So is the end of HAMP near?  Looks like Congress is making a run at ending HAMP.

Sadly, HAMP never lived up to its touted goals and in fact mainly served as a way for servicers to line their folks while dragging homeowners through mountains of paperwork which was required to be faxed over and over.

Likely the short sale component of HAMP called HAFA will be disappearing as well.

Will this help or hurt homewoners?  Too early to tell.

- The Bank Slayer

The Fox News story is below:

House Committee to Push Bill Ending Obama Foreclosure Program

Published February 24, 2011 | Associated Press

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WASHINGTON — A House committee plans to write legislation next week ending the Obama administration’s flagship effort for helping struggling homeowners avoid foreclosure and abolishing three other housing assistance programs.

At its meeting next Thursday, the highest-profile target of the Republican-run House Financial Services Committee will be the Home Affordable Modification Program. The Treasury Department has acknowledged the program won’t meet its original goal of preventing 3 million to 4 million foreclosures, and last month a federal inspector general said it has been a failure.

The bill comes at a time when Republicans are proposing deep spending cuts across the federal budget. They have already pushed legislation through the House cutting this year’s spending by $61 billion, despite opposition by President Obama and congressional Democrats.

The committee will also vote on GOP plans to terminate programs that help state and local governments buy foreclosed properties and sell or rent them, provide loans to unemployed people who have fallen behind in their mortgage payments, and help restructure mortgages for people who owe more than their homes are worth.

Democrats are expected to oppose the Republican effort. House Democratic aides and Treasury spokesmen did not immediately respond to requests for comment.

Financial Services Chairman Spencer Bachus, R-Ala., who announced his committee’s meeting on Thursday, said the targeted programs have had little impact, have increased some homeowners’ debts and may have led to additional foreclosures.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” Bachus said in a written statement.

The Home Affordable Modification Program is designed to help financially troubled homeowners reduce their monthly mortgage payments by offering them lower interest rates and longer repayment periods.

Foreclosures have remained high, with the foreclosure listing firm RealtyTrac Inc. saying there were 2.9 million foreclosure filings last year and over 3 million expected this year.

Even so, the modification program is expected to ultimately complete only 700,000 to 800,000 permanent modifications, according to a report issued last month by the government’s special inspector general overseeing the program.

The program “continues to fall dramatically short of any meaningful standard of success,” the report said.

This is very scary for anyone attempting a mortgage modification and/or short sale.  Imagine thinking that your short sale or loan modification was “in review” (we discuss this review process in another article here) then suddenly find out you are in foreclosure or worse – foreclosed already.

Sadly this happens every month in the Greater Houston area.  We work with families and their REALTORS everyday who tried to get a mortgage situation resolved only to find out they are staring down a foreclosure auction sale date in just a few days.

The article below highlights where attorneys around the nation are crying out that mortgage servicers while claiming to help homeowners AND being paid by HAMP/TARP funds to assist borrowers are instead having no qualms about dumping them into the foreclosure machine; some by accident, some on purpose.

If you are working with a homeowner or are one yourself who is attempting a short sale or mortgage modification you should always check with the foreclosure attorney EACH & EVERY month to determine if the home is posted for sale.

If they say it is on HOLD then danger, danger Will Robinson!  This means it has not been PULLED from sale (which is what you want) but is at the yellow light.  Meaning that if the foreclosure sale date comes and goes while still in hold you are safe but it could simple turn green and your sale is back on.

We have seen mortgage servicers green light foreclosure sales the SAME DAY of the sale while only the day before it was on hold.

- The Bank Slayer

Read on from the Huffington Post

Banks have started foreclosures on more than 2,500 homeowners still in the process of applying for mortgage modifications, according to a new survey of 96 consumer attorneys.

“People every single day are being put into foreclosure while they’re waiting for modifications,” said Ira Rheingold, director of the National Association of Consumer Advocates, which conducted the survey in November with the National Consumer Law Center. “It’s all related to the broken mortgage servicing system.”

The mortgage-servicing system found itself in the spotlight this fall when employees at big banks admitted in sworn depositions to signing off on foreclosure filings without verifying any of the information. Banks and the government have insisted it’s just a paperwork problem and no homeowners have been harmed.

Rheingold and other consumer attorneys argued that the unverified documentation is yet another symptom of a system that routinely seizes homes under false pretenses.

“I’m not sure whether it’s incompetence or intentional venality,” Rheingold said. “The fact they can’t modify someone’s loan and at the same time stop a foreclosure is ridiculous.”

Banks are required to evaluate all delinquent borrowers for the Obama administration’s Home Affordable Modification Program, its signature foreclosure-relief effort, and to solicit applications from borrowers who meet eligibility requirements. The program drastically reduces monthly payments for eligible borrowers, but more have been bounced from HAMP than have received “permanent” five-year modifications.

Homeowners are often shocked and confused when they discover that after they’ve been encouraged to apply for a modification, the foreclosure process has continued — even though a directive from the Treasury department this year forbade servicers from proceeding with foreclosures on HAMP applicants. The Treasury Department has not punished any servicers for breaking the program’s rules, though a watchdog report released this week said Treasury is considering witholding incentive payments for 132 modified loans. Most of the lawyers said their clients had been making payments exactly as they’d been told to by their bank.

Wednesday’s report “means there’s massive noncompliance with HAMP because there’s no enforcement mechanism,” said Diane Thompson, an expert on mortgage servicing and a lawyer for the NCLC.

The 96 attorneys said they represent more than 1,200 homeowners “who had been placed into foreclosure due to misapplication of payments, improper fees, or force-placed insurance,” according to the survey.

“I was surprised at how large the numbers were in every category,” Thompson said. “From not very many attorneys we get more than a thousand homeowners in every category being put into foreclosure wrongly.”

The total lack of oversight and teeth in the “enforcement” of HAMP is a Fatal Flaw according to Steve Gillan.  We agree.

Over and over we hear from homeowners,  “I am in HAMP and have made seven on time payments in a row but am now facing foreclosure.  The bank said I was still in review.  What do I do?”    This is sad but ridiculous.

When a homeowner is denied a HAMP modification or the process is taking ten to twenty months to complete, no one is checking on the servicer.   NO KIDDING!!!!

It is frustrating for homeowners who are required over & over & over & over to fax in documents similar to what it would take to refinance their loan only to be told by their lender, “Sorry, we didn’t receive your paperwork.”   When called on the carpet by the homeowner, the mortgage servicer simply makes up a story (READ: lies) or says the loan modification is in review.

What does “the file is in review” mean? In review by who?  When did it go into review?  What are they reviewing?   All very basic questions (especially if this was a straightforward refinance) which should be easily answered.

The difference is that in a standard refinance, the mortgage broker or loan officer GETS PAID WHEN IT CLOSES to the tune of 2-4% the size of your loan.  Yes, thousands of dollars to get your loan closed.  But in a loan modification the “agent” or negotiator is many times paid very little and is judged on how many files are RESOLVED.  In other words, approved, denied, closed, or opened – whatever, as long as the file is moved off his/her desk.

Who is monitoring the process to ensure borrowers are not being dragged on for financial gain?

The Treasury has clearly stated it has no intention of performing this function even though it is mandated by HAMP.

Why is it that so many borrowers trying to get a loan mod (and doing everything they are told to do) need to hire an attorney to force the bank to actually review the documents and make a decision?   The answer  – because Uncle Sam is letting them get away with it.

Don’t let you mortgage servicer give you the run around.  Take action today!

Hats of to Steve for the article below.

- The Bank Slayer

The Fatal Flaw in HAMP: Lack of Servicer Oversight

by Steve Gillan is Executive Director of AAHMP, American Alliance of Home Modifications Professional

Twenty months into HAMP, nagging administrative issues are still prevalent and the program seems to have run out of steam.  This is evident from the plethora of processing problems we see and hear on a daily basis. From lost documents, improper calculation of income, poor knowledge and implementation of underwriting guidelines, long approval times, and more recently the robo-signing scandal. The list goes on and on…

To Treasury’s credit they have put forth an effort to work out some of these problems.  They implemented directive after directive to deal with the challenges and shortfalls of the original program. But no progress has been made. Servicers say they are doing everything possible to comply, but in the end they claim their operations to not be set up for broad based loss mitigation programs.

The troubling part is that during the foreclosure escalation process, no one oversees the servicer’s actions. When a homeowner is denied a HAMP modification or the process is taking ten to twenty months to complete, no one is checking on the servicer.  No one requests to see the files to determine if that homeowner does or does not actually meet the guidelines.  Again are we just to believe the servicer performed their underwriting role correctly. Who is monitoring the process to ensure borrowers are not being dragged on for financial gain?

This lack of oversight is the “Fatal Flaw” in HAMP.   How can Treasury assure American homeowners or the American taxpayer that everything is being done to appropriately address the foreclosure crisis if no one is double checking whether or not each loan modification was underwritten properly? If servicers have willingly taken part in robo-signing, why is anyone to believe they did not cut corners in the underwriting process?  Based on all the evidence, this is a forgone conclusion but what is Treasury to do? They can leave it up to the courts and individual Attorney Generals but it will take years to clear out the backup that is already in place at county courthouses.

Treasury could implement a component in HAMP that better addresses compliance.  This job is contractually the responsibility of Freddie Mac and requires them to review the servicer operation and procedures to assure that all applications for HAMP are given the same treatment. This compliance operation is part of the Participating Servicing Agreement (PSA) that over one hundred servicers have signed with Treasury. Part of this guideline is the “Escalation” process where a homeowner that has been denied a modification has the ability to have their case reviewed by Treasury.  Treasury has hired Homeownership Preservation Foundation (HPF) to handle those calls.  According to Treasury it is the job of HPF to work with the homeowner and servicer to try and iron out differences, to act as an advocate of the homeowner with the servicer.

A strong “Escalation” process performed by a neutral third party can either affirm or dispute those findings.  In a case where the servicer did in fact make a mistake, a completed modification application, fully underwritten by a HUD Direct Endorsed Underwriter would be given to the servicer for review and completion. This escalation process would also give Treasury the information they need to verify whether or not the servicer had done their job. It would also send a message of accountability to the servicing industry.

Unfortunately at this time, Treasury has clearly stated it has no intention of performing this function even though it is mandated by HAMP.  Doesn’t it make sense to actually “review” a file for accuracy?  Without this, what recourse is left to the investor and homeowner?  The answer is possibly “the Courts,” but that would only slow the housing recovery process even more.  This does not benefit anyone but the servicer. This “Fatal Flaw” needs to be corrected.

A class action lawsuit filed by New York law firm Harwood Feffer alleges that Wells Fargo-owned mortgage servicer, America’s Servicing Company, induced distressed borrowers into defaulting on their payments supposedly in order to get a loan modification all the while accruing late fees and penalties.  READ:  Enriching themselves at borrower’s expense.

This isn’t the first time we’ve heard this and ASC is not the only servicer that tells homeowners to stop making payments so that they can get a loan mod.  But looking only at Wells Fargo it is easy to prove these tactics – and not just for loan mods but deed-in-lieu and short sales.

For example, on Tuesday this week, a negotiator at Wells Fargo  emailed us the following (concerning a short sale):

Please be advised the property must be 31 days delinquent at the time of closing…

Hmmm… this clearly indicates the borrower is being told by the owner of the mortgage debt (or the agent of that owner) to purposely default.

Can’t you just see the ads?

Anyone can now be a foreclosure expert!  No experience, license or training required.  Yes, you can make money at home (or in an office) with a full time job working for a bank!!

Only requirements for this job are sight and upper limbs, so you can see where to place signatures and the ability to use a pen and/or stamp.    Better than stuffing envelopes, this job allows you to make money every thirty to sixty seconds simply stamping and signing papers!   Apply today and start working tonight!

Robo-signers were initially thought to be limited to a few dozen rogue bank and/or foreclosure mill folks.  At least that is what the banks wanted everyone to believe.  Guess what?  It ain’t true.

Hundreds, maybe thousands of folks across the country have found employment as robo-signers.  Attorney’s representing homeowners across the country are digging deeper and deeper with depositions of signers and finding out as an AP story that came out today (can be found here) :

…the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

Many Americans think this whole robo-signer deal is nothing more than failure to cross a few t’s and dot some i’s.  But the legal implications are serious.  Swearing that you have actually read and verified the facts in a document, when you have not, is a legal offense.

The real issue though is who actually owns the underlying debt represented by the mortgage!

Why?  How about innocent folks being foreclosed on by accident?  It’s happening (look here).

Further, we have had three peple come into our office in the last 30 days who are CURRENT with their payments and one who is AHEAD, (yes paying extra) and have either been threatened with foreclosures and in the case of the person who is ahead was foreclosed upon!

We have folks that are in the process of either being reviewed for HAMP or have actually received a loan modification and are being foreclosed by the new alleged debt owner.

Want an example?  We have one client that did a short sale three years ago settling a first and second lien; but now a new alleged debt owner of the 2nd lien claims money is still owed.  Something along the lines of they didn’t get the money from the servicer who approved the short sale – three years ago!!!   Hear that?

The previous servicer, Fremont, who is long gone supposedly never sent the money onto the owner of the debt?  Is it true?  Who knows at this stage but the new owner of the home now has a new servicer, Litton trying to make a claim on the old second lien AND the past homeowner, who short sold the house, has their credit being hammered for a debt already settled.

The rush to foreclose homes by using robo-signers impacts not just those who deserve to be foreclosed but those that don’t. Why?  Because robo-signers as these depositions have shown:

…barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

I feel sorry for the buyer of a foreclosed property that expects to close and move into or fix it up and is being held up by banks like Chase or Bank of America as they examine the foreclosure signing disaster. I feel sorry for title companies employees and others that are being hurt by this mess but it needs to be fixed.

The title to one’s home must be clean or it hurts everyone involved in the sale or purchase of a home.

People should not be allowed to live for free on the back of someone to whom they owe a debt but if either the debt is NOT owed (current or been paid off) or the wrong creditor is trying to collect it must be stopped.

The AP story is below.

– The Bank Slayer – see our list of short sale homes were currently working on.

Robo-signers: Mortgage experience not necessary

By MICHELLE CONLIN AP Real Estate Writer © 2010 The Associated Press

Oct. 13, 2010, 12:28AM

NEW YORK — In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

“The mortgage servicers hired people who would never question authority,” said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them — earning them the name “robo-signers.”

The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.

Ticktin said he would make the testimony available to state and federal agencies that are investigating financial institutions for allegations of possible mortgage fraud. This comes on the eve of an expected announcement Wednesday from 40 state attorneys general that they will launch a collective probe into the mortgage industry.

“This was an industrywide scheme designed to defraud homeowners,” Ticktin said.

The depositions paint a surreal picture of foreclosure experts who didn’t understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners’ loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn’t define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor or defendant. She testified that she didn’t know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. “I don’t know the ins and outs of the loan, I just sign documents,” she said at one point.

Until now, only a handful of depositions from robo-signers have come to light. But the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

Judges are unlikely to look favorably on a bank that claims paperwork flaws don’t matter because the borrower was in default on the loan, said Kendall Coffey, a former Miami U.S. attorney and author of the book “Foreclosures.”

“There has to be a cornerstone of integrity to the process,” Coffey said.

Bank of America responded to Tiktin’s depositions by re-affirming that an internal review has shown that its foreclosures have been accurate. “This review will ensure we have a full understanding of any potential issues and quickly address them,” Bank of America spokesman Dan Frahm said. Frahm added that, on average, the bank’s foreclosure customers have not made a payment in more than 18 months.

JP Morgan Chase spokesman Thomas Kelly said the bank has requested that courts not enter into any judgments until the bank had reviewed its procedures. But Kelly added that the bank believes that all the underlying facts of the cases involved in the document fraud allegations are true.

Litton Loan Servicing did not respond to a request for comment.

Even before the foreclosure scandal broke, the housing market was in the midst of an ugly detoxification. Now the escalating crisis is likely to prolong the housing depression for at least another few years. The allegations are opening the entire chain of foreclosure proceedings to legal challenge. Some foreclosures could be overturned. Others could be deemed illegal.

For a housing recovery to occur, all the foreclosed properties — which could account for 40 percent of all residential sales by 2012 — need to be re-scrutinized by the banks and resold on the market. Now, with so much inventory under a legal threat, the process will become severely delayed.

“This just adds more uncertainty to the whole mortgage process, so buyers are asking themselves: do I want to buy a home in this environment?” says Cris deRitis, director of credit analytics at Moody’s Analytics. “We need to fix these issues before the economy can recover.”

Though some have chalked up the foreclosure debacle to an overblown case of paperwork bungling, the underlying legal issues are far more serious. Yes, swearing that you’ve reviewed documents you’ve never seen is a legal offense. But at the center of the foreclosure scandal looms something much larger: the question of who actually owns the loans and who has the right to foreclose upon them. The paperwork issues being raised by lawyers and attorneys generals have the potential to blight not just the titles of foreclosed properties but also those belonging to homeowners who have never missed a mortgage payment.

So far, JP Morgan Chase, PNC Financial and Litton Loan Servicing have stopped some foreclosure proceedings in 23 states. Bank of America and GMAC, recently renamed Ally, have extended their moratoriums to all 50 states. Wells Fargo and Citigroup have said they are continuing with foreclosures, adding that they are confident in their documents and processes.

But Citigroup has now backpedaled some on that assertion. The bank sent out a press release Tuesday that it was no longer using the law firm of “foreclosure king” David Stern, now under investigation by the Florida attorney general’s office. “Pending the outcome of the AG’s investigation, Citi is not referring new matters to this firm,” the bank said in an e-mailed statement.

Late last week, in an interview with the Florida attorney general, a former senior paralegal in Stern’s firm described a boiler-room atmosphere in which employees were pressured to forge signatures, backdate documents, swap Social Security numbers, inflate billings and pass around notary stamps as if they were salt.

Stern’s lawyer, Jeffrey Tew, did not respond to a request for comment.

Meanwhile, the public outrage continues to mount. In what is perhaps a sign of things to come, a Simi Valley, Calif., couple and their nine children broke into their foreclosed home over the weekend and moved back in, according to television station KABC of Simi Valley. The couple, Jim and Danielle Earl, say they were working with the bank to catch up on payments until they discovered a $25,000 difference between what they owed and what the bank said they owed. The family was evicted from their Spanish-style two-story in July. The home has been sold, and the new owner was due to move in soon.

The Earls and their attorney now allege that they were victims of fraudulent paperwork.

___

Curt Anderson contributed from Miami.

America’s Servicing Company (“ASC”) / Wells Fargo look for any possible ways to deny loan modifications.

We have a client who had previously submitted their 66 pages of “loan modification required documents” in all its glory to ASC.   But then you know the drill…months pass by and many, many, many, more documents are faxed since ASC “didn’t receive them” (even though you have fax confirmations).

Then POW they summarily reject and deny the loan modification, without a warning or phone call.

When they came to us we started digging.  Why did it get denied?

Turns out the date was written BELOW the word Date instead of ABOVE it.   Let’s see now…the IRS accepted this as OK, but it’s not good enough for ASC?

Look here…We blacked out the person’s name but see for yourself.

What a joke!  They could have at least called and told the homeowner so they could have fixed it.

Ring, Ring.   “Hello.  ASC, Hi, it’s me.  Did you see my other post about the guy who got a free house.  Game on.”

- The Bank Slayer

H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010″ has been offered in the House but will it go anywhere?

Kudos to the National Association of Realtors for their support of a housing initiate that could help the mortgage/housing crisis, if it passes AND has some teeth.

We don’t need another sissy HAMP/HAFA-like program that offers “guidelines” for servicers and doesn’t provide punishment and remedies for home owners.

I’m not holding my breath yet. But it is a start.

- The Bank Slayer

Short Sale House

NAR Hails Bill to Hasten Lender Response to Short Sale Requests

Homeowners who are underwater with their mortgage may find that relief is on the way from a bill strongly supported by the National Association of Realtors® that would impose a deadline on lenders to respond to short-sale requests.

The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered yesterday in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days.

“The short sale, which requires lender approval, is an important instrument for homeowners who owe more than their home is worth,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “While the lending community has worked to improve the size and training of their short sales staffs, they still have a long way to go on improving response times.”

“As the leading advocate for homeownership issues, NAR believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy,” said Golder.

The number of potential short sale properties is rising across the country. According to NAR data, in the second quarter of 2010, Nevada, California, Florida and Arizona are states where significant shares of all properties on the market are potential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.

“Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time. Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price. Many consumers have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives,” Golder said.

She commended Reps. Andrews and Rooney for their efforts on the bill and urged Congress to pass the bill quickly

It’s simple, follow the money.   Everyone understands the purpose of a compensation plan.  Develop a plan that uses money to motivate a certain behavior.

For the past several years we’ve been saying that the banks/servicers WANT to foreclose properties.   It is the fastest way for them to generate fee income as well as convert a home to cash.

4closure fraud.com and Mandelman matters posted a great article about an interview with a past JPMorgan Chase employee.    He echos some of the same things that one of our employees who used to work for IndyMac/OneWest states…

While GSE’s like Fannie & Freddie tout efforts to slow foreclosures… and “Fannie Mae guidelines allow for modifications to be considered...Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure…”

While homeowner after homeowner is ready to sell their soul to save their house the reality as this employee states is  “They’re [sp] whole focus is to foreclose, not to modify.  They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure.  Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.”

Face the reality that you need to take matters into your own hands and fight hard if you are going to win versus a large and powerful bank.

- The Bank Slayer

JP MORGAN INSIDER – “CHASE is in the Foreclosure Business, NOT the Modification Business.”

“JPMorgan CHASE is in the foreclosure business, not the modification business’.”  That, according to Jerad Bausch, who until quite recently was an employee of CHASE’s mortgage servicing division working in the foreclosure department in Rancho Bernardo, California.

I was recently introduced to Jerad and he agreed to an interview.  (Christmas came early this year.)  His answers to my questions provided me with a window into how servicers think and operate.  And some of the things he said confirmed my fears about mortgage servicers… their interests and ours are anything but aligned.

Today, Jerad Bausch is 25 years old, but with a wife and two young children, he communicates like someone ten years older.  He had been selling cars for about three and a half years and was just 22 years old when he applied for a job at JPMorgan CHASE.  He ended up working in the mega-bank’s mortgage servicing area… the foreclosure department, to be precise.  He had absolutely no prior experience with mortgages or in real estate, but then… why would that be important?

“The car business is great in terms of bring home a good size paycheck, but to make the money you have to work all the time, 60-70 hours a week.  When our second child arrived, that schedule just wasn’t going to work.  I thought CHASE would be kind of a cushy office job that would offer some stability,” Jerad explained.

That didn’t exactly turn out to be the case.  Eighteen months after CHASE hired Jared, with numerous investors having filed for bankruptcy protection as a result of the housing meltdown, he was laid off.  The “investors” in this case are the entities that own the loans that Chase services.  When an investor files bankruptcy the loan files go to CHASE’S bankruptcy department, presumably to be liquidated by the trustee in order to satisfy the claims of creditors.

The interview process included a “panel” of CHASE executives asking Jared a variety of questions primarily in two areas.  They asked if he was the type of person that could handle working with people that were emotional and in foreclosure, and if his computer skills were up to snuff.  They asked him nothing about real estate or mortgages, or car sales for that matter.

The training program at CHASE turned out to be almost exclusively about the critical importance of documenting the files that he would be pushing through the foreclosure process and ultimately to the REO department, where they would be put back on the market and hopefully sold.  Documenting the files with everything that transpired was the single most important aspect of Jared’s job at CHASE, in fact, it was what his bonus was based on, along with the pace at which the foreclosures he processed were completed.

“A perfect foreclosure was supposed to take 120 days,” Jared explains, “and the closer you came to that benchmark, the better your numbers looked and higher your bonus would be.”

CHASE started Jared at an annual salary of $30,000, but he very quickly became a “Tier One” employee, so he earned a monthly bonus of $1,000 because he documented everything accurately and because he always processed foreclosures at as close to a “perfect” pace as possible.

“Bonuses were based on accurate and complete documentation, and on how quickly you were able to foreclosure on someone,” Jerad says.  “They rate you as Tier One, Two or Three… and if you’re Tier One, which is the top tier, then you’d get a thousand dollars a month bonus.  So, from $30,000 you went to $42,000.  Of course, if your documentation was off, or you took too long to foreclose, you wouldn’t get the bonus.”

Day-to-day, Jerad’s job was primarily to contact paralegals at the law firms used by CHASE to file foreclosures, publish sale dates, and myriad other tasks required to effectuate a foreclosure in a given state.

“It was our responsibility to stay on top of and when necessary push the lawyers to make sure things done in a timely fashion, so that foreclosures would move along in compliance with Fannie’s guidelines,” Jerad explained.  “And we documented what went on with each file so that if the investor came in to audit the files, everything would be accurate in terms of what had transpired and in what time frame.  It was all about being able to show that foreclosures were being processed as efficiently as possible.”

When a homeowner applies for a loan modification, Jerad would receive an email from the modification team telling him to put a file on hold awaiting decision on modification.  This wouldn’t count against his bonus, because Fannie Mae guidelines allow for modifications to be considered, but investors would see what was done as related to the modification, so everything had to be thoroughly documented.

“Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure,’ according to Jerad.  “Files would be on hold pending modification, but still accruing fees and interest.  Any time a servicer does anything to a file, they’re charging people for it,” Jerad says.

I was fascinated to learn that investors do actually visit servicers and audit files to make sure things are being handled properly and homes are being foreclosed on efficiently, or modified, should that be in their best interest.  As Jerad explained, “Investors know that Polling & Servicing Agreements (“PSAs”) don’t protect them, they protect servicers, so they want to come in and audit files themselves.”

“Foreclosures are a no lose proposition for a servicer,” Jerad told me during the interview.  “The servicer gets paid more to service a delinquent loan, but they also get to tack on a whole bunch of extra fees and charges.  If the borrower reinstates the loan, which is rare, then the borrower pays those extra fees.  If the borrower loses the house, then the investor pays them.  Either way, the servicer gets their money.”

Jerad went on to say: “Our attitude at CHASE was to process everything as quickly as possible, so we can foreclose and take the house to sale.  That’s how we made our money.”

“Servicers want to show investors that they did their due diligence on a loan modification, but that in the end they just couldn’t find a way to modify.  They’re whole focus is to foreclose, not to modify.  They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure.  Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.’  That sure is what it seemed like to me, anyway.”

According to Jerad, JPMorgan CHASE in Rancho Bernardo, services foreclosures in all 50 states.  During the 18 months that he worked there, his foreclosure department of 15 people would receive 30-40 borrower files a day just from California, so each person would get two to three foreclosure a day to process just from California alone.  He also said that in Rancho Bernardo, there were no more than 5-7 people in the loan modification department, but in loss mitigation there were 30 people who processed forbearances, short sales, and other alternatives to foreclosure.  The REO department was made up of fewer than five people.

Jerad often took a smoke break with some of the guys handing loan modifications.  “They were always complaining that their supervisors weren’t approving modifications,” Jerad said.  “There was always something else they wanted that prevented the modification from being approved.  They got their bonus based on modifying loans, along with accurate documentation just like us, but it seemed like the supervisors got penalized for modifying loans, because they were all about finding a way to turn them down.”

“There’s no question about it,” Jerad said in closing, “CHASE is in the foreclosure business, not the modification business.”

Have three months have past by and you’re still awaiting your “permanent” modification?  As Gomer Pyle says, Surprise, surprise, surprise. 

USA Today points out that Chase & Bank of America just don’t quite seem to know how to calculate three months.   It seems three is the same as five or six or NEVER!

Unfortunately, this is the norm and not the exception.   If your loan modification is going nowhere or your latest payment has been rejected then contact  professional to resolve the situation.  Be very aware that some of the mortgage servicers such as Flagstar, Wells Fargo & Ocwen are known for canceling your modification mid-stream and then setting the foreclosure sale date for the next month.

Also, make sure that your modification agreement doesn’t waiver future rights to resolve conflicts with your mortgage company.  Many times folks seek help after signing away their rights in a modification.  We recommend that every loan modification agreement be reviewed by an attorney.

The USA Today article is below.

- The Bank Slayer

Some 3-month mortgage modification trials dragging on

By Stephanie Armour, USA TODAY

	By Rick Bowmer, AP
Cancellations in the program are growing because of insufficient documentation from borrowers, missed payments, or because borrowers are found to earn too much to qualify, according to Treasury.

Bank of America (BAC) and JPMorgan Chase (JPM) service the mortgages for half the homeowners who have been awaiting decisions on permanent
mortgage modifications for three months or more, according to a government report.

Through July, the government’s mortgage-aid program had a backlog of 118,000 borrowers  whose trial plans have run at least six months —
three months past the typical duration for determining if they qualified for a permanent modification, the government said Friday. Bank of
America and JPMorgan Chase, the two biggest banks, account for about 59,000 of the cases.

HOUSING MARKET: Outlook remains dim
Under the government’s Home Affordable Modification Program (HAMP), borrowers are supposed to get permanent modifications if they
keep up their adjusted payments for a three-month trial.

But the program has been dogged by controversy.

Servicers blame delays on borrowers who don’t provide necessary documentation and on the government’s frequently changing requirements.
Borrowers complain that the servicers repeatedly lose the paperwork they send and don’t return calls.

Friday’s report said the number of borrowers who have been in trials for six months or more had dropped from 166,000 in June and that servicers
indicate decisions on those remaining should be made in August.

Bank of America expects to make decisions on most of them in August and September, says spokesman Rick Simon.

BofA’s total number of customers in trial modifications dropped from 121,000 in June to 85,000 in July as decisions were made on who
qualified for permanent modifications, he says.

JPMorgan Chase declined to comment on whether it will resolve all of the older trial modifications this month.

For the most part BAC Home Loans Servicing, LP is the pits.   Faxing documents several times in a  row because BAC “lost them” or got a new fax number has been the norm for a long time.   Before Equator kicked in (which is a whole other story) Bank of America was consistently the slowest servicer in helping homeowners with short sales or loan modifications.

While the speed at which they have been approving short sales has improved, I believe in a large part this is due to their new standard policy of pumping out an approval that simply releases the lien on the home without forgiving the borrower the deficiency balance.   This can be deadly for the homeowner and the real estate agent who likely advised them to accept the short sale offer.

- The Bank Slayer

Thanks to Robert Doggett @ Texas RioGrande Legal Aid for the following post.

Bank of America N.A. and its wholly owned subsidiary, BAC Home Loans Servicing LP, have been sued by 15 homeowners and the Texas Housing Justice League for abusive servicing practices.  The Texas suit alleges:

This lawsuit complains … of a systematic home loan servicing scheme that includes hours of telephone runaround, misleading and inconsistent information, lost correspondence, verbal abuse, and extensive delay, all of which have documented costs not only in terms of money, but in health. The facts in this case reveal the harsh reality that underlies the loan servicer’s press statements about loan modifications and forbearance agreements following collapse of the U.S. housing market.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 1 here.

It would be hard to imagine that Bank of America and BAC will fight the facts of the case; the question will likely be whether they can get away with it.  The servicer will likely claim that poor “customer service” is something that must be accepted like a slow waiter or a bad movie.  The difference is of course that homeowners are not merely customers that should expect to be mistreated and lied to — homeowners have a contract with the holder of their home loan and these servicers are the agents for the holder — and moreover, servicing a home loan is not in the realm of someone forgetting your fries or being tricked into seeing Gigli.

Many of the Plaintiffs were told that they were eligible for loan modifications or other workout assistance, only to spend months being shuffled through Defendant BAC’s “Home Retention,” “HOPE”, “Foreclosure,” “Bankruptcy” and “Collections” departments with no resolution. Others simply wanted to know that they had been reviewed accurately for eligibility in any available programs, that a denial of assistance was final, and that their arrearage had been correctly calculated. Instead of providing Plaintiffs with basic information about the servicing of their loans and providing timely screenings for workout assistance, however, Defendant BAC misrepresented material information to the Plaintiffs about their loans, and forced them into a scheme of operation so dysfunctional that the constant barrage of misinformation, misdirection, and deliberate inactivity amounted to abuse and harassment.

Plaintiffs describe feeling “harassed,” “like a yo-yo,” and “blocked at every turn.”  When Plaintiffs called Defendant BAC the information they received over the telephone often conflicted with written statements or prior telephone conversations. In many of the telephone calls Defendant BAC spun Plaintiffs in a labyrinth of transfers from one department to another and back again. Plaintiffs spent hundreds of hours on the telephone, explaining their stories to a different person each time they called; often they were transferred between departments, knowing they would never speak to the same person again, and wondering if the information being provided would be contradicted by the next person they spoke with. Often, it was.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 5-6 here.

While servicers will likely complain about the heavy caseloads and large number of loans in default that require attention — one thing is certain, the foreclosure arm of these servicers and their contractors have managed to deal with the heavy caseloads quite well.  If servicers can foreclose on behalf of these lenders at a record pace, they can provide accurate, helpful, timely information to the other party to the contract — the homeowners.

The Texas suit does not merely seek monetary relief, it also seeks injunctive relief as well in an effort to actually encourage or force servicers to make real changes and eliminate these complaints:

Requests to speak with supervisors or managers were met with resistance. During the course of telephone calls to Defendant BAC, Plaintiffs often found themselves disconnected after waiting on hold to speak to a supervisor, or were told that no supervisors were available. Some Plaintiffs sought out face-to-face interviews by contacting Bank of America branch offices, but simply found themselves on speakerphones with the same unaccountable departments that had previously been providing them with misinformation by telephone. Written communications did not fare better. Plaintiffs’ written submissions were often lost or misplaced.  Plaintiffs were asked to sign the same documents three, four or even five times, and were asked to provide the same information repeatedly. Many of the Plaintiffs were assigned multiple “negotiators” who would not return telephone calls, or provide timely information to Plaintiffs.

Plaintiffs’ experiences are not isolated incidents, but instead reveal a pattern and practice by Defendant BAC of deliberately misinforming borrowers in default or at risk of default, and refusing to respond to Plaintiffs’ legitimate, written and oral requests for information.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 5-6 here.

If servicers treated lenders the same way that they treat homeowners, their businesses would disappear.  Let’s hope this reform effort catches on, and servicers make changes without the necessity of litigation or a magician.