The latest COP report just rips into Treasury for the lack of help for homeowners. Here's the juice:
HAMP will prevent only 700,000 foreclosures -- far fewer than the three to four million foreclosures that Treasury initially aimed to stop, and vastly fewer than the eight to 13 million foreclosures expected by 2012.
Get worse, the report basically says it's too late to really do anything about it. Nice huh, press releases, lots of warm buzz claiming government will help homeowners only to send them to a rat maze and they still lose their homes.
It is too late for Treasury to revamp its foreclosure prevention strategy, but Treasury can still take steps to wring every possible benefit from its programs. Treasury should enable borrowers to apply for loan modifications more easily -- for example, by allowing online applications. Treasury should also carefully monitor and, where appropriate, intervene in cases in which borrowers are falling behind on their HAMP-modified mortgages. Preventing redefaults is an extremely powerful way of magnifying HAMP's impact, as each redefault prevented translates directly into a borrower keeping his home.
The report also sums up nicely the fact foreclosure pays and that's due to the securitization process:
A major reason is that mortgages are, in practice, far more complicated than a one-to-one relationship between borrower and lender. In particular, banks typically hire loan servicers to handle the day-to-day management of a mortgage loan, and the servicer‟s interests may at times sharply conflict with those of lenders and borrowers. For example, although lenders suffer significant losses in foreclosures, servicers can turn a substantial profit from foreclosure-related fees. As such, it may be in the servicer‟s interest to move a delinquent loan to foreclosure as soon as possible. HAMP attempted to correct this market distortion by offering incentive payments to loan servicers, but the effort appears to have fallen short, in part because servicers were not required to participate. Another major obstacle is that many borrowers have second mortgages from lenders who may stand to profit by blocking the modification of a first mortgage. For these reasons among many others, HAMP‟s straightforward plan to encourage modifications has proven ineffective in practice.
Beyond this aspect, the Congressional Oversight Panel literally says Treasury outsourced their responsibilities to Fannie Mae and Freddie Mac, who in turn had conflicts of interests and seemingly protect these very servicers.
There was $30 Billion set aside for HAMP and the report estimates only $4 billion will be used.
Below is Senator Kaufman overviewing the report.
Meanwhile there is an Iowa attorney general claiming they will put people in jail for foreclosure fraud.
The leader of a nationwide investigation of foreclosure fraud told homeowners Tuesday that the probe will have some serious consequences for bankers.
"We will put people in jail," Iowa Attorney General Tom Miller said, according tohomeowner advocates present at the meeting in Des Moines.
Miller said the 50 attorneys general participating in the investigation want criminal prosecutions as part of a big settlement with home-loan providers. The probe launched this fall in the wake of news that the foreclosure processes at many large banks are as bogus as the lending practices that fed the housing bubble in the first place, as banks granted loans indiscriminately to feed derivatives-market speculation and failed to track original mortgage documents after packaging the loans and selling them to investors.
Several banks temporarily halted foreclosures shortly after some of the more egregious practices were revealed, but resumed seizing homes as the scandal fell off the front pages.
Other components of the proposed settlement would require banks to modify home loans and reduce debt burdens for customers whose homes are worth less than their mortgages.
"One of the main tools needs to be principal reductions, just like in the farm crisis in the 1980s," Miller told the assembled homeowners, adding that he also supported restitution for victims of wrongful foreclosure. "There should be some kind of compensation system for people who have been harmed."
Justice delayed is justice denied. Notice he mentions the farm crisis of the 1980's and principle reduction as the real answer.