US Treasury Department Asleep as Borrowers Race Lender Foreclosure Vs Their HAMP Loan Modification

With the US Treasury Department announcing this week that they will be cracking down on lenders who have not followed through on loan modifications, they are still asleep at the wheel. Most borrowers are in a race to try and modify their loan at a lenders snail pace, as the same lender accelerates the foreclosure of their home.

HAMP benefits far outweigh any desire for the lenders to want to modify. The program in its current form is just another way for banks to receive additional funds even after being bailed out by taxpayer money. First, lenders are rewarded dollar for dollar in the reduction of DTI from 38% to 31%. Second, they are rewarded and paid money through short selling and 'cash for keys" directly from the US Government. This means your tax dollars pay for the lenders to have people leave their homes. Third, HAMP rewards through money lenders who do "any type of" modify, (including a non-permanent modification), by give them $1000 dollars upfront and then payments for several years ahead.

Most lenders, do not slow down the mortgage foreclosure process when a borrower applies for HAMP. Instead, many like IndyMac, also know as OneWest Bank, accelerate the foreclosure process without every slowing down. So, for most borrowers, the foreclosure happens even while they are still on the phone trying to work out the loan modification. As Lenders, did their best during the housing boom, to find ways to prostitute the banking system to their benefit, they continue to do so through the beauty of HAMP. This is done by "approving" the borrower for a trail period modification, thus securing the reward money from the US government. Once the trial period is over, most borrowers, who had made the trial period payments on time find themselves stressed. They receive a denial and a foreclosure acceleration at the same time.

Emails received from one lender, IndyMac Bank,prove that this is the game that lenders are playing against the government. The borrower discussed in the emails, has put in for a loan modification at the beginning of the year and according to HAMP guidelines had meet all of the qualifications. As the modification department told him his loan was under review, at the same exact time IndyMac was accelerating the foreclosure and had set a auction date. Through family he was able to bring the loan up to date but his financial position has not changed. Then almost immediately received a letter IndyMac stating he didn't qualify through HAMP because his loan was not "seriously delinquent." He stated to me, "So what is the answer?"

The Treasury Department needs to do more in the way of not allowing lenders, who brought us to the near collapse of the US economy, to access loopholes that prostitute the system. Here are several recommendations that should be enacted.

First, the loan modification should be pre-qualified from the borrower, just as they do loan packages. If it initially meets certain requirements, all foreclosure proceeding should be halted.

Second, lenders should not receive any funds until the modification is completed. A reasonable deadline for a modification to be completed from beginning to end needs to be applied.

Third, all trial modifications should cease. There is no reason for them and they serve no purpose other than to allow the lenders to once again scam the system for additional bailout money.

Fourth, severe fines should be imposed upon lenders/servicers who do not show adequate participation based on a schedule of required amount of modifications that must be meet monthly. Penalties should be severe, immediate and would require a assignment of a government board placed within the lender/servicer to oversea.

Fifth, creation of a consumer hotline to report lenders abuse of HAMP system and lack of cooperation. Upon a certain number of complaints, government would have to intercede.

Until such actions as the ones described are done, Obama's Home Affordable Modification Program will continue to fail homeowners and reward lenders for using the system as another form of bailout money. Once again our government has created another program to fail for the American public and to reward those that have raped the financial system. So much for Robin Hood, who stole from the rich to give to the poor. Seems that "Robbin From The Hood" is more in tune with today's government and financial institutions polices and actions. The reality is millions of borrowers qualify, but only the chosen ones from lenders get the brass ring.