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.

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.

Over 700 protesters rolled up on the front lawn of Bank of America’s general counsel Gregory Baer because they are sick and tired of getting the shaft from BofA.

Straight from the Huffington Post.

- The Bank Slayer

Huge raucous crowds converged outside bank employees’ houses on Sunday afternoon to demand banks stop lobbying against Wall Street reform.

“Bank of America: bad for America!” shouted community leaders outside the house of Bank of America general counsel Gregory Baer.

The Chicago-based grassroots organization National People’s Action, in coordination with the SEIU, bused more than 700 workers from 20 states to Baer’s neighborhood, one of the wealthiest corners of Washington. The action kicks off several days of protests targeting K Street for lobbyists’ role in financial reform.

Baer himself apparently tried to blend in with the crowd until a neighbor outed him. The mob booed loudly as he walked into his house. “I don’t have time for you,” he said, according to Trenda Kennedy of Springfield, Ill. who used a bullhorn to tell the crowd about her trouble getting a mortgage modification from Baer’s bank.

Kennedy told HuffPost she’d been making reduced monthly payments thanks to a trial modification via the Home Affordable Modification Program. She said that when the bank turned her down for a permanent mod, she was told she still owed all the money she’d been paying during the trial. She said she’s been notified of several sheriff’s sale dates but has somehow managed to keep her home.

“Every time I’m inches away from losing my house, by some miracle it’s been pushed off,” said Kennedy, who is a member of Illinois People’s Action.

Passersby and dogwalkers smiled at the sight of people gathered all over Baer’s lawn and blocking the road. Baer’s neighbor from across the street won little sympathy when he angrily yelled at protesters for waking up his two-year-old daughter. Kennedy was one of several people who used a bullhorn to tell personal bank horror stories.

Baer, formerly a senior official at the Treasury department, is a lawyer for the bank’s regulator and public policy legal group. Bank of America declined to comment.

“Bank of America came to the homes of everyday Americans when you spread predatory loans in neighborhoods across, the country, when you financed payday-lending storefronts, when your reckless behavior sent the economy to the brink of disaster, and when your bank-owned properties littered neighborhoods from coast to coast,” said a letter the group asked Baer to deliver to CEO Brian Moynihan. “You’ve created a historic mess and have been unreceptive to very polite, very formal and very consistent requests to fix the problems you helped create.”

The group also protested outside the house of Peter Scher, a lobbyist for JPMorgan Chase. Nobody answered the door.

According to the OCC and OTS the number of mortgages falling behind by 90 or more days increased 21.1%.

Bottom line is more foreclosures are coming.  Hopefully some will be averted with short sales and modifications but homeowners and REALTORS have to act quickly before the loan is too far behind.  The foreclosure process in Texas is FAST!!!!

Stats from 2008, (in the Houston MLS) show that only 15% of all REALTORS listing short sales successfully closed them.

An 85% failure rate is not good.

Don’t waste another minute.

- The Bank Slayer

Declining Mortgage Performance in Q409 Means More Foreclosures Ahead: Feds

Posted By JON PRIOR

In Q409, the amount of mortgages falling behind by 90 or more days increased 21.1%, resulting in more foreclosures ahead, according to a study from the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS).

The OCC and the OTS report covers nearly 34m loans totaling $6trn in principal balances, representing 64% of all outstanding mortgages in the US. Overall mortgage performance declined for the seventh consecutive quarter, as 86.4% of the mortgages studied were current and performing at the end of Q409.

Banks initiated fewer new foreclosures in the quarter, swelling projections of the “shadow inventory” of homes waiting to hit the market. The actual number of that inventory remains in debate. Standard & Poor’s showed it could take three years for the market to clear ^[1] the overhang. Richard Powers, senior vice president of real estate sales at Altisource Portfolio Solutions said that number could double ^[2].

The US Treasury Department launched the Home Affordable Modification Program (HAMP) in March 2009 to give incentives to servicers for the modification of loans on the verge of foreclosure. Today, the Treasury mandated that servicers participating in the program halt foreclosure procedures ^[3] until a borrower has been considered for HAMP. In Q409, HAMP servicers initiated more than 250,000 new HAMP three-month trial plans and converted more than 21,000 trials into permanent modifications.

But echoing same sentiments from the Treasury, servicers reported that HAMP and even some private-market foreclosure programs are not for everyone ^[4], and not everyone can get help.

“In this regard, servicers reported that they expect new foreclosure actions to increase in the upcoming quarters as many of the mortgages that are seriously delinquent may eventually result in foreclosure as alternatives that prevent foreclosure are exhausted,” according to the report.

Finally they fessed up!  While Neil Garfield refers to mortgage servicers and trustees as pretender lenders. The U.S. Treasury has been playing pretend for months as well and final conceded that the Home Affordable Modification Program (“HAMP”) is a dud. The 10-month-old program is going nowhere, said the Treasury, because big institutions charged with implementing it are dragging their feet. Like this is a surprise?? Imagine how much “better” it will be after these banks pay off their government bailout money and are out from under the watchful eye of Uncle Sam.

After blowing through billions of our tax dollars to prop up the banks, the Obama administration rolled out the $75 billion loan modification plan to show its support for beleaguered homeowners. But it hasn’t worked as expected. Really? Are you kidding me? Is anyone surprised? Please show me the government programs that are run efficiently and effectively!!

Since President Obama announced this program and its ability to save 9 million homeowners our trusted banking partners have completed less than 2,000 permanent modifications according to government audits. To boot, 14.4% of all mortgage borrowers are in default and barreling towards foreclosure.

Additionally, Laurie Goodman, senior managing director at Amherst Securities Group says her research shows that 70 percent of modifications involving only interest rate cuts, rather than reductions in the principal borrowers owe, have failed after 12 months.

Kudos again to Gretchen Morgenson at the New York Times for a great article on HAMP.

- The Bank Slayer