Bailout

When banks refuse to modify mortgages

By Felix Salmon

Paul Kiel has an important story today on something I was not aware of at all: banks converting trial loan modifications into… trial loan modifications. This violates the government’s guidelines, but it seems that the likes of Chase and Wells Fargo are doing anything they can to avoid doing what is clearly envisaged in the government plan: transforming all trial modifications to permanent modifications if the trial-mod payments are made in full and on time for three months.

This screams “bad faith” to me. Up until now I’ve reckoned that a lot of the incompetence at mortgage servicers was due to incompetence rather than outright malice, and that they were simply overwhelmed by the volume of distressed mortgages they have to deal with. But there’s no reason at all for them to be asking for updated paperwork from people who have already completed their trial modifications — unless they’re desperately searching for excuses, legal or not, to avoid converting those modifications to permanent status. Shame on them — and I hope that somewhere a regulator with teeth is reading this story and preparing some serious penalties. Otherwise, this obnoxious behavior is only going to continue unabated.

Full post as published by Macroprudential on January 14, 2010 (boomark / email).