Has Mortgage Modification failed?

Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Designed to help prevent foreclosures by incentivizing and giving legal protection to previously indifferent middle-men servicers it isn’t producing anywhere near the number of modifications that were anticipated. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why.

Servicers Gaming the System Over the past few months, more and more stories have come out about servicers finding ways to line their pockets while consumers and investors are getting shortchanged. The one that brought the gaming issue to everyone’s attention is Peter Goodman’s article in the New York Times. Here are my favorite three since then:

Story One, Financial Times:

JPMorgan Chase, one of the first mega banks to champion the national home loan modification effort, has struck a sour chord with some investors over the risk of moral hazard posed by certain loan modifications.

Chase Mortgage, as servicer of several Washington Mutual option ARM securitizations it inherited last year in acquiring WAMU, has in several cases modified borrower loan payments to a rate that essentially equals its unusually high servicing fee, according to an analysis by Debtwire ABS. Simultaneously, Chase is cutting off the cash flow to the trust that owns the mortgage. In some cases, Chase is collecting more than half of a borrower’s monthly payment as its fee.

Story Two, Credit Slips

Countrywide Home Loans (which is now part of Bank of America) has been the subject of proceedings in several bankruptcy courts because of the shoddy recordkeeping behind their claims in bankruptcy cases. Judge Marilyn Shea-Stonum of the U.S. Bankruptcy Court for the Northern District of Ohio recently sanctioned Countrywide for its conduct in these cases…The resulting opinion makes extensive reference to Credit Slips regular blogger Katie Porter and guest blogger Tara Twomey’s excellent Mortgage Study that documented the extent to which bankruptcy claims by mortgage servicers were often erroneous and not supported by evidence. Specifically, the court adopted Porter’s recommendation from a Texas Law Review article that mortgage servicers should disclose the amounts they are owed based on a standard form. Judge Shea-Stonum found that such a requirement would prevent future misconduct by Countrywide.

Mary Kane, Washington Independent

Even as the Obama administration presses the lending industry to get more mortgage loans modified, the practice of forcing borrowers to sign away their legal rights in order to get their loans reworked is a tactic that some servicers just won’t give up on…

In a dramatic confrontation last July, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, told representatives of Bank of America to get rid of waivers in their agreements. His pronouncement came after Bank of America representatives denied they were using the waivers – and Julia Gordon, senior policy counsel at the Center for Responsible Lending, produced one from her briefcase.

Check out those stories. The first has the servicers set the payment to maximize their fees, and not anything beyond (to make sure very poor and desperate mortgage holders are able to pay each month), making sure their interests are above the lender’s ones. The second one shows that it is very difficult to determine incompetence from maliciousness with the way that servicers are handling their documents on the borrowers end. And the third would be a great piece of classic comedy if it wasn’t so terrible. I bet these guys sleep like babies at night too.

The servicer’s interests are their own – and if they can rent-seek at the expense of the parties at either end, ‘nudging’ them with $1,000 isn’t going to make a big difference.

Redefault Risk There’s another story where the servicers aren’t modifying loans because it isn’t profitable for the lenders. There’s a very influencial Boston Federal Reserve paper by Manuel Adelino, Kristopher Gerardi, and Paul S. Willen titled “Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization.” They point out that, according to their regressions, redefault risk is very high – the chances that even under a modification there will still be a foreclosures, so why not foreclosure immediately?

I’d recommend Levitin’s critique (Part 1, Part 2), notably that the securitization regression doesn’t control for type of modification, specifically they don’t variable whether or not the modification involved principal reduction, which is probably does for the on-book loans and not for the off-book loans.

But regardless, this is a valid argument as U3 unemployment starts its final march to 10% we are going to see consumers become riskier and riskier, and that will be a problem for modification that will get worse before it gets better.

General Inexperience Servicers were never designed to do this kind of work; they don’t underwrite, and paying them $1,000 isn’t going to give them the experience needed for underwriting. It’s hard work that requires experience and dedication, skills that we don’t have currently. (Isn’t it amazing with the amount of money we’ve put into the real estate finance sector over the past decade we have a giant labor surplus of people who can bundle mortgages into bonds but nobody who can actually underwrite a mortgages well?)

But isn’t it at least possible that as the sophistication of the servicers increase, they’ll become equally good at learning how to game the system? I don’t mean this as a gotcha point, because I think it is the fundamental problem here, and there isn’t any way to break it. The servicers get paid when they have to get involved, and learning the contracts better will give them more reasons to get involved.

It’s been know for several years now that this was a weak spot in the mortgage backed security instruments. In the words of the creator of this instrument, Lewis Ranieri in 2008: ” The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary. And part of our dilemma here is ‘who is going to make the decision on how to restructure around a credible borrower and is anybody paying that person to make that decision?’ … have to cut the gordian knot of the securitization of these loans because otherwise if we keep letting these things go into foreclosure it’s a feedback loop where it will ultimately crush the consumer economy.”

He’s right of course; the people we are trying to ‘nudge’ into acting as the fiduciary are going to be more than happy to rent-seek these instruments while they crush the consumer economy. This ‘gordian knot’ has to be broken, but it’ll need to be done outside the instruments – in the bankruptcy court.

31 responses to “Has Mortgage Modification failed?

  1. He’s right of course; the people we are trying to ‘nudge’ into acting as the fiduciary are going to be more than happy to rent-seek these instruments while they crush the consumer economy. This ‘gordian knot’ has to be broken, but it’ll need to be done outside the instruments – in the bankruptcy court.

    That would be a step in the right direction, but I think we’re going to have to go alot farther “outside” than that.

    Feudalism is so entrenched that there’s no way we’ll be able to dislodge it with baby steps vs. particular rent-seeking practices, a reform here, a reform there. Such reforms are impossible (as we’ve seen, they’re simply defeated or gutted one by none).

    To carry the step metaphor further, where it’s a broad abyss you must cross, you cannot try to take small steps across it. Clearly only an intrepid, confident leap will carry you across.

  2. Lavrenti Beria

    “Has Mortgage Modification failed?”

    Do dogs relieve themselves at picnics?

  3. Another issue on the Refi’s is that half of the mortgages outstanding are owed to the the D.C.lenders. The other half is owed to the banks or has been securitized.

    The rules are different between these groups. It is easy to get a Mod. from one of the Agency lenders. They cut back on interest rates, fast. But they just add more principal and make it likely the borrower wil default again in less than 6 months.

    The private lenders are trying to get people out of the house and end the problem. They look for deed in lieu of payment transactions. They do not want to do a mod that just ends up as a new problem loan.

    So the two groups have different objectives. One a social one driven by DC. The other a commercial approach to cleaning the decks of bad loans.

    You are getting neighborhoods where the houses with GSE loans are filled with people that are underwater and waiting for Godot. The other half of the houses on the block have been sold in a short sale and there are new owners at much lower values.

    Some people are walking away from the ownership nightmare with little or no consequence. Others are trapped in their house and have no options but to hope that a rep from WaMu or Indy Mac calls. (they don’t).

    The flaw in the mod program is that each situation is handled differently. Why should one group be treated one was and that same group be treated differently by a different class of lenders?

  4. In order for the mortgage industry to ‘succeed’ in the future (under the assumption that the paper is held instead of resold), it will require a complete reeducation of an entire generation of loan officers. The process that evolved over the last 20 years resulted in an almost complete dearth of knowledge about real financial and credit analysis (since few loans were held).

    But, at base, very few people/institutions are willing to take a loss on their assets until forced to. Mortgage modifications will likely be a very modest endeavor under any circumstances.

  5. Marie Antoinette

    Nice post and good discussion. A special shout out to Bruce K for pointing out the elephant in the room: HAMP created a two-class system based solely on who owns your paper, the government (“savable”) or someone else (“sorry”).

    This is insane. No one has any control over who owns or services their loans, yet this rather than anything else seals your fate. What a fickly finger!

    What no one has yet discussed is the fact that these servicers are not the free-floating vampires they appear but wholly owned subsidiaries in most cases of TARP banks. But because they are wearing their servicer hat they are invincible? How does that work?

  6. Either bankruptcy court, as Mike suggests, or HOLC, as Nouriel Roubini and Obama’s Secretary of State proposed.

    HOLC (Homeowner’s Loan Corporation) was a Depression-era program kept people in their homes, and at the end of program life had actually made the government a small profit.

    The ability of the Obama administration to reject policy options with a proven track record of success has been truly astounding (stim pack of sufficient size; single payer health care; and HOLC).

  7. Are you suggesting we pierce the corporate veil of invincibility?

  8. I’m all for mortgage modification — and would love for the administration to find a way out of this morass, but I think it’s always a mistake to just quote the various complaints of the various parties. For example you observe that “Servicers were never designed to do this kind of work; they don’t underwrite, and paying them $1,000 isn’t going to give them the experience needed for underwriting. It’s hard work that requires experience and dedication, skills that we don’t have currently.”

    I would think that the natural conclusion would be that the servicers need to charge their clients higher fees in order to provide good service. If their contracts prohibit higher fees this would be a problem, but if their contracts permit them to recoup necessary costs, then we would expect the investors in the securities to bear the costs of modification.

    You, however, don’t conclude that we should expect servicers in this situation to charge higher fees to securitization trusts where ever possible, you conclude instead “But isn’t it at least possible that as the sophistication of the servicers increase, they’ll become equally good at learning how to game the system?”

    It is of course always possible that somebody will choose to game any system rather than to deal honestly. However, the fact that WaMu’s servicing contracts grant them the right to charging high fees to securitization trusts, as the Financial Times article on JP Morgan states, is in no way evidence that they are gaming the system. Nor is the fact that a researcher was able to find just TWO loan mods where only principal (and almost no interest) flowed to the securitization trust.

    When you support the point of view that this constitutes “gaming the system”, it seems to me that you are erring by simply parroting one party’s view of the situation.

  9. Here’s the very latest twist: Another round in the tug-of-war over losses from loan modification. According to a Federal judge, the two pieces of Federal legislation passed to facilitate loan modifications do not contain “safe harbor” provisions protecting servicers from investor lawsuits. The judge ordered the case to be tried in state court. Banks (Bank of America) lost this round.

    Bank of America Loses Bid to Have Countrywide Suit Heard in Federal Court

    http://industry-news.org/2009/08/19/bank-of-america-loses-bid-to-have-countrywide-suit-heard-in-federal-court/

  10. Its simple.. People who are underwater but still comfortably making the monthly payment are fully aware and watching to see who gets modified. If the govt. starts to modify principle for the folks who did a cash out refi every other year or the folks who maxed out on their home equity you can rest assure the “good guys” will walk in a new york second. It seems simple to me and everyone likes to make it seem like a complex problem.

    I am guessing a good amount of the foreclosures are deserving to be foreclosed on based on the following article

    http://blogs.wsj.com/developments/2009/07/28/study-finds-underwater-borrowers-drowned-themselves-with-refinancings/

    I am not underwater on my mortgage but live in a small modest home but have credit card debt.. You can bet when I see other folks getting something for free I plan on jumping on the bandwagon and will walk from anything I can.

    The way I see our current situation is the only people benefiting today are the people who are “gaming the system”..

    The banks who bulk sell their REOS to their buddy’s who then flip for double in 10 days time to low – income Hud recipients who are getting a free down payment from the government. Nobody ever seems to ask who is buying the homes in the low-end category? It is the FHA backed money buying these homes to people with low-income and bad fica scores who qualify for help from HUD. Take some time out and check out all the great public housing opportunities.

    The banks have succeeded in not creating a waterfall of “walkaways” by NOT modifying mortgages of folks who out right do not deserve it. I don’t see how this can last thought with govt pressure.

    Everywhere I see and read the prudent and responsible are becoming very bitter and ready to jump on any opportunity even if it means you need to run over the next fellow to be first, hence the C4C program..

    Just visit a mortgage broker forum and you see today how the brokers are doing everything in their power to game the system.. These guys are still making big bucks off of the current FHA subprime loans..

    Realtors are making big bucks because the banks are holding back on foreclosures..

    Folks are living in their homes without making a payment for months to years..

    Everywhere you read the “gamers” are winning..

  11. Taylor bean & whitaker, finally did a loan mod for me with the help (no help!) of a legal aide attorney, however, with my documentation and financial in front of them they raised my payment $9 and put all I owe them on back of loan putting me way underwater and a definate chance of default due to the fact I needed everything decreased because of having to go on disability and loosing like $40,000 a year in income!
    So doing a loan modification like that sucks!

  12. There is always a problem of how govt can benefit the common good. For instance, it can use taxes and pay for the good, or force individuals to pay for the good. Some people object to individuals being forced to take losses for the common good. They would argue that, if it’s for the common good, we should all pay for the good through taxes.

    In the case of Servicers, the argument was that they had no incentive to not foreclose. Since the govt decided that they wanted more of them to avoid foreclosures, they gave them an incentive by paying them $1000. The govt could offer more. However, if the real problem is that the lenders don’t like avoiding foreclosure, they might not be able to do it, even with incentive being raised.

    As for the lenders, either through the courts or forcing them to rent, the govt is forcing any losses on the lenders. After all, if it made economic sense to avoid foreclosure, then they’d do it on their own. So, in this case, the govt has decided to ask the lenders to take any losses, even if they amount to more than foreclosure.

    In the real world, once you’ve offered somebody an incentive, it’s hard to go to another party involved and foist the losses on them. The foisted party tends to dig in its heels for an incentive. Frankly, since AIG, everybody has been lining up for an incentive.

    The solution would to pay money to the lenders, i.e., give them an incentive. The only reason that they’re not being offered one, in my book, is that they must not be powerful or popular enough to get one. However, they are powerful enough to avoid, so far, the losses being foisted on them. Given that we’re this far into the problem, I’d say that we’ve achieved a kind of balance, that won’t be easy to shift without the govt paying money out.

  13. Marie Antoinette

    cc,

    I take your point about people being angry at others “gaming the system” but some of your particulars are puzzling.

    “People who are underwater but still comfortably making the monthly payment are fully aware and watching to see who gets modified. If the govt. starts to modify principle for the folks who did a cash out refi every other year or the folks who maxed out on their home equity you can rest assure the “good guys” will walk in a new york second.”

    Excuse me, how will they know that someone has had their loan modified and on what terms? Unlike a sale or foreclosure, the new loan terms don’t become a matter of public record. It’s not until the owner either sells or loses the house that anyone knows the terms they had.

    Realtors are not making big bucks. Far from it.

    Folk are living in their homes for years (in some instances) but sooner or later they lose, big.

    And I know that people are upset about “bailouts” of “irresponsible” homeowners, but I can’t for the life of me figure out why when this article–like every other article of the past year on the subject–makes the point VERY CLEARLY that none of these programs is benefitting ANYBODY.

    It has become a Pavlovian response–the mere discussion of helping homeowners avoid foreclosure sets off rage and indignation among the self-described “prudent” class.

    But who has been saved? You can count them on one hand.

  14. if I had a house in a neighbourhood where people are in distress but I can get by what would I opt for?

    If the houses are foreclosed and standing empty any amount of time my home would lose in value because sooner or later empty houses show they are empty by loosing their “shine” – if they find a new buyer at a drastically reduced price this new owner tends to be lower on the social ladder than I am – the neighbourhood will slowly loose its “shine”

    if the distressed owners are turned into renters without a good chance of re-acquiring their home the homes wouldn’t deteriorate as fast as empty homes but still why should renters take the same care of their homes that owners do? so sooner or later the houses would lose their “shine”

    what a mess but still
    no matter how galling it may be my own property would profit from houses around me going on to be occupied by owners of my own class or formerly of my own class who hopefully like to keep them in good shape at the same standard I am used to

  15. Loan modification was never intended to work. It was the excuse put forth to justify bailing out the banks, particularly AIG (Goldman). Borrowers have no real incentive to modify without reduction of principal. Lenders survived the effort to give that power to bankruptcy judges. What’s left is a minuet which will keep housing in disarray for years.

  16. That’s why a clear definition of MBS was needed before it’s full explosion.. The borrower should make downpayment (10-20%) for the loan, the originator needs to maintain equity (another 10-20%)in the loan, so essentially not more than 80% of the loan amount should be allowed for securitization. Originator retains the ownership of the house and the investors of securitized MBS need to have recourse to originator, i.e. no matter whether the borrower pays or not, originator need to pay the investor. In this structure, originator is not transferring the entire risk to investor, but is only securing funding for the mortgages, which is the purpose of securitization.. This way the money multiplier in the shadow banking comes down.. This structure may be similar in concept to covered bonds.. The moral is: equity in loan does enforce good lending practices..

  17. Hillbilly Daryl

    The most simple and obvious solution is to outlaw servicers, and in my view securitization.

    What value does their creation or innovation provide? To the homeowner/mortgagee who signed up with a particular bank or mortgage company? None-negative in fact, it externalizes more hassle and work onto this mortgagee, and increases costs. What value does it provide our courts including bankruptcy when they are adjudicating property rights and contracts? None-negative in fact, the servicer is not the mortgage holder and typically has no authority to modify-creates an additional seperation that adds no value.
    To society and the community at large? None-negative in fact, being able to securitize and sell mortgages as AAA, when they are in fact much less in quality led to this very economic crisis due to CDOs, etc.

    How about this, if you want to be in the mortgage business, you underwrite the paper based on your lending standards, you set and satisfy reserve requirements, you service the mortgage, and you stand one step away from the mortgagee to facilitate contract and property right adjudication in the courts. You disclose fees and costs up front.

    Sounds pretty basic to me. In fact, isn’t this the way it used to work before “innovation”? And, wasn’t it less expensive for the borrower, with fewer foreclosures, and involved far less hassle?

  18. Earl Killian

    Mortgage modification was never a good idea. The Federal government should have offered low rate refinancing, e.g. 4%, directly to homeowners who would qualify at the low rate, cutting the banks out of the equation. The system knows how to deal with refinancing; it doesn’t know how to deal with modification.

    The only place modification has a place is where there is a prepayment penalty. We should have a ban on prepayment penalties to deal with this. To deal retroactively with prepayment penalties, perhaps we could have cut a deal to let banks that eliminated
    those penalties be loan servicers for the refinances.

  19. The other alternative to bankruptcy is eminent domain of the mortgages. The government would seize the mortgage, refi, sell the new loan, and pay the servicer the loan proceeds. This does not require the consent of the servicer, but would require that the servicer have a right to go to court and complain that the refi was too generous. (This right is given by the Constitution.) Burden of proof and litigation costs would be on the servicers, and busy judges would defer to the government for most deals.

    The fun part is that it can be done by the states, as well as the Feds. Thanks to wingnut Supreme Court jurisprudence, the mortgagers wouldn’t be able to get into Federal court. (This is likely a feature, not a bug.)

    This sounds a bit like HOLC. However, HOLC won’t work, because the servicers won’t consent at a reasonable price.

  20. I have visions of the nationalization of a great deal of housing (all that shadow inventory that just keeps growing and growing). The vision of the subsequent subsequent non-arms-length privatization is a little fuzzy, but it’s still there.

    Government cheese? Government housing. Lots and lots of government housing.

  21. but to put it to “good” use you have to create clusters
    – 5 houses here 5 houses there doesn’t get you any possibility to ever better and/or discipline, oops nudge, people sufficiently

  22. This whole mess was created by securitization. Pooling trust pays originator to originate loans and sell them to the trust. Originator gets paid more money the bigger the loan is, and originator carries no risk in case of default because originator got paid before the loan was ever made. Of course originator is going to be incentivized to make giant loans to people it knows can’t pay it back. I’m sure most subprime and many prime loans include massive 1003 loan application fraud on the part of brokers, at the behest of originators, to make huge loans. Then originators fail to properly underwrite, despite charging hundreds in underwriting fees, because they know that real underwriting will result in the loan being denied and consequently no money for them from the pooling trust.

    The other dirty secret of securitization is that the big banks originated a lot of these loans and stayed on as servicers. Why do you think WaMu charges extremely high servicing fees? You’ll find that it’s often the case that the originator and servicer are subsidaries or divisions of the same bank.

    To give you an example, here is the pooling agreement of a Merrill Lynch run securitized trust.

    http://www.secinfo.com/dsvr4.u73h.d.htm

    First Franklin, at the time a wholly owned subsidiary of Merrill, sold all of its loans to Merrill Lynch Mortgage Investors, the depositor of the pooling agreement. Merrill then bundled them together and created this trust. The servicer, Home Loan Services, Inc., is also owned by Merrill. The trust then sells the rights to collect on the loans to the public (ie investors). The Trustee acts as the single entity that holds all the paperwork in the name of the trustors.

    Now lets say all of First Franklin’s default. First Franklin already got paid when it originated the loans. Merrill Mortgage got paid when it sold the loans to the trust. Home Loan Services, as the servicer, gets paid no matter what, and actually gets paid more if the loan is in default or forecloses. The Trustee gets paid a bonus when it forecloses on a property. All the legal fees and foreclosure costs are paid by the Trustors. The only ones that are going to feel the pain of a default are the Trustors, who have no voice in the matter other than to sell the bonds of the trust, and have no idea what’s going on as to each individual loan.

    Of course no one is going to modify! Every party here other than the trustors either already got paid or will get paid more if there is a foreclosure. The banks will foreclose even if it’s to the detriment of the Trustors (ie borrower offers to set balance at $200k on a $100k FMV house, servicer+trustee will foreclose anyway because they only make money if there is a foreclosure).

    The only way to get servicers+trustees to offer modifications that will benefit both borrower and trustor is to restructure securitization agreements (don’t see how this can be done unless Trustors sue) or prosecution of the servicer+trustors for breach of fidicuiary duties (again it’s in the hands of the Trustors), or some other action that will disincentivze servicers+trustees from making deals that screw the Trustors.

  23. I am in the middle of the whole mess and I can say without a doubt, “it’s been horrible.” I went to a credit counslor a little over a year ago and they told me back then to walk away. I stood my ground and basically could not fathom the idea of walking. They said nothing will come of my loan modification until I am seriously ready to walk. Well guess where I am at today…ready to go. Wells Fargo can keep my $275,000 upsidedown house. And to think, at one time, I offered to keep my principal balance where it was and change my loan to a 40 year term. Thanks Wells Fargo for saying No to that….you basically are securing my future when you end up taking my home back.

    P.S. If anyone out there thinks I am just trying to be one of those people who feels I need to get my break or piece of the pie, you could’nt be more wrong. I have stable income but have lost enough to fall very short every month. My savings is gone and my wife has not been able to find work since being laid off. Add to that the fact that we have been trying to modify for 11 months now makes this whole modification process a joke. Now have nowhere else to turn but the rental market.

  24. I’ve just started doing a modification. I hope it goes well. I started a blog with my day to day experiences in hope that it will help people understand what they may be getting into.

    http://loanmodificationcityfinancial.blogspot.com

  25. PEx, you need to keep reminding people of this. I hope you to cut and paste it for further blog comments on this blog whenever applicable.

  26. to cc: money is the name of the game. this ain’nt no socialism club. America was built on the teams that win. Winners count. Losers dont.

  27. why are we so stuck on modifying loans which gives so much power to the servicers and the investors.why dont we use the established practice of refinancing to clear up the mess that these securitized loans present.If the government backed new loans processed by any bank or investors, they could be made available on an exchange type electronic market place that would eliminate the former loan holders stranglehold on the process.a first mortgage at 4% fixed for ten years could hold first position and a 15-20% second could represent the differance between what the homeowner could afford and also the current appraised value. That second loan could be paid with non deductable lump sum payment due in ten years with interest accumulating at 2-4%. It would be transferable with the property and inflation would very likely take care of that portion of the balance.It would be like issueing a ten year note against the house.If these packages were available to the general public it would also lift the value of all the housing stock.The packages would be available like sba loans giving the banks a way to profit.As a post script my 2 attempts at a loan modification with the bank of america came to an end when they told me the investor never intended to modify my type,Pity they didnt tell me that 4 months ago>Who is the investor i asked..wells fargo bank was the answer.weeks later i remain stunned by that nail in the coffin of free competative markets

  28. Yes, mortgage modifications have failed, no doubt. I see the larger problem that the market relationships between financiers (those who securitize security interests in mortgages in specialized paper), the banks (many of whom are small and hold whole loans –this is why so many of them are struggling so mightily — 300 may fail this year) who can’t afford to modify, mortgage companies (most of who have a direct relationship with the large investment banks or large banks and have their hands tied. This is a really scary problem, because it means that the prime movers behind toxic asset toxicity can’t or won’t take any action.

    So, what’s next? Much more peril. Lots of people and banks walking away with no solutions and no money. This is not going away, because so many Alt-A and Adjustables will try to reset in the next two years, and without relief from modiifications, will continue to drag our economy closer to the edge of the abyss.

    Upshot? Real social revolution is entirely believable within the next two to three years. Look at what happens in the third world: revolution!! Don’t think it can’t happen here!!

  29. Great points. It is noteworthy to point out that if the trustor has a credit default swap on the investment, even he gets paid. Considering the unregulated nature of CDS’s, the trustor may have purchased 2x or more then the original investment worth of swaps. So even the trustor gets paid (read AIG), in spades, should the “mortgage” foreclose.

  30. I, being a homeowner myself, am glad to see some sort of attempt at preventing forclosure in hard times. Everyone is suffering right now and at some point the mortgage companies should be required to help the little guys (i.e. ME) from falling into homelessness. Also, if home values are over-valued on an area, who is to blame for supporting the trend anyway? Prices skyrocketed in large cities because (supposedly) jobs were high paying and plentiful. Now, the jobs are dwindling and folks are looking to have their property correctly valued to follow the overall value of the area in which the home is located. Perhaps multi-billion dollar profit mortgage companies should rethink how they decide what a home is worth. I just don’t see how a home would ever be worth more than it cost to build it anyway.

  31. HOME LOAN MODIFICATION: My fees were 10k not 1k AND now 40 years! At the end of 40 years, I have to pay a 93k balloon payment or COLONIAL SAVINGS would not do the refi. According to the OBMAMA modificatin, it was only to cost home owner’s 1k, no balloon payment etc. In addition, even when one’s mortgage has never been late, home mods report it as late for the entire loan, thus credit is PERMANENTLY ruined. ANYONE know a loop hole here?