Bailout

HAMP failure of the day

By Felix Salmon

David Lazarus manages to prompt one of the great moments in bank public relations today, which would almost be funny if it wasn’t so infuriating. He’s telling the story of Mike and Ellen Kahara, who signed up for a HAMP mortgage-modification program through their lender, Wells Fargo. They made all their HAMP payments in full for the three-month trial period, and then continued to make payments as Wells dawdled over whether or not to make the loan-mod permanent.

Eventually, on August 11, Wells Fargo sent the Kaharas a letter saying that the bank had rejected their application for a permanent loan modification. That’s bad enough — but the bank made matters infinitely worse by then turning around and selling the Kaharas’ house, in a foreclosure sale, just five days later, on August 16. Without even bothering to notify the Kaharas that they were foreclosing in the first place.

When Lazarus called up Wells flack Jennifer Langan to ask what on earth was going on, he got this priceless response:

She said the bank shouldn’t have told the Kaharas that their home wouldn’t be sold within 30 days. “It was clearly a mistake that we put that in the letter,” Langan said.

Evidently, refusing to give the Kaharas a permanent loan modification, or foreclosing five days after rejecting their application — that’s just fine. The main mistake that the bank made, in its own eyes, was in telling the Kaharas that they could stay in their home for another 30 days, when in fact they couldn’t.

I’m hoping that pretty soon public records are going to come to light allowing us to find out exactly what the purchase price was: how much money Wells Fargo got for selling the Kaharas’ home from under them. In an ideal world, the buyer, Pacifica, would make a healthy return on its investment by renting out the house to the Kaharas for the $1,400 a month they were paying on their modified mortgage, but that doesn’t seem to be the case. Instead, they’re telling the Kaharas that they have to be out of the house immediately.

It’s a dreadful story, which is being played out in many other homes around the country. And it’s a clear indictment of HAMP, as well as of Wells Fargo.

Full post as published by Macroprudential on September 10, 2010 (boomark / email).