The Home Affordable Modification Program, or HAMP, was introduced by the Obama Administration in 2009 as a lifeline for homeowners who were drowning. It was supposed to give some 4 million struggling homeowners the opportunity to hang on to their homes by offering them reduced monthly mortgages through loan modification.
But according to a new report on the program, that help didn’t come easy, if it ever came at all.
In fact, for most of the intended target borrowers, it was a nightmare that ultimately ended in foreclosure. The federal oversight report indicates that six years after the program was unveiled, only about 887,000 people received home loan modifications. That’s less than a quarter of what was promised when Americans were first informed of the program.
So why did it fail? According to The New York Times, which carefully analyzed the federal report, “The program has allowed big banks to run roughshod over borrowers again and again.”
In fact, rather than actually working with borrowers to keep them in their homes, banks shot down more than 70 percent of the applications they received. That amounts to 4 million borrowers turned down.
The two principle problems were boiled down to this:
- Banks were allowed to voluntarily participate in the program;
- Banks that chose to participate were allowed to run the program internally.
That gave banks the upper hand. There are countless reports of individuals who applied for loans, only to be given the runaround – some for years. Banks would deny receiving certain paperwork. They would request an exorbitant amount of paperwork. The documents in some files contained countless errors – ones that were easily identifiable and fixable.
One of the banks with the worst track records in the HAMP, according to the new report, was CitiMortgage, which is a part of Citibank. At that location, nearly 90 percent of borrowers who applied for a loan modification were shot down. At JPMorgan Chase, the rate of denial was nearly 85 percent. At Bank of America, it was a rejection rate of 80 percent. Wells Fargo had one of the best records for a 60 percent rejection rate.
Banks insist they aren’t to blame. They say borrowers didn’t cooperate, didn’t complete the proper paperwork or never came through with the necessary initial payments under the program. Other banks say the denial rates cited in the federal report are wrong. For example, Bank of America said two-thirds of the applications filed with them were by people who didn’t qualify in the first place. Of the 1 million whose records were reviewed for modification, more than 80 percent were able to avoid foreclosure – either through modification or some other approach, such as short sale.
However, the special inspector general said the rejection rates her office uncovered indicate the primary problem was the banks – not the people.
Ultimately, though, the onus was on the federal Treasury department to make sure banks weren’t taking advantage of their position and wrongfully rejecting homeowners’ requests for modification. As the report indicates, this kind of necessary oversight was not happening.
Foreclosure defense attorneys who are familiar with bank practices know that rarely is a home loan modification request properly evaluated by the bank the first time around. Lawyers are constantly having to push back and fight for clients against wrongful denials.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
A Slack Lifeline for Drowning Homeowners, July 31, 2015, By Gretchen Morgenson, The New York Times