Now I am not a fan of all the government intervention in markets this Administration has created. I think it is the power of free markets that built this country, and the power of command economies that sank the old Soviet Union.
But I always thought that the Administration was wrong, but had good things in mind. Now it looks like they are just plain wrong all around.
What is most disturbing about the meeting with Treasury and the things that were said, or more accurately admitted, is that an argument could easily be made that this [HAMP] was an overt act by the administration to mislead and trick the American homeowner. That our government has been complicit in the bank's ravaging of the bank accounts, retirement, and investments of nearly five million people.But then was this the Administration, or the bureaucracy? It's clear HAMP - Home Affordable Modification Program - hasn't done quite what it set out to do. And hurt a lot of people along the way.
Here's what really happens: The trial modification lasts three months according to the rules. Banks and servicers string the borrower along for longer than the requisite three months, sometimes going as long as nine months. At one point, after the homeowner has made all the payments on time at the lower monthly rate fully expecting to be granted a permanent modification the bank pulls the rug out from under them and denies the modification. They give no reason for this and claim that they are under no obligation to provide one. At this point the mortgage goes back to the original terms and amount and here's where the "tax break" argument falls apart. The homeowner now owes the difference between the trial payments and the original payments. So a six month trial modification with a $500 "tax break" is now a $3000 bill on top of the original unaffordable monthly payment. In addition, servicers will add monthly charges, late fees, and reports to credit agencies further burying the homeowner who is now broke, humiliated, and desperate. In many cases, like my loan with Ocwen for example the trial payments never get recorded or applied to any of the interest or principal - they simply disappear.And of course, government being government, and the fact that this program was thrown together in an instant, there is little in the way of oversight.
Do you wonder why people are walking away from their homes? After a few months in this "trial modification" program, they are worse off than they were before the government got involved. What were those scary words? "I'm from the government, and I'm here to help."