Seth Wheeler is a senior adviser to the US Treasury Department and spoke recently at the American Securitization Forum in DC. Of note in his comments was a switch in language used to describe the Obama Administration’s goals.
For example, he one of the main goals is to fix the mortgage market. In another place, he said the focus of the Administration is shifting away from modifications because getting borrowers into the Home Affordable Modification Program (HAMP) is not always the best solution.
Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve [housing] stability. Modifications are only for a certain subset of distressed homeowners. HousingWire.com
So What’s the Solution Then?
So if modifications are the right way for most people (which I’ve been saying for months)…what is?
Well, according to the administration…it’s their foreclosure alternative program – the Home Affordable Foreclosure Alternatives program, or HAFA.
See our article on HAFA for more info, but the short version is that the program focuses on short sales and deeds in lieu rather than modifications and refinances.
Hold the Phone!
So that means you’ll lose your home rather than keep living in it because at least it keeps you from going through foreclosure.
I guess the financial reality of the situation has finally hit the administration. They’ve finally figured out that you can’t simply modify mortgages ad infinitum to keep people in their homes. So they’re incentivizing servicers to speed up and accept short sales and deeds in lieu.
Kicking the Can down the Road
All they’re really doing, though, is kicking the can down the road and putting the problem in the hands of the banks and their balance sheets rather than leaving it with homeowners.
I guess they figure that if they dump the problem in the lap of people with a profit motive rather than being motivated by an emotional desire to keep their home, the problem will get taken care of more quickly and the markets can normalize themselves?
Gee…sounds like the market economists have won…also sounds like we’re heading again for the REIC days of the 90s.
You’ve Been Betrayed
It’s easy to think you’ve been betrayed if you’ve been trying to get a HAMP mod or if you bought into the HAMP-mania from the start. But this is truly just fiscal reality coming home to roost. If you can’t pay your mortgage, why would you be allowed to keep your home?
It’s worked that way for a long, long time…and the administration tried to change economic rules and it didn’t work.
According to Colleen Hernandez, CEO of the Homeownership Preservation Foundation,
We are seeing middle class unemployed, who are unused to financial hardship. They are slow to apply for benefits, slow to pick up that a job pays less, and slow to take up the new world order. They can’t keep their home, but they can avoid foreclosure. HousingWire.com
And this…from the CEO of a nonprofit that partners with local governments, borrowers and lenders to facilitate foreclosure alternatives and promote homeownership.
Wow! Kind of mean and belittling if you ask me?
According to the same Housingwire.com article
“HAMP can not be seen as the only solution,” said Doug Potolsky, a senior vice president at Chase Home Finance. “Chase has aggressive programs that deal with loans that fail HAMP.”
Clearly, he said, other solutions are necessary as, in his department, HAMP is not particularly successful. Nearly one-third of Chase HAMP trial modifications result in no repayment, and only 20% ever reach permanent modification status, Potolsky said.
HAMP servicers completed a total 66,465 permanent modifications through December, according to the latest Treasury report.
“HAMP is not perfect, but improving. I think as a servicer we have to work on building our own [modification] program.” In terms of trying to follow the administrations directive to fix mortgage markets, Potolsky added that option ARM mortgages are particularly challenging to modify.
So, there you go…you feel better, don’t you? You’ve avoided foreclosure…congratulations…now get busy finding your next home with credit that’s marginally better (if at all) than if you would’ve went through a complete foreclosure. Check out our Foreclosure and Your Credit Score article for more info…
February 11th, 2010 at 8:59 am
so does this mean that the current trial period payment plan that i am in is not going to convert to a permanent loan mod?
I am now on payment number 6 and when I call they just tell me they can no longer see my loan and that it is now with the final loan officer and Soon i should have a fed ex package with the completed loan. Well i did get a fed ex package but it only said they have not got 4 of my six payments?? I had to go to a local B.O.A branch and they had my payment history sent to me by fax. It showes all of my payments on it and that they are also all on time? I can not believe that i have to mail them back their own systems notes showing that i have made them all on time?
I just can not even begin to think of them saying NO and that now the past due balance is due in full. I think if this happens it is just a setup
Please help me understand this better.
Thanks
Rob
Todd Temaat Reply:
February 13th, 2010 at 12:18 pm
This doesn’t change any plans that are currently in the modification or trial period. Any agreements that have been made should not be changed…this only affects packages that no decision has been made on yet.
After a little more research, I found something definitive. According to this training guide, the HAFA short sale and dee in lieu program doesn’t begin until April 5, 2010. Look at page 5.
John Hart Reply:
February 18th, 2010 at 7:18 am
Yes, Rob, but directly under that is a sub-bullet which says that a service may implement HAFA before that date if they are able to meet the reporting requirements.
February 11th, 2010 at 10:13 am
I can’t believe what I’m reading. Loose my home and rent somewhere else? I bought my home because, after the first few years, the monthly payment would be less than if I rented. When I rent am I not just paying someone else s mortgage + a profit for them. Yes, I am unemployed at this time but I am looking new employment.
I did not leave my last job voluntarily, the companies operating officers decided it was necessary to lay off employees in order to maintain investors profitability. So, because they don’t want accept a smaller return on their investment until this economy picks up, I and hundreds of my fellow employees, 15% in the last quarter of 2009, were laid off. I had been on the job for 24+ years with above average reviews every year. That company has recently announced another set of lay offs until they reach an additional 11% reduction in force in the first half of 2010.
They talk of tightening your belt to get through this. How about these investors tightening their belts a few notches and not put this burden on those who actually DO ALL THE WORK to make them their money!
As I see it it’s all about GREED and their quest for avarice.
Todd Temaat Reply:
February 13th, 2010 at 12:12 pm
Thanks for commenting. I can’t begin to imagine what you must be going through because I haven’t been there, thank God. And I totally agree with your buying vs. renting comments. However, a landlord wouldn’t let you live in their house without paying payments…why should a lender?
I’m not trying to to say the banks are in the right and have done everything above board because that’s certainly not always the case. And I don’t think you, or most other people in similar situations, “deserve” to lose your homes. But if you can’t pay the payments and don’t qualify for a workout from your lender, regardless of your reason for being in that situation, you should be foreclosed upon. Otherwise, the whole financial system comes tumbling down because no one would feel a sense of responsibility about paying their bills.
You’re free to disagree, of course…and I welcome your comments. I wish you luck in your job search. Hopefully you’ll find a job and won’t have to worry about foreclosure any more.
February 18th, 2010 at 8:51 am
I think that by taking this seriously you pretty much have undermined yourself and your whole effort. Your job is to help, not to hurt.
If you want to organize an effort to have this guy have his hand’s slapped, OK. But, if you think Barack is behind this “take” on HAMP you are mistaken. Why do I know that and you don’t? (I have studied 2,300 years of Western political economy, but this is your web site, not mine.) I’m not responsible.
Barack is trying to bring this country back on line with Washington, Lincoln & FDR and still “live to tell about it”. I doubt if you were in his position you would have done even that which he already has done…which is 10 times more than his destructive predecessor.
I wonder why you don’t know he is going to continue on his path even if he leaves the White House in a box. Don’t distort what is happening and what those who are owned by the corporations and banks are trying to get him to do. Tune in to what he says. Tune the rest out! Try supporting our country. Because we really have a President now, there is some cause to do so.
May 13th, 2010 at 12:12 am
Wow, why should I be able to keep my home without paying my mortgage? Let me see, I have adopted my 2 small grandchildren, purchased this home , at the time I was in a hurry..I was rushed to do this so that I wouldn’t be denied the adoption. I knew nothing about purchasing a home. I didn’t realize my credit score was high enough to get a decent loan. I b elieved them when they told me the 80 -20 was the way to go..I’d build credit all year and be able to re fi at years end. years end came, the market began to falter and NOONE would fix my loan. Now my credit sucks..I have a mortgage at 12% and another at 9% how sad. I am behind because they will NOT accept partial payments. It’s all or nothing. They scammed me into becoming 2 months behind by giving me a temporary modification. It required that I skip February and begin payments in March at a reduced amount. No sooner did I make the payment and I was denied ( immediately) now i’m stuck..now i’m 2 months behind..how do i overcome that?? They’ve been stealing from me for 5 years as I paid excessively high rates, took advantage of my lack of knowledge coercing me into an 80-20 to begin with, and now ..they will take my home.. What a joke!!!! Great country!!!
June 8th, 2010 at 10:16 am
Well I can not believe it but they just today sent back all the signed final mod papers and also online it now showes my new loan terms with BOA.
It was a very long process (13 months)and I was never informed what was going to happen every day i thought i was going to loose the house, even after the fed ex package with the new contract came i still was uneasy because it said until both i sign and they sign it It was not final I waited over three month for the orignal to come back to me signed by them. Now It feels good to know they really do some of the loan mods.
I got the first five years at 2%
sixth year at 3%
seventh year at 4%
eighth year till the 37th year at 5%
and the term was extended to 37 years to get my payment at the 31%
they did lower my payment $743.51
I am very happy now that it is all over and done. Your site helped out very much and I wish everyone else the best of luck with your mod.