Why Hamp Failed

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We’ve all heard about HAMP, but why are very few people actually getting approved for Obama’s Housing Affordability Modification Program (HAMP)?  Besides, it costs the “banks” nothing …so what’s the problem here?

Facts are, the HAMP program was born out of the good intentioned but ill-informed legislators.  You see, Congress assumed that banks were actually doing the right thing…like actually owning the promissory note.  As part of the HAMP requirement (to be able to collect the money that is set aside for distressed homeowners), all the bank has to do is to testify and prove that they own the debt/promissory note.  Simple.  Right?

Well,, by now you should be aware that these “banks” are nothing more than servicers and do not own the debt/note.  And if they don’t own the note, they can not participate in the HAMP program…and so when you try to apply for such a loan modification program to get relief, invariably, you will be denied or be told that participation in the HAMP program is optional…and the lender has decided not to participate in the program.

Is this beginning to make sense now?

They don’t own the note!  And if they don’t own the note, they can not modify the note, nor receive relief from HAMP.

We are Not in the Loan Modification Business

In a recent deposition by a Chase employee, he states that “they are in the foreclosure business…not the loan modification business.”  It is enough to drive you crazy.  Here they are representing that they not only have the authority but the ability to do a loan modification with you where in fact, all they are interested in doing is to lure you into foreclosure (by requiring that you are 60 to 90 days late before they can talk to you) and then require you to jump through as many hoops as possible.  I have known people who have submitted their application 10+ times…and are told “you make not enough money”  and then in the next response they say “you make too much money to qualify”.

It is utter nonsense.

It is all a scam.

There are these things called “Credit Default Swap”(CDS).  You may have heard of them but don’t know what these are.  A CDS is essentially an insurance policy to cover the “lender” in the event of a default by the borrow.  When a borrower defaults, the lender gets paid…up to 30 times the face value of the loan.  In the interest of brevity, we will not go into how this is possible.  You can read about it in my next book.

So, for a CDS to trigger, the property must be be in default (ie. late 60-90 days).  Once this is triggered, the investors are all paid.

This leaves the servicer in a lurch.  You see, a servicer makes money in the fees they collect.  They make fees when you are late.  They make fees when they have to process your foreclosure, they make fees every time you submit a loan modification request, etc.  The more they interact and “service” your account, the more fees they make.  If your loan is modified, they don’t get paid.

Paid for Performance

Here’s where it gets really wild.  A servicer is paid a fixed amount based on a bid process for a foreclosure.  The faster they foreclose, the more they receive in bonuses.  The trick here is, if they don’t or can not foreclose…they don’t get paid.

This really puts the incentive for these servicers to cut corners, do robo-signings, and anything and everything possible to churn through these foreclosures….and homeowner’s rights be damned.

So, ultimately, this is just a game for them.  These people have no compassion for you, your family or your home.  All it is is big business, and money.

So, before you get scammed again.  Next time you talk with your “lender”, be sure to ask them and require them to stipulate:

“Do you have the authority to modify my loan?”

“Who owns my note?”

“Do you have permission from the owner of the note to modify my loan?”

“Can I get it in writing?”

If you do this, you will be surprised at their reaction.  All the sudden, they don’t want to talk to you any more.  They know that you are onto their scam.

Don’t be fooled.  Educate yourself!

Spread the Word

We need to let other homeowners who are trying to do loan modifications know about this scam.  It’s just not right.

Please forward this post to your friends.  Let them know.  It’s time to get mad.

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