Foreclosure Fail: Study Pins Blame on Big Banks

Foreclosure Fail: Study Pins Blame on Big Banks

by Paul Kiel ProPublica

Answers to homeowners’ questions about the Independent Foreclosure Review.The administration’s website for the foreclosure prevention program. Provides an FAQ, homeowner examples, and other tools to see whether you might qualify for the program.A list of HUD-approved housing counseling agencies nationwide.Tips for homeowners from the Federal Trade Commission.These rules lay out how mortgage servicers are supposed to conduct the program.A finance and economics blog that provides news and metrics on the state of the housing market.

Over the past several years, we’ve reported extensively on the big banks’ foreclosure failings. As a result of banks’ disorganization and understaffing — particularly at the peak of the crisis in 2009 and 2010 — homeowners were often forced to run a gauntlet of confusion, delays, and errors when seeking a mortgage modification.

But while evidence of these problems was pervasive, it was always hard to quantify the damage. Just how many more people could have qualified under the administration’s mortgage modification program if the banks had done a better job? In other words, how many people have been pushed toward foreclosure unnecessarily?

A thorough study released last week provides one number, and it’s a big one: about 800,000 homeowners.

The study’s authors — from the Federal Reserve Bank of Chicago, the government’s Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago — arrived at this conclusion by analyzing a vast data set available to the OCC. They wanted to measure the impact of HAMP, the government’s main foreclosure prevention program.

What they found was that certain banks were far better at modifying loans than others. The reasons for the difference, they established, were pretty predictable: The banks that were better at helping homeowners avoid foreclosure had staff who were both more numerous and better trained.

Unfortunately for homeowners, most mortgages are handled by banks that haven’t been properly staffed and thus have modified far fewer loans. If these worse-performing banks had simply modified loans at the same pace as their better performing peers, then HAMP would have produced about 800,000 more modifications. Instead of about 1.2 million modifications by the end of this year, HAMP would have resulted in about 2 million.

That’s still well short of the 3-4 million modifications President Obama promised when he announced the program back in early 2009. But it’s a big difference, and a reasonable, basic benchmark against which to compare the program’s failings.

The report does not identify these poor performing banks, but it’s not hard to ID them. A “few large servicers [have offered] modifications at half the rate of others,” the authors say. The largest mortgage servicers are Bank of America, JPMorgan Chase, Wells Fargo and Citi.

Bank of America in particular (the largest of all the servicers when HAMP launched) has been far slower to modify loans than even the other large servicers, as other analyses we’ve cited have shown.

Rick Simon, a spokesman for Bank of America, said the banks’ “home retention results are significant and in line with our industry peers to date.”

The Home Affordable Modification Program (HAMP) paid subsidies to mortgage servicers on the theory that doing so would convince them to embrace modifications. The authors say that voluntary approach apparently didn’t have much effect with the biggest servicers. They weren’t very good at modifying loans before HAMP was launched and weren’t much better after it launched.

The authors wrote that while they can’t be sure why these banks underperformed, they “may not have responded to the program since doing so would involve changing their business focus from processing and channeling payments to actively renegotiating loans. In addition, this may have involved significantly altering their organizational capabilities, such as building appropriate infrastructure and hiring and training servicing staff.”

That echoes on our reporting on how ill-suited the big banks were when it came to modifying loans. The result inside the banks has sometimes been chaos. As one Bank of America employee complained, “The whole documentation collection thing has got to be purposely not funded. Like, I can’t get a fax. I work for a huge bank that has tons of money, and you’re telling me that I can’t get a fax?”

Since HAMP’s oversight has been lax — the Treasury Department, which runs the program, has responded indulgently to mortgage servicers breaking HAMP’s rules — banks haven’t had to worry much about their low modification rates. (You can see this explained with a song. It’s also a big part of our book on the foreclosure crisis.)

A Treasury spokeswoman, responding to the new report, said HAMP had resulted in “one of the most comprehensive compliance reviews of mortgage servicing operations in the country. Servicers in the Making Home Affordable Program are subject to an unprecedented level of compliance oversight.”

The report did have some positive findings concerning HAMP. As we’ve reported, modifications in the program have been more generous to homeowners than modifications done outside HAMP. The authors also found that the program did boost the number of modifications — i.e. it caused modifications that likely would not have happened if not for the program.

The authors also say that HAMP might have induced more modifications if the program had not required such extensive screening of homeowners seeking a modification. From the program’s launch, the administration emphasized that the program wouldn’t help the wrong sort of “irresponsible” homeowner. That emphasis led to requirements that homeowners send in lots of paperwork to prove their income, which in turn further taxed the big servicers’ inadequate systems.

Despite the recent stabilization in home prices and a drop in the rate of homeowners falling behind on their payments, HAMP’s limited impact remains a very relevant issue. Even in the sixth year of the foreclosure crisis, the country remains saddled with an extraordinarily high number of loans in foreclosure — about 2 million. That backlog hasn’t improved much in the last couple years, meaning it’s still hard to forecast when the foreclosure rate will return to a normal level.


13 Responses to “Foreclosure Fail: Study Pins Blame on Big Banks”
  1. Kimmi says:

    If u didn’t realize HAMP was a TOOL for stealing homes, u weren’t paying attention. Fact!

  2. stripes says:

    The truth is, you can’t force people to pay for what they can’t afford. You can’t microchip, rent or tax insolvent debt. It can’t be sustained.

  3. stripes says:

    Lies…stop believing their LIES…! It’s mind control…they try to fill you with fear and anxiety to make you feel hopeless… your mind and free yourself..! Just remember….they owe a Gazillion dollars in fraud….they are suicide bankers and their debt can never be sustained. If we go will they…! That is the problem with stealing all of our wealth and jobs…When we can no longer afford to bail them out..they die. There isn’t enough wealth on the planet to pay their rent or tax bills…we can never bail out these greedy jerks….!

  4. lies is all they tell says:

    to atripes i hope you get this. I am going to wake you up. you are now going to tske the ………. pill. are you ready NEO??? please google federal reserve/ birth certificates. we are already debt slaves. the money we earn over our life time is already pledge to an 1913 bankrupt america. our lives are worth money. that is themoney that is loaned out by the fed reserve our money. next please google zeigieist addendum. there are a few watch # 2 1st ehn watch the others. next watch “the inside job” as you watch this , istne to the names , jot them down, now notice each person mentioned works in some capacity for our governmnet how convienent. you are now wide awake. please pass your newly found information on to your facebook freinds and family.
    remember the banks did not loan us any money, the true lend is not onany of our mortgages. there fore all the mortgages have a TILA violation wish null and voids the mortgages

    • stripes says:

      Oh WOW lies, you ARE brainwashed…! Don’t you know that is exactly what they want you to believe….? How can you be a slave to insolvent debt….? YOU CAN’T…UNLESS YOU ALLOW IT…! By the name you picked you should know… It’s ALL LIES…and ALL FRAUD…!

  5. Mystify says:

    And when the bank sends you a modification loan it says trial at the top, that is because they will gladly take your money and still continue to foreclose on you. They sent me paperwork and I didn’t even request it! Just say no!

  6. allisunra says:

    Let’s get real here. The banks have no incentive…none– to modify loans. They get a pittance from the government for this; conversely they get ten to thirty times the price of the foreclosed home from insurance, the government gives them additional money, with the added icing on the cake…they get to seize foreclosures, buy them back on the cheap and then hit up the suffering homeowner for the difference between the sale and the appraised value. What a racket!
    They also ginned up pre-mod fees for “working” the homeowner files to the tune of thousands of dollars which they add to the foreclosure fee burden..and collect.
    Truth : our government purchased about 97% of all non-performing loans thru Fannie and Freddie; kept them or returned them to the banks and Fannie and Freddie are actually foreclosing our homes.

  7. stripes says:

    WOW..CNBC’s Rick Santelli speaking out again this morning…Mr. Santelli said ..The teachers in Chicago are striking over being evaluated for their job performance and they are getting paid from bankrupt entities…!

    • stripes says:

      Earlier this morning, Mr. Santelli said….. The U.S. TAXPAYERS pay for everything….the FED just prints the paper and hands us their bag of IOU’s….

    • stripes says:

      This begs the question…Why are WE THE PEOPLE…in most cases, being forced or convinced we must pay bankrupt entities..? That is not only fascism but it is outright robbery!

  8. Bobbi Swann says:

    @ Bruce Boyles – let me ask you a question. If the HAMP program was intended to help halt the foreclosures then why did not the gov’t put restrictions on how the TBTF monies were to be spent? All that (taxpayer) money went right to the pockets of the TBTF employee bonus’s instead of retaining those monies to help stall the enevitable. Now, when the program is merely a pimple on the face they are trying to stop it from spreading to complete acne. Simply put, there was no intention of those monies to do anything but keeping the banking system in control of the gov’t. That’s where the problem lies….and like Stripes has said, they want complete communism and that’s exactly where we are headed. An example is more recently from the DNC/RNC conventions…who were the largest contributors to these campaigns??? Bankers! And who is putting forward their largest amount of capital into lobbyists to stop any regulatory action by the senate/congress? Bankers. If you are an attorney then you are educated…does not take a genius to figure out where all this is going!

  9. The more homeowners I represent the more I believe that the poor performance of modification is purposefully done. Banks do not lose documents that I send onto opposing counsel for the loan modification process. The loan modification process usually grinds to a halt about the same time the unrepresented Homeowner has default judgment rendered against them. In addition, many homeowners tell me that the loan modification representative told them they did not need an attorney or did not need to worry about the foreclosure complaint because the matter would be resolved through a loan modification. If banks take advantage of the poor performance of an understaffed and under funded loan modification department, isn’t that the same as purposely delaying the homeowner to take advantage of them

    • stripes says:

      An attorney told me a long time ago…don’t sign or agree to anything regarding the mortgage. It is a set up to fail..because, the banks debt is unsustainable and can never be repaid. These people claiming to own your mortgage are imposters. They want to take every property away from the people …I said…that is communism….he said…No..that is complete communism…that is what they want ….that is what this is all about…complete communism.

      It’s another Hitler Plan.

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