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All we are saying… is give HAMP a chance… All we are saying… is give HAMP a chance… All we are saying…

Come on, what’s wrong… sing it with me?

No?  Yeah, I understand… I’m not really up for singing about that subject yet either.

But the Treasury Department says they want to change all that… and they’re making some changes and are starting to sound pretty optimistic about the potential for greater success than in the past… and actually… in a distorted sort of way, I believe them this time.

Now, don’t start yelling at me about how HAMP sucks, or is not the answer for this or that… I know all that, silly… and I’ve never claimed it to be anything more than what it is.  From talking with homeowners just about every single day of the last two years, I’ve come to understand that there are reasons… and perfectly acceptable reasons, I should add… for people to want to get their loans modified, even though I readily agree that at best it is a Band Aid, and certainly not any sort of real solution.

I have to admit something here… if my wife and I were at risk of foreclosure today… even knowing what I know… I’d probably chose a modification above all of the other available options… the ones available today… for mine and my wife’s needs… I think… I’m pretty sure, anyway.  You never really know the answer to this sort of question until you have to ask it of yourself in real life.  But I really think I would vote to modify.

Why?  It’s simple, really.  For one thing, our daughter is 15 years old, and we probably wouldn’t want to do anything to shake the rug that’s under her high school and after school life at the moment.  And two… I’m really tired and after 20 years of living where we live, I just don’t want to have to clean out our garage this year or even next year, for that matter.  I mean, underwater, schunderwater… this blogging 24/7 thing is exhausting and besides that… you haven’t seen my garage, so I’d withhold judgment if I were you.

Now, once our daughter was off to college, assuming that quaint little tradition is still possible three years from now, we’d walk away from a mortgage underwater by 50% faster than you could say, “strategic default”.  We wouldn’t need to give such a move more than a few hours worth of thought to figure out that paying twice as much as a house is worth is stupid… with a capital “STUPID”.  And, although I realize that prices might return to 2006 levels by something like… well, NEVER… there’s no reason to just hang around waiting for that to happen.

Assets never magically re-inflate themselves, and with the way this administration has handled the financial crisis, there’s no reason to believe that I’ll still be around when the American middle class feels anywhere near prosperous again.

Other people have their own reasons to want to stick a Band Aid on their mortgage situation, and I’ve heard them all, I think.  Grandparents that don’t want to move just because they’re in their 70s and don’t want to…  because they don’t want to.  You ever try to argue with someone in his or her 70s whose made up their mind about something?  Why, you’d have better luck trying to get paint to peel by yelling at it.  It just ain’t gonna’ work, in most cases anyway.

So anyway… there’s a new name being bantered about town… and they call her HAMP’s “architect”.

The name of “HAMP’s architect” is Laurie Maggiano, although up until now it’s not hard to see why that moniker was better kept under wraps.  More technically speaking, she is the Director of Policy at the Homeowner Preservation Office inside the Department of the U.S. Treasury.  Yep, this mess is… at least in some ways, and I’m not trying to be rude here… her fault.  And Geithner’s too, of course… let’s not overlook Transparency Tim when dealing out some blame for HAMP’s failure.  He’s first, second, and third in line when serving up the HAMP blame-burgers.

It’s funny, but Tim Geithner’s about the only guy I can think of at the moment that I wouldn’t care whether he got a fair trial… you could just lock him up for a few years and I don’t think the U.S. Constitution would even cross my mind.

I mean, I think you have to give the Oklahoma Bomber a fair trial, but Geithner… well, not so much.  Bye-bye Tim.  You know… come to think of it… you could send Ben Bernanke up the river with about a ten-minute trial and I’d be just fine with that, too.  Waterboarding for two?  Absolutely, and I might even go pay-per-view on something like that… have a few people over… serve those little cocktail weenies with dough wrapped around them… some ginger ale… you know, the whole shebang.

Well, Treasury now says that they have been cooking up several new enhancements to the Home Affordable Modification Program designed to address the needs of homeowners, and they’ve already begun implementing some of them. Maggiano says all that HAMP now needs is a chance to succeed.

Nope… I’m just not feeling any sympathy for that position quite yet either, Laurie.  What are these so-called “enhancements” you speak of, anyway?

Going Up?

First off… as of February 1st, Treasury has a new escalation program.  The idea is to provide a place for borrowers to go when denied a loan modification or when they’ve been jerked around incessantly by their servicer.  Now, they’ll be able to raise their concerns directly with Treasury Department employees, assuming they put in enough phone lines.

Yeah, when you say it like that it does start to sound kind of fun, I suppose.  I’m sure those Treasury employees are a real treat when you’re at risk of losing your home and need someone to take action.

Also, the Treasury Department 1has established two call centers, one in Dallas, located at the Fannie Mae HAMP Solution Center, where trained personnel can help borrowers get explanations to their questions, and that’s actually making me laugh while I’m typing this… LMAO.  The Fannie Mae HAMP Solution Center?

That’s about like naming a flight school, the 9-11 Academy.  Or, maybe the McDonald’s Healthy Diet Center, or the U.S. Army’s Efficiency Center… would be better examples?

Okay, what else you got?

How about this one… each HAMP servicer is now required to have their own escalation teams that report things like the number of complaints and how they were handled directly to Treasury.

Okay, not bad… keep going…

Maggiano was recruited in 1999, by the Department of Housing and Urban Development.  She designed and implemented the Federal Housing Administration’s loss-mitigation program currently in place, a program that was widely thought of as a failure for the first two years, but in year three the program started reporting more modifications than foreclosures, and today it’s referred to as a success.

Maggiano claims that in the third year of HAMP, which begins this spring, servicers will be pushed to do better.  Maggiano made her comments at a recent Mortgage Bankers Association servicing conference held in Texas. Here’s some of what she had to say:

“You won’t see any major new programs coming out.  (Applause!) We may tweak around the edges, but our primary objective in 2011 is excellence in the program we have. You have changed your systems at great agony. But we are ready to execute and execute really, really well. Borrowers have been jacked around the last few years. We need to improve that.”

Actually, Laurie… may I call you Laurie?  It’s better than the other names for you that I’m considering right now, take my word for that.  Actually, what you and yours needed to do in regards to your last two sentences was to not “jack around,” as you so eloquently phrased it, the borrowers in the first place, and if some amount of “jacking around” was inevitable, then you needed to stop said “jacking around” as soon as you became aware of it, and then punish, or at the very least admonish, those that were doing it.

And as far as the servicers enduring anything even remotely resembling “great agony,” I can only offer that you would be doing this administration a great service if you were to shut the hell up about whatever it is that you’re talking about because not only do you sound like an insensitive babbling fool, but you’re not helping improve anyone’s perception of the administration either.  And, believe me when I say that you guys could use all the improved perception you can lay your hands on at this point.

Laurie, as “the architect” of the HAMP program, are you aware that these servicers you’re pandering to at the Mortgage Bankers Association conference, have been nothing short of torturing America’s homeowners relentlessly, mercilessly, and without rhyme or reason for three straight years?

Do you realize that I personally have spoken to thousands of homeowners… normally peaceable individuals who care deeply about their fellow man, and that as a result of their treatment at the hands of your servicers, would likely stand up and cheer upon learning that any of the major servicers’ main facilities had been completely destroyed by an incendiary device… and I think that would hold true even if it were to happen during the work day.  I realize that sounds harsh, and I assure you that I wouldn’t have written it here if I didn’t believe it to be quite literally the truth of the matter.

What the servicers have done to America’s homeowners is criminal, even if the law doesn’t ever view it as such, and that’s to say nothing of their role in not only preventing any sort of economic recovery, but in deepening what was already the worst economic downturn in 70 years.  Did they undergo any sort of “great agony?”  Lord, I’d like to think so, but you and I… and at this point just about everyone else involved knows they didn’t endure any such thing.  In fact, they’ve done nothing but make more money than ever before, hand over fist, as the saying goes.

One more thing, before I return to your drive towards “excellence”… does it bother you in the least to realize that the servicers have not gotten any better at modifying loans even though they’ve been ostensibly trying to do so for at least the last two years?  Does that bother you at all?

I mean to say… how it such a thing even possible?  If I were to force you to sit through a one hour class each day at which they taught people to speak French, do you think it would even be possible that you could not be any better at speaking French two years later?  Or, how about a daily one-hour golf lesson?  Could you possibly attend that learning experience and not be any better at golf after 24 months straight?

Not a chance… yet the servicers, who have been modifying loans for more than two straight years… every day… pretty much day in and day out… and they haven’t changed a bit… not one iota.  Oh sure… the HAMP program has improved somewhat, but the servicers have not.  They’re still “jacking around” homeowners like it was their collective first day on the job.

Another improvement that Treasury claims is on the way involves the HAMP secret NPV test.

The acronym “NPV” stands for Net Present Value, and normally an NPV calculation would be fairly easy to understand… many people think of it as a calculation used to determine the “time value of money”.  But, in the case of HAMP’s NPV test, there’s a whole lot more involved and Treasury has be steadfast in their refusal to release the details of the formula.

A positive NPV result, means that the investor that owns the loan would come out ahead financially by modifying the loan, as opposed to foreclosing, and therefore the servicer should agree to modify.

Because of the Dodd-Frank Act, servicers will now be required to provide borrowers every input that went into their NPV test when they deny HAMP loan modifications due to negative net-present values.  And if the borrower finds that there are errors in those inputs, they’ll be able to call the Treasury’s new call center and… well, we’ll have to see how that whole thing pans out before commenting further.  I’ve called many government phone numbers over the last couple of years and let’s just say the experience has to-date been underwhelming.

Also… it’s important to note that even under Dodd-Frank’s new requirement, Treasury is not required to release the formula in its entirety, rather they are only required to release components of the formula they do not consider proprietary.  So, although this is a step in the right direction, it’s a far cry from what one would think of as being transparent.

According to Maggiano…

“If a borrower can prove income was wrong, a ZIP was wrong, they have ability to appeal for reevaluation.  Call center employees can short circuit these appeals if they see it would be negative anyway.”

And, for the record, I have no idea what the second sentence in that preceding statement means.  They can short circuit something if they see it would be negative anyway?  Huh?

Treasury is also said, now by sometime in May, to be making available an online NPV calculator that will be available to both consumers and servicers, but if a borrower finds errors causing the test’s outcome, he or she must pay the servicer $200 to re-run the test, according to Maggiano.

So, let’s just let our imaginations go for a moment, and think what this new process will look like in real life.  Someone will enter their personal information into the online calculator… the servicer will say… “I’m sorry, but you’ve failed the NPV,” as is their practice today.  Then the homeowner will ask that the servicer send them the inputs used in the NPV calculation, and if lucky, the homeowner will receive all of the non-proprietary components of the formula.  Then if they discover some aspect of the calculation was incorrect, they can pay the servicer $200 to re-run the test with the corrected information… and then the servicer will call and say, “I’m sorry, but you’ve failed the NPV test yet again… pack your things, it’s time to go.”

Does that seem about right, Laurie?  Why am I asking you?  You wouldn’t have any idea, now would you?

I don’t know about the rest of the people reading this, but I’d prefer to have my own NPV test run so I can compare it to the one run by the Mystery Date Calculator that still won’t show me what’s behind Door #3.  But that’s just me…

Maggiano says that she believes that, combined with some $7 billion in unemployment assistance that is being made available through the “Hardest Hit” funding, overall the HAMP program will be a turn around story.  She also pointed out some of the current stats about loan modifications, such as the fact that in-house modifications are outnumbering HAMP mods by four to one, and said that in 2008, 60% of in-house modifications became 60-days late six months later, but in 2010 that percentage fell to 21%.

Okay, look… I can’t believe I’m still responding to this 60% re-default stat from 2008, but I guess I am.  In 2008, 60% of the loan modifications resulted in payments that were higher than before the loans were modified… again… 60% of loan modifications in 2008 resulted in higher payments than before the loans were modified.  So, is it any surprise than 60% of those modified loans became 60 days delinquent within six months?

If the payment on a loan is made higher, by the way, then it’s not a “loan modification”.  Loan modifications make payments go down… period.  Never up… only down.   I realize that technically the loan is being “modified” even when the payment is increased, but if a payment on a loan is raised to a higher amount, it should not be referred to as a loan modification or lumped in with statistics about loan modifications.  If the payment is increased it should be called a “payment increase”.  And if you have any questions about that, please get yourself a Dictionary of the English Language and study up.

And please… let’s stop throwing around that garbage re-default statistic from 2008 that was thrown around by the banks in an effort to prove that loan modifications didn’t work.  It was a stupid point from the start.

Of course loan modifications “work,” it’s just a matter of how much you modify… or, in other words “lower” the monthly payment.  If you reduced someone’s payment to $1 a month it would “work,” right?  No one would re-default on a payment of $1 a month.  So, enough with the junk stats, damn it… it’s really starting to give me a headache and the next time I hear the 2008 loan modification re-default statistic used to make a point, I may just say “okie dokie” to whatever point is being made and move on to the next topic.

In Conclusion…

I’ve said this before, but I might as well say it again… HAMP started getting better last June when Treasury changed the rules for getting a trial modification to require the borrower’s income be documented before a trial modification is granted.  In fact, prior to writing this, I asked several attorneys who see loans modified every single day, that in contrast to what they were experiencing a year ago, today’s trial modifications almost always become permanent ones.

But, don’t misunderstand me… HAMP improving doesn’t mean that homeowners are getting any better at dealing with servicers when attempting to get their loans modified.  To say the process is cumbersome, overwhelming, unpleasant, fraught with lies and traps of quicksand, stressful, and astoundingly frustrating, represents a monumental understatement.

Servicers are still working under incentives that ensure maximal profits only by foreclosing.  They are not a fiduciary to the loan and therefore should not be permitted to masquerade as the loan’s owner for the purposes of negotiating a modification of the contract’s existing terms.

Okay, but they are, and so it is what it is…

From what I see and hear about every day, the best advice I think I could offer a homeowner these days is to run a REST Report, send it to the servicer… and then never give up… and should you reach the point at which you can’t take it anymore, hire an ethical and experienced law firm to keep fighting for you.

If the REST Report shows a positive NPV, and/or that you qualify for HAMP, and assuming that you can document your income and its sufficient to make the modified payment… then you do qualify and from what I see happening today, ultimately you’ll get your loan modified.  It won’t be pleasant, mind you, but it’s highly likely that it’ll get done assuming you never throw in the towel.

And so I do believe that things can only improve from here… Laurie-the-Architect, as callous and misguided as she may appear to be, does seem to be committed to improving various aspects of the program, and I would have to admit that some of Treasury’s changes certainly won’t make things worse.

So, all told… the forecast for the coming year in loan modifications, while not 85 degrees, sunny and balmy, won’t have the same perpetual storm front and tsunami warning that homeowners have consistently lived under for most of the last two years and then some.  And that’s an improvement… considering from whence we’ve come.

Mandelman out.

Still stuck in loan mod hell?  Write and tell me your story… mandelman@mac.com.  I’m truly interested to know what you’re dealing with… and want to help in any way I can.