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.
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
Rebuilders are delivering over 30,000 signatures to Senate offices in Ohio, Maine, Florida and Massachusetts as part of the Hope for Homeowners campaign.Why? To demand Congress force banks to let responsible homeowners refinance their mortgages at today's low interest rates. The package of home mortgage relief legislation (S. 3085, S. 2909, S. 3407) will pave the way for responsible homeowners to reduce their monthly bills and stay in their homes.Patricia in Massachusetts and Faye in Maine were two of the first to deliver their petitions. Faye is a retired grandmother who originally bought her currently underwater home to be closer to her grandchildren. After being laid off from her job, her little house isn't becoming the nice retirement home she planed. Patricia is a single mom and an underwater homeowner who has lived in her home for eight years with excellent credit and current mortgage payments. Both these rebuilders would benefit from the lower payments from interest rate reduction on their homes through the home mortgage relief bills.
Faye in Maine: "Delivering the petitions felt like an honor. The responsibility was daunting. Senator Snowe's office was most gracious, and even helpful.Area Representative for York County, Peter Morin was most accommodating, but the delivery of the petitions to Senator Collins' office into the hands of her office representative met with a more non-committal response.I am grateful to have been able to provide some support and " voice" for the under- represented, and challenged folks of Maine whose housing values have been so crushed. We all deserve better."
Patricia in Massachusetts: "Like millions of other Americans, my home is underwater and at risk of foreclosure.If I had the ability to refinance my mortgage I could save hundreds of dollars a month -- and my son and I could stay in our home. But even though I haven’t missed a payment in six years, I’m unable to get any relief.However, a few months ago I received an email from Rebuild the Dream asking me to share my housing story. Last week I delivered thousands of signatures in support of Hope for Homeowners legislation to Senator Scott Brown along with a letter sharing my story and explaining how the bills would help me and my family.When I went to Bank of America to discuss my loan and see if I was eligible to refinance, they told me they no longer held my loan and directed me to Fannie Mae -- who has ignored my repeated attempts to reach them. But when I delivered thousands of signatures to Senator Scott Brown’s office, it got his attention. His staff followed up immediately offering to help and to strongly consider supporting the legislation currently before Congress.Too often voices like mine get ignored while the big banks always find an open door. That’s why the work Rebuild the Dream is doing is so important.I know I’m not the only one like this. Lots of people are suffering, and the banks aren’t helping, and we have to do something to help people out, or else they’re going to lose their homes."
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.