Firms Will Be Embarrassed
Posted by CM on November 29, 2009
Yes, you read the heading correctly. It seems that Obama and Geithner can’t seem to get our beloved mortgage servicers to effectively modify delinquent home loans. That is one heck of a surprise! We all know from experience that mortgage servicers will stop at nothing to get a foreclosure processed.
On Monday, Obama will initiate a new campaign aimed at embarrassing mortgage firms (I hope mortgage servicers are included) into creating permanent modifications that reduce monthly payments. Unfortunately, reducing principal balances was not mentioned in the article.
Those servicers who have not made enough permanent modifications will be called out and embarrassed. Recall that Geithner’s entire idea with his monthly mortgage servicer performance reports was to embarrass those firms that haven’t made many modifications. That hasn’t worked very well and now it seems Geithner and his team is trying another embarrassment model for the servicers. I don’t know about you, but when all the administration can think of is different ways to embarrass mortgage servicers, I don’t hold out much hope for this new campaign.
A guess a bit of a change to HAMP is that the puny incentives ($1000 per modification) will not be paid until the modification is permanent and monthly payments are reduced. To date, only 2,000 out of 500,000 or 0.4% of loans have been permanent modifications1. If that is the only plan for pushing servicers in the right direction, I fear that that will only push servicers right out of HAMP all together.
The word inside the Treasury Dept. is that HAMP is not really working but no one seems poised to create a new plan. I have 2 ideas, 1. Reduce Principal Amounts and 2. One Year Freeze on all Foreclosures.
Luckily the Senate is getting restless and they are pretending like they will create a National Foreclosure Prevention Program (like Philadelphia’s) where every delinquent home owner gets to have a court-supervised mediation1. Or they want bankruptcy judges to amend mortgages1.
It all boils down to the fact that servicers have zero incentive to modify loans and have more incentives to do a trial modification while still collecting delinquent fees.
“I don’t think [mortgage servicers] ever intended on doing permanent loan modifications1.” Margery Golant
1. U.S. Will Push Mortgage Firms to Reduce More Loan Payments. Peter S. Goodman. NY Times. 11/29/09.
For more about the run around between mortgage servicers and their customer’s regarding modifications see Goodman’s related article:
Winning Lower Payments Takes Patience and Luck. 11/29/09