Modifications: The Real Story
For the last for months, I have watched the Obama Administration, the media and other third parties criticize the Mortgage Modification Industry to the point that many shops are being forced to close their doors. The negative press labeling an entire industry “as fraudulent” is unbelievable when it is reported that approximately 5.4 million people are in some form of delinquency with their mortgage.
I am writing to you because the real story is being buried by headlines of mortgage modification company scams and the immediate call for government legislation. I agree that the industry needs to be regulated immediately and that there are individuals and companies taking advantage of homeowners in distress and it must be stopped. That story has been told.
The real story, the one that is not being told, lies in the following questions:
- Why loan modifications are not being done in mass by companies who have received tarp money to survive?
- Why there are approximately 5.4 million homeowners in default with no relief in sight?
- How many more millions of taxpayer dollars will be spent on the “linchpin” of the Obama Administration’s program, mortgage modifications, when it appears to be all smoke and mirrors?
The headline should read: The Obama Administration promised to help people stay in their homes…where are the loan modifications?
Recent articles and papers have been written to support my claims and I have referenced the links to these articles below.
A recent paper published by the Federal Reserve Bank of Atlanta (http://www.frbatlanta.org/filelegacydocs/wp0915.pdf) discusses whether it’s really in the interest of investors and their servicers to modify delinquent loans versus completing a foreclosure. There have been estimates that the gains from modifying loans rather than foreclosing on them runs as high as $180 billion, more than 1 percent of GDP. The author of the paper disagrees and notes, “While contract frictions (potential law suits from investors) are one possible explanation, another is that the gains from loan modifications are in reality much smaller or even nonexistent from the investor’s point of view.” He further notes “Even though it may be in society’s interest to make modifications (because of the large externalities from foreclosure), it may not be in the lender’s interest to do so, whether or not this lender is an investor in a mortgage-backed security or portfolio lender.”
Mortgage Servicing Companies sign securitization agreements that require them to act “AS IF” they owned the loan in their own portfolio, for the investors they are paid to represent. More government waste? http://www.forbes.com/feeds/ap/2009/05/30/ap6484004.html
Non for Profit Organizations completing loan modifications also on the governments’ wasteful spending agenda. These organizations receive government funding and lender payment for assisting homeowners with loan modifications. Can they really be trusted to be unbiased third parties assisting the homeowner in procuring the “best loan modifications” or are they simply selling the lenders “canned” modification offer for profit? Most people are unaware that these agencies are paid by the servicer when the modification is completed. We can eliminate the government’s funding of non for profit agencies that assist with mortgage modifications and allow private mortgage modification companies to do the work saving the taxpayer millions while only costing the borrower a small fee. Why should the taxpayers continue to pay for the housing crisis? My clients pay me to a complete a service there is no taxpayer money involved. We can create more jobs for our economy and save the taxpayers millions simply by regulating the mortgage modification industry.
A recent study found that 50% of loan modifications fail only to the detriment of our economy and communities. Can the servicers and investors be trusted to police themselves and do what is right for homeowners? It would appear they cannot be trusted based on the re-default rates of loan modifications. Are the modifications being negotiated right now in the best interest of investors or homeowners? Will the lenders be allowed to continue to “fix” their balance sheets by imposing poor modification solutions on uneducated homeowners, bringing their loans current for a short period of time only to have them default in the future? This system will only create more toxic assets that will continue to pollute the market and our economy.
The question I continue to ask is who is really protecting the homeowner, our community and the economy? Is anyone watching what is going on? I am a small business owner trying to make a living by providing a service. It would appear the government “linchpin” program needs some work and questions need to be asked about who is actually monitoring its progress because its current design is destined to fail.
All the negative publicity about poorly run mortgage modification companies and their scams is only covering up the real issue of who will give the homeowner the ability to choose a loan modification negotiator? Will the only path available to homeowners be non for profit assistance and homeowner “self” negotiation? It would appear by the data available to us that a homeowner’s lack of knowledge about modification options, such as principle and/or rate reductions, places them at the mercy of the lenders and their incentive based loss mitigation process.
On a final note, I read today a story in the NY Times, Promised Help is Elusive for Some Homeowners, about a Mesa Arizona woman who has not defaulted on her mortgage but has lost her job and is trying unsuccessfully to negotiate with her lender Countrywide. A quote in the article is from a Treasury spokeswoman, Jenni Engebretsen, when asked how many loans had been modified. “Ms. Engebresten declined to say, noting that the Treasury was working with mortgage companies to “fine-tune reporting systems”. If you have no tools to know how many are completed, then you have no tools to monitor their success. http://www.nytimes.com/2009/06/03/business/03mortgage.html
Craig Antonucci Article Source:http://www.articlesbase.com/mortgage-articles/modifications-the-real-story-980058.html
www.modify-it.com
