Consumer Law

HAMP report: Banks not doing the Job

By Alan White

The taxpayer is being ill-served by the banks we bailed out, the same banks that signed contracts with Treasury to modify eligible mortgages and prevent foreclosures.  The August report on the HAMP program confirms that a homeowner?s chances of negotiating an alternative to foreclosure depend mightily on which company services their mortgage.  On a number of performance measures, Bank of America is falling woefully short of even the poor performance of servicers as a whole.

 For example, roughly half a million homeowners had temporary HAMP modifications canceled, for missing payments, or more likely, due to lost paperwork.  Of those unfortunate families, about 45% overall have been offered an alternative modification option outside of HAMP.  Bank of America, however, offered alternative modifications to fewer than 25% of this group.   Chase, in contrast, offered alternate mods to 60% of the HAMP cancellation victims.

 Similarly, another 600,000 homeowners were rejected for even a temporary HAMP modification.   Of that group, 31% overall were offered alternative modifications, but BofA made such offers to fewer than 12%. 

 BofA has also mastered the art of false hopes.   It has converted only 26% of trial modifications to permanent ones, while servicers as a whole have achieved a rate of over 50% (still terrible, but it?s all relative.)   Over half of BofA?s trial modifications are more than six months old, despite the fact that they are supposed to convert to permanent or be canceled after three months. 

 Bank of America services the former Countrywide portfolio, plagued by predatory loan originations and servicing errors.  If anything, BofA should be working harder than other servicers to prevent foreclosures.  While HAMP certainly has design flaws that hamper its ability to turn around the foreclosure crisis, servicer performance is a serious issue, and some banks are either unwilling or unable to honor their program contracts.

Full post as published by CL&P Blog on September 24, 2010 (boomark / email).