HAMP, FAILING OR JUST MISUNDERSTOOD?

Home affordability modification Program failing horribly this 75 billion dollar program was planned to help 5 million home owners and it has not. What happened? What is HAMP discussed here.

The $75 billion Home Affordability Modification Program designed by the Obama Administration to help struggling homeowners by lowering borrowers’ monthly payments with mortgage rate reductions and extended loan terms. HAMP originally promised to help four to five million homeowners.[4]

TOTALS OF A REPORT HAMP MODIFICATION ACTIVITY BY SERVICER.
This program report through July 2010.
Total estimated eligible 60+ day delinquent borrowers 1,456,363
Trial Plan offers extended 1,553,925
All HAMP trials started 1,307,489
Active trial modifications 255,934
Permanent modifications 421,804
[5]

This site at https://dumpmycreditors.wordpress.com/2010/11/17/hamp-failing-or-just-misunderstood/

LOCAL PRACTITIONER DISCUSSION
Terry Bankert a Flint Bankruptcy Attorney attended a professional workshop , Birch Run 11/17/10, on the problems of HAMP (Home Affordable Modification Program). This Huffington article was the foundation of the discussion that “the best in the field” made top flight comments and recommendation. Here it is morphed with other material to inform. [trb] This article is SEO to explain this, Terry Bankert a Flint Bankruptcy Lawyer 810-235-1970

BANKS HARRASS HOME OWNER

Wells Fargo put an Illinois woman though a “nightmare of harassment, frustration, and relentless stress” when she tried to apply for a mortgage modification under the Obama administration’s Home Affordable Modification Program, according to a lawsuit filed in federal court this week. From the Huffington Post updated story 11-12-2010.
http://www.huffingtonpost.com/2010/11/12/wells-fargo-makes-it-near_n_782634.html
[1]

The Mortgage default risk is no longer limited to the “subprime” sector. Delinquencies on mortgages held or sold by Freddie Mac and fannie Mae have also mushroomed. Fannie Mae delinquencies have increased to 4.72 percent from 1.72 percent a year ago. Delinquencies in Freddie Mac’s portfolio increased to 3.72 percent from only 1.52 percent last year.[3]

WHAT IS HAMP

On March 4, 2009, the U.S. Department of the Treasury (Treasury) announced details of the Home Affordable Modification program (HAMP) as part of the Making Home Affordable Program. HAMP is a loan modification program designed to reduce delinquent and at-risk borrowers’ monthly mortgage payments. Freddie Mac is pleased to play a leadership role by implementing this program.[2]

[This program]…designed to encourage lender to modify mortgages in order to reduce monthly mortgage payments for borrows. Under the program sevicers and lenders would receive compensation from the Department of the treasury for agreeing to modify mortgages. [3]

HAMP FOR THOSE 31 DAYS DELINQUENT

HAMP is effective immediately for mortgages originated on or prior to January 1, 2009, and will expire on December 31, 2012. Servicers must solicit eligible borrowers who are 31 or more days delinquent for a modification under HAMP, but cannot solicit borrowers for this program who are current or less than 31 days delinquent.[2]
HAMP establishes a step by step process to reduce payments.[summarized here]
1.Is the debtor eligible?
2.Calculate the debtors gross monthly income
3.Capitalize the arrearage
4.Reduce the interest rate to reach the target payment
5.Re-amortize the loan
6.Principal forbearance
7.Compensation to the lender and Service [3]

HAMP APPLICATION CAN CAUSE SOME TO LOSE THEIR HOME
It’s a familiar nightmare to many lured by HAMP’s promise of reduced monthly payments. More people have been bounced from the program than have received “permanent” five-year modifications, and federal auditors say the program sometimes actually causes borrowers to lose their homes.[1]

[Upon receiving a request from a servicer]..even where the information is unidentified the service can effect a modification …for a three-month trial period….If the borrowed makes the three payments during this 90 day trial period and submits all the documentation the modification become permanent.[3]

BOGUS BANK EXPLAINATIONS BOUNCES HAMP?
Therese Crowley of Deerfield, Ill., facing reduced income because of health problems and less demand for her broker services, first asked for a HAMP application in April 2009. Wells Fargo allegedly dragged its feet for four months before it sent one along, then denied the application in October and gave her bogus explanations when she called to complain. [1]

A TRAIL OF TEARS
In November, Wells Fargo told Crowley to apply again, then denied her again the following month. A week later she called the bank and spoke to a woman named Paula, who “determined that Wells Fargo had erroneously overstated Crowley’s income by $2,800,” the complaint alleges. “Also, the file erroneously indicated that Crowley owed $2,381.07 per month on a credit card debt which in fact had been paid off in 2002. Paula agreed that with the correct information (information that Wells Fargo had during this entire process), in her opinion Crowley qualified for a HAMP loan modification.”
Crowley applied again and was denied again in March. She called to complain, and was once again told she qualified. Then Wells Fargo allegedly put her in a “special forbearance period” during which she made reduced payments for three months while continuing to pursue a HAMP modification.[1]

CATCH ALL REJECTION JUSTIFICATION NPV
One day, she’d be told she didn’t qualify because of her income, another she’d be told she failed HAMP’s opaque “Net Present Value” test.[1]

WHO KNEW?
In August, she allegedly received the following from a Wells Fargo executive: “As indicated, your income doesn’t have anything to do with why you were actually denied for HAMP. You were denied for Net Present Value, at the time of the denial for NPV, we had been instructed to not use that as the reason because we were not prepared to explain Net Present Value denials.” [1]

40% MAKE IT

Crowley’s putative class action complaint is just one of many moving through courts across the country reflecting widespread frustration with HAMP. President Obama said the program would allow three to four million homeowners to modify their mortgages and keep their homes by 2012. So far, 466,708 are in active permanent modifications, while more than 700,000 have had their modifications canceled.[1]

The bankruptcy community has been disappointed with the failure of the Bankruptcy Code to deal with the mortgage payments that are out of reach of financially strapped debtors. Debtor attorneys should at least attempt to work servicers to modify mortgages under the HAMP program while a debtor is in a chapter 13 case. If so, many debtors might actually obtain a permanent modification, a family home can be saved, and a mortgage creditor can avoid a crushing loss.[3]

MAGIC NUMBER 31% SAVES $500 PER MONTH TO HOME OWNER
Eligible borrowers are supposed to have their monthly payments reduced to 31 percent of their monthly income, usually saving $500 a month. If they make the reduced payments for three months, the modification is supposed to become permanent.[1]

BANK MUM, EMAIL LYING?
Wells Fargo declined to comment on Crowley’s HAMP lawsuit (banks generally don’t discuss individual customers) but said in an email to HuffPost that 92 percent of its mortgage customers are current in their payments as of the second quarter of 2010 and that less than two percent of its owner-occupied servicing portfolio has gone to foreclosure sale on an annual basis.[1]

AVERAGE LOSS TO BANK $54,000
“Wells Fargo has led the real estate lending industry with more than $3.4 billion in principal forgiveness for customers facing financial hardship, permanently erasing on average 13 percent of the principal owed, which equals more than $54,000 per loan for more than 65,000 customers,” said a spokeswoman. [1]

FORECLOSURE
“Foreclosure is a last resort after all available options for maintaining homeownership have been exhausted.”[1]

PERGATORY
As for Crowley, she “hangs in limbo somewhere between loan modification and foreclosure,” according to the lawsuit.[1]

HARRASSMENT,FRUSTRATION, RELENTLESS STRESS, THANK YOU HAMP
“I am not just fighting for myself,” said Crowley in a statement. “I want to make sure other people won’t have to endure the same nightmare of harassment, frustration, and relentless stress that I have suffered.” [1]

An attorney assisting a borrower struggling financially and seeking relief under chapter 13 should examine the debtors mortgage to determine whether a HAMP modification might be possible. Obviously if a debtor’s mortgage payments can be reduced, chapter 13 becomes feasible. By performing an initial HAMP calculation an attorney can identify whether a mortgage payment target is possible……documenting the information necessary to support a HAMP modification is a task often beyond most debtors….The official document known as a Request for Modification and Affidavit (RMA) is a three page document that makes it relatively simple for a chapter 13 debtor to request a modification. The supporting documents are more challenging.[3]

[At the end of the day]…the lenders net present value analysis of the prospective modification vis a vis foreclosure. Simply stated the lender must make a mathematical determination as to whether there there is a greater value to the loan as modified than there is pursuing a forclosure.[3]…from all appearance the NPV test is based on faith.[3]

[1]
http://www.huffingtonpost.com/2010/11/12/wells-fargo-makes-it-near_n_782634.html

[trb]
This cite and CAP headlines by Terry Bankert 1000 Beach St, Flint MI 48503, 810-235-1970, http://attorneybankert.com

[2]
http://www.freddiemac.com/singlefamily/service/mha_modification.html

[3]
HAMP and your Chapter 13 practice ABI Journal 2/12/2010 article by Henry E.Hildebrand III Office of Chapter 13 Trustee Nashville Tenn. Hank13@ch13nsh.com

[4]
http://agentgenius.com/real-estate-news-events/home-affordability-modification-program-failing-horribly/
[5]
Making Home Affordable Program Servicer Report through July 2010

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