Not only is Hamp a total failure,  entering into any type of modification agreement not only puts you in a far worse place than before you entered the agreement, you also wave all of your rights and defenses that you had against the pretender lender that will foreclosure on you when you are declined… Read the fine print in these “modification packages”, you will be surprised.

From the Ticker
Karl Denninger

HAMP: A Colossal Failure Of Leadership

Mark Hanson (of Hanson Advisors) once again digs up a gem.

He’s been on the HAMP/HAFA nonsense since it began, but today I would like to focus on one snippet out of his latest missive, to be found right here:

Uh, yeah.

Gross debt-to-income ratios of 59.8% after modification?

Folks, do you understand what this means?  The average gross income of these folks is $2,702, or $32,433 annually.  But their debt-service ratio, or amount of debt post-modification, is 59.8%.

That means they’re spending almost as much on their other debts as they are on their house payment, even after modification.

Let’s break this down.

The person with a $2,702 monthly income has the following “come out” of their check:

  • Their debt service of $1,616, of which half, roughly, is their (modified) house payment.
  • FICA and Medicare tax of 6.2 and 1.45% respectively, or $206.70.
  • Federal withholding of approximately 10% (slightly more, actually) assuming a married person, or approximately $300.  (If single head-of-household it is somewhat higher, if married with dependents it is somewhat lower.)

This “average person” has $579.30 once their mandatory debt service and withheld taxes are deducted, and from this they must pay:

  • Electrical, water, sewer, and garbage disposal services.
  • Health costs, if any (including deductions from their paycheck, co-pays, etc)
  • Automobile insurance for their car, along with gasoline.
  • Food
  • Hazard insurance on the house (if not included in the back end ratio, and it frequently is not.)
  • Any other expenses (e.g. clothing, school supplies if there are kids in the home, any sort of recreational activities, etc.)

All on $600 a month for a family of four?  You’re joking, right?

Good luck just buying your food and paying the electric bill on what’s left!

Continue reading here…