Econintersect: The federal government launched a program called HAMP (Home Affordable Modification Program) in 2008 and expanded it as of 01 June 2012. According to a recent Bloomberg/Businessweek article, only 1.1 million have been successful enough to be considered permanent. That is less than 10% of the total of over 12 million mortgagors who were underwater at the height of the crisis in 2009. The government program was referred to recently by Bloomberg as “ham-handed“. Bloomberg said that the “well-intentioned program” was “as clunky as its name“.
It now appears that there may have been bank collusion to help prevent HAMP from being more effective.
According to affidavits filed last week in a Massachusetts law suit, Bank of America may have run programs that pushed eleigible homeowners into foreclosure rather than into HAMP. From CNBC:
“We were told to lie to customers,” said Simone Gordon, who worked in the bank’s loss mitigation department until February 2012. “Site leaders regularly told us that the more we delayed the HAMP [loan] modification process, the more fees Bank of America would collect.”
Testimony from former Bank of America employees indicates that the bank had a corporate-wide systematic program to keep mortgages out of HAMP and push them into foreclosure. Further from CNBC:
“Based on what I observed, Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications while leading the public and the government to believe that it was making efforts to comply with HAMP,” said Theresa Terrelonge, a Bank of America collector until June 2010. “It was well known among managers and many employees that the overriding goal was to extend as few HAMP loan modifications to homeowners as possible.”
The reason for the policy is alleged to be the greater fees banks could collect from the foreclosure process compared to going through a Hamp process. As many cases of possible fraud associated with the financial crisis, compensation schemes that rewarded transactions rather than for outcomes appears to be at work again here.
Bank of America has denied all charges. From Bloomberg:
Bank of America has helped the most homeowners under HAMP and is committed to assisting customers at risk of foreclosure, Rick Simon, a company spokesman, said Friday in an email.
“At best, these attorneys are painting a false picture of the bank’s practices and the dedication of our employees,” Simon said. “While we will address the declarations in more depth when we file our opposition to the plaintiffs’ motion next month, suffice it to say that each of the declarations is rife with factual inaccuracies.”
Sources:
- Home Affordable Modification Program (MakingHomeAffordable.gov, 28 May 2013)
- As Foreclosure Fade, Ham-Handed HAMP Keeps Going (Kyle Stock, Bloomberg Businessweek, 30 May 2013)
- Bank of America Paid Bonuses to Foreclose: Lawsuit (John W. Schoen, CNBC, 17 June 2013)
- Lawsuit: BofA gave bonuses, gift cards for meeting foreclosure quotas (Hugh Son and David McLaughlin, Bloomberg News, Charlotte Observer, 14 June 2013)
