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.
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.
This article has been republished from ProPublica, an independent, nonprofit newsroom that produces investigative journalism in the public interest.
Next time you meet someone who's puzzled about the Underwater Voter phenomenon, hand them a copy of Merriam-Webster's Dictionary.Merriam-Webster added new words and definitions to their iconic dictionary last week. The sheer number of underwater homeowners and economic impact of underwater homes and the housing crisis compelled the dictionary editors to add "underwater" as a new word.It's official: the housing crisis and the currently 16 million underwater homes have left a permanent dent in our language. The word "Underwater" now has a new definition.
un·der·wa·ter adj \??n-d?r-?w?-t?r, -?wä-\: having, relating to, or being a mortgage loan for which more is owed than the property securing the loan is worth
Gabby Douglas won gold, but faced financial obstacles on her road to London.
Our Olympic athletes put everything on the line to represent the United States of America.When the country cheers on our Olympians, we can forget that they face many of the same problems as millions of Americans on their path to achieving their Olympic Dreams.Bronze Medal Gymnast Danell Leyva lost his home to foreclosure in 2010. His parents were living in Florida, the state second hardest-hit by foreclosures after the collapse of the housing bubble. The Leyva family owed over $326,000 on a home that later sold for $141,800. His step-father, a former gymnast and coach, describes how he lost half his students during the housing collapse:
"I was in a hard situation, like everybody else, three or four years ago when the housing market collapsed," he told the magazine. "We live in Miami where most people’s business is real estate, so we lost about 50 percent of our students. We looked at the students who were really good in gymnastics but whose parents were struggling now, and told them to pay us whatever they could each week: If you can pay 20 bucks, pay me 20 bucks. If you can pay 10 bucks, pay 10 bucks. And when things get better, we’ll go back to normal and you don’t have to pay me what you owe me; we’ll just start over."
Leyva isn't the only Olympian affected by Florida's housing bust. Swimming star Ryan Lochte's parents are facing foreclosure. Even America's sweetheart, gymnast Gabby Douglas, has been affected by the economic downturn. Her mother filed for bankruptcy earlier this year. Most of her debt came from a mortgage on modest home in Virginia.Millions of homeowners across the country are still suffering from the economic collapse. It isn't just a few over-leveraged homes, it's everyone -- even the Olympians we'll be cheering on tonight.
"More than 85,000 Rebuild the Dream members have signed a petition calling on President Obama to fire Acting Director DeMarco, and thousands more have made phone calls to the White House. We value the administration's continued pressure on DeMarco to embrace principal reductions -- including Treasury's repeated offers to provide assistance and incentives -- but the time for more forceful action has come. This community will continue demanding that our leaders provide real hope to homeowners, including principal reductions that will keep families in their homes and expanded refinancing options that will save millions of homeowners hundreds each month."- Ian Kim, Managing Director of Rebuild the DreamWant to catch up on the news surrounding Ed DeMarco? We have a miniature roundup ready for you:
- New York Times Columnist Paul Krugman writes, not one, but two editorials calling to fire DeMarco.
- Even Treasury Secretary Timothy Geithner writes a strongly worded letter opposing DeMarco's decision.
- Politico points out many progressive groups, including Rebuild the Dream, want DeMarco gone.
- Slight humble-brag: Our CEO Natalie Foster was mentioned in articles in the Huffington Post and San Francisco Chronicle
- And yes, it is absolutely possible for Barack Obama to replace Ed DeMarco.
Wow. After Ed DeMarco announced that he would block any plan helping millions of homeowners through principle reduction, Rebuilders stood up. Over 115,000 have signed our petition calling on President Obama to fire Ed DeMarco and over 25,000 have signed up in the last 24 hours!Check out the email by our CEO, Natalie Foster, and join the call: Fire DeMarco!
Rebuilder,Remember Ed DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which regulates the government mortgage giants Fannie Mae and Freddie Mac? He's back in the news.DeMarco is the Bush appointee who has been dragging his heels and blocking Fannie and Freddie from engaging in targeted principal reductions (resetting home loans to fair market value) for struggling, underwater homeowners on the grounds that it would cost the taxpayers too much.Today, two things happened. First, FHFA produced a study that said principal reductions would actually save taxpayers more than a billion dollars. And then DeMarco announced that he still wouldn't allow any principal reductions!1Tell President Obama: If DeMarco won't change his mind, he needs to change jobs. Fire him now!Almost 90,000 of you have already called for DeMarco to be fired. And President Obama is listening -- his administration has pushed DeMarco to drop his opposition and offered the Treasury Department's help to Fannie and Freddie in making it all work. Today, Secretary Geithner even released a letter challenging DeMarco's logic and calling on him to change his mind.2It's important to know we've got allies in the White House. But while homeowners are still struggling to hang on to the homes where they've built lives and lasting memories... it's just not enough. DeMarco needs to go.DeMarco is now officially out of arguments. Principal reductions are the most direct way of helping people whose home values plummeted after the banks crashed the economy, but are left owing those same banks thousands more than their homes are worth. They would save taxpayers money by preventing losses from default and foreclosure. The program is already designed to weed out people who don't really need help -- in fact, the bigger problem is that it's not broad enough!And most importantly, this would keep families from losing their homes! This is nothing more than callous, cold-hearted opposition to something that would help millions of real people instead of banks.Add your name now.This fight over homeowners is the epicenter of the huge debate going on in our nation today. At question is whether our government works for big banks, or for the middle class... and we need our leaders to pick the right side.Let's go,Natalie and the rest of the Rebuild the Dream TeamSources:1) "Regulator Rebuffs Obama on Plan to Ease Housing Debt," NY Times - 7/31.2) "Letter from Secretary Geithner to Acting FHFA Director DeMarco," U.S. Treasury Department - 7/31.
Yesterday, Rebuilders from across the country spoke up for homeowners and demanded a vote to force banks to allow responsible homeowners to refinance their mortgages at today’s record-low interest rates.Hundreds of calls have been reported so far! If you haven’t already please take 60 seconds to call your senator and demand they pass this commonsense bill before the August recess.Here's yesterday's email from Ian in case you missed it:
Rebuilder,This week Rebuilders in swing states are delivering tens of thousands of your signatures to local Senate offices, demanding that Congress force banks to allow responsible homeowners to refinance their mortgages at today’s record-low interest rates.Homeowners are in serious trouble, while banks rake in record profits and Congress sits on its hands. Our efforts have definitely got their attention, but right now, we’re hearing conflicting reports about Congress's willingness to pass this legislation. So we don’t know for sure what they plan to do.If we can force a vote, it will help make the housing crisis an election year issue. So we need to figure out -- fast -- where the Senate stands, because we only have one week before Congress goes on recess. After that the only thing they will care about is the November election.Can you take 60 seconds to call your senators to find out their position on homeowner relief legislation?Just click here to go to our call page. We have all the information you need, including:
We're sending this message to enough people to get about 5 phone calls per senate office, which should be just enough to get the information we need. And along the way, we'll also send a clear signal that everyday voters really care about this solution. That could be enough to force a vote.This is a commonsense proposal that will keep folks in their homes. There’s no reason Congress shouldn’t pass this -- but we all know how Washington works.If we can just force a vote, however, then the millions of 'Underwater Voters' will know who to hold accountable in November for Washington's inaction.Click here to go to our call page and let us know where your Senators stand on homeowner relief legislation.Speak up today and let them know you're paying attention, that you vote, and that you'll remember what they did (or didn't do) while people were losing their homes.Thanks,Ian and the Rebuild the Dream team
- Your senators' phone numbers
- A quick script for what questions to ask (the whole call should take under a minute)
- A form where you can report back what you found out
A house is not just a piece of property -- it's a space for families and friends to make memories, share struggle and triumph and happiness, and feel safe and secure.For millions of Americans, that's all slipping away, in the most heartbreaking ways.Dozens of Rebuilders have shared their stories of loss and hardship on our America Underwater Tumblr blog. With the news dominated by the latest polls and politics instead of what's really happening to America, we couldn't think of a better time to get this out there.Check out the America Underwater photo blog and share with your friends and family -- Tweet it, share on Facebook, email it. Lift up the voices of other Rebuilders.A few months ago, in partnership with The New Bottom Line, we asked Rebuilders across America whose homes were underwater to submit a photo of themselves standing in front of their home with a piece of paper denoting how much their home was underwater -- meaning they owed more on their home than it was worth. Dozens of homeowners sent in their stories and photos.You can't read these stories and stay on the fence about helping homeowners. If you share this blog and even one friend reads it, you've created real change.We are quickly approaching a vote to pass legislation that would allow homeowners who are current on their payments to refinance their homes. Reading these stories reminds us of what is really at stake here. Places where memories are made. Places for families and friends to gather. Homes.Chances are, you know someone whose home is underwater. It is painful, frustrating, confusing, and isolating. When someone shares their personal story, they start feeling like they have the power to change things. When people feel empowered, they are moved to action. When people are moved to action, it is almost impossible to stop them.Please read the America Underwater Tumblr photo blog and share if you feel moved.
And so I listen. I feign dispassion but I'm not fooling anybody. Somehow they can tell that I care and thank me even as they admit that it isn't my fault, that it isn't my responsibility to listen. I've stood inside another's dream for an hour as they spoke, not really to be heard but to say goodbye - to leave the ghosts behind.The anonymous realtor writes about the process of foreclosure and the almost unbelievable stories that the homeowners share. As anyone can tell you, a home is more than justa a house. It's a powerful place filled with memories.
Sometimes the kids are there, maybe waiting in the car, maybe not. I see the marks on the wall showing how the kids grew over the years. I see the anguished poetry scribbled on the wall by stoned teenagers and the occasional hole punched in the wall. One woman handed me the key to her reinforced bedroom door - during the divorce her now ex-husband was still living in the house and she had to barricade herself in at night. Another said "right there is where I found my son - he couldn't handle losing the house".You can read the entire story on Reddit.