buying was an important part of the residential housing market?
what will be the impact on that market of millions of home owners whose houses cannot be sold because the amount owed on the mortgages is higher than the amount the house can be sold for.
keep in mind, i’m not talking here about mortgages in default; those are several million MORE homeowners (whose future credit and hence purchasing power, is being ruined by foreclosure and bankruptcy so the loan servicers and banks can make more money now.
the current situation seems to be trading the future of the residential housing market (and the millions it employs) for present corporate gain -
a very, very bad deal for the nation.