ECONOMY - The Broken Home Affordable Modification Program

"Homeowners Express Frustration with Government Loan Modifications"
PBS Newshour 10/25/2010


Home Affordable Modification Program, HAMP

Excerpts from transcript

PAUL SOLMAN (Newshour): Attorney Kevin Costello represents homeowners in cases against J.P. Morgan Chase, Wells Fargo, and Bank of America, a NewsHour underwriter, arguing that, when servicers drag out the HAMP trial process, then reject the homeowner, they're breaking a contract.

KEVIN COSTELLO, attorney: I think it's clear that servicers have not invested the time, the energy and the resources in creating an infrastructure within their shops to adequately discharge their duties under the HAMP program.

It may be that the financial incentive isn't enough. There are all sorts of fees that mortgage servicers are collecting while the limbo for the homeowner drags on and on.

PAUL SOLMAN: According to a recent report by the National Consumer Law Center, servicer fees based on a percentage of outstanding balance provide incentives to increase the loan principal by adding delinquent amounts and junk fees.

Don Madden (homeowner) says he was surprised to see his loan grow after he was rejected from HAMP by Bank of America after a six-month trial that cut his payments from $1,400 to $656.
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PAUL SOLMAN: The main problem, according to attorney Costello, servicers haven't been pressured to make permanent HAMP modifications.

KEVIN COSTELLO: What stick is the federal government bringing to bear against servicers who are failing to comply? The data is there that folks are not getting permanent modifications who appear to be entitled to them. What is Treasury doing to enforce the rules of HAMP against servicers?

HERBERT ALLISON, Former Assistant Treasury Secretary For Financial Stability: We don't, Under the law, have the authority to require servicers to be part of the program. And we cannot fine the servicers for not complying.

PAUL SOLMAN: Until his recent retirement, Herb Allison oversaw Treasury's TARP program, which funds HAMP.

HERBERT ALLISON: These are voluntary programs. We have to strike a fine balance between getting very tough with them and making sure that they are active and involved in our program.

What this adds up to? HAMP is a toothless law, the banks are dragging their feet (no matter what they say) and all the while they collect more money in fees, and the homeowner gets shafted.