A Plan to Stem Foreclosures, Buried in a Paper Avalanche

[azurnoir]

Source: NYT

LOS ANGELES — Somewhere on earth, there must be a more difficult task than this: persuading American mortgage companies to lower payments for homeowners who can no longer afford their loans. But as Karina Montenegro struggles to accomplish this feat for a troubled borrower, she strains to imagine a more futile pursuit.

Ms. Montenegro, an intern at a local company that seeks loan modifications, dials Washington Mutual to check on the status of an application for a homeowner whose income has plummeted. She endures a Muzak-scored purgatory while on hold. Syrupy-voiced customer service representatives chide her for landing in the wrong department. She learns that the documents her company sent in have simply vanished — for the third time since November.

Ms. Montenegro and her colleagues suffer these sorts of excruciating exchanges all day long. It is a potent indication of the difficulties afflicting the $75 billion taxpayer-financed program created by the Obama administration in an effort to avoid foreclosure for as many as four million distressed homeowners.

Mr. Wasser has already negotiated a solution: GMAC will accept only $270,000 in repayment, allowing the couple to get a fixed rate mortgage from another bank.

But that suddenly is in disarray. The Piercys have been making their payments, but GMAC has been putting their checks aside, holding the money as “loss mitigation fees,” until their application is completed. It has notified credit bureaus that their loan is more than 90 days delinquent, which has lowered their credit score, disqualifying them for the next mortgage.


Read more: http://www.nytimes.com/2009/06/29/business/29loanmod.html?pagewanted=2&partner=rss&emc=rss

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IMO this is a shell game banks and mortgage companies are playing with tax payers

[flvegan]

1. These lender/noteholders are too fucking stupid to even exist.

I could do a page long rant, but it wouldn't matter. It's funny that these huge financial icons don't fucking begin to understand the very, very, VERY basics of finance.

[dysfunctional press]

2. what makes you think that they don't understand the basics of finance?

[destes]

3. I presume "the basics of finance" they don't understand are the

Poor Richard's Almanac basic rules. Like, "A bird in the hand is worth two in the bush" or "you can't get blood from a turnip."

On every level, working from the bottom toward the top, financial entity employees simply refuse to show loss but instead, let the next level up take the heat. This juggling act is how the mess got started and these folks think that as long as they keep the balls in the air, maybe just until the next election, they'll be able to make it through, business as usual.

The reality of the market is this: If I can't sell my house then it's value could well be zero. If I'm FORCED to sell it at market value and that value is less than my debt, depending on my income stream vs remaining balance due I may well default(hang the consequences)rather than come up with "money for nothin". At this time there is still no debtors prison.

[melm00se]

4. your comments are all well and good

but something that gets overlooked is that GMAC/BoA/most banks are not the owners of the mortgage, they are acting as servicing agents for the current owner of the mortgage and figuring out exactly who that is is a challenge. Mortgages are bundled and sold into pools who are then bought and then split up again and sold again.

While the servicing companies know where to send the check, it is determining who at the that address has the authority to renegotiate the loan terms that is the monumental task and then, once given the instructions from the mortgage owner, the servicing company must execute as instructed or be liable for breach of contract and subsequent damages.

So in the above case, if the mortgage owners' authorized said to hold payments as "loan loss mitigation" and the contract/short sale agreement allows for it then that is exactly what the servicing company must do.