Recent Testimony: Bankruptcy Mortgage Modification Necessary to Enhance HAMP’s Effectiveness
July 29, 2009
On July 9, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law heard testimony on the effectiveness of voluntary mortgage modification efforts, including the Obama Administration’s Home Affordability Modification Program (HAMP). “Effectiveness” was defined as preventing foreclosures.
Irwin Trauss, of Philadelphia Legal Assistance, testified on behalf of NACBA (The National Association of Consumer Bankruptcy Attorneys.)
Trauss is overall supervisor of the Save Your Home Philly Hotline, which has handled over 10,000 calls from homeowners facing foreclosure. He is also one of the creators of the Philadelphia Court of Common Pleas Foreclosure Diversion Program.
In his testimony, Trauss gave numerous examples of servicers ignoring the requirements of HAMP. Servicers sometimes told homeowners they were not eligible to apply, and often denied applications for reasons that did not comply with the program guidelines.
He also described the program’s failure to help many large sub-groups of homeowners.
Trauss concluded his testimony by stating that “absent significant leverage on the part of homeowners to force a change in behavior, the majority of servicers will continue to find ways to avoid meaningful modifications despite HAMP.
“The only way to change their behavior to the extent required to make meaningful modifications common is to provide the homeowner with leverage over the servicer, such as the threat of a bankruptcy judge imposing a modification.
“The availability of such an option for homeowners would likely complement voluntary programs such as HAMP and the Diversion Program and substantially increase the chances that meaningful long lasting modifications will result.”
The above post was partially excerpted from a National Association of Consumer Bankruptcy Attorneys (NACBA) email alert.
NACBA is a national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy.
HAMP Incentives: What Does Your Lender or Mortgage Servicer Get For Modifying your Mortgage?
July 27, 2009
HAMP: What is it?
The Home Affordable Modification Program (HAMP) was established in March 2009 using 50 billion in funds from the Troubled Asset Relief Program (TARP).
HAMP aims to get mortgage servicers and lenders to modify mortgages in default or in danger of default.
Which mortgages are covered by HAMP?
Your mortgage might be eligible for a HAMP modification if your mortgage servicer participates in the program OR if your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
Even if your servicer is not an official participant in the program, it may participate in order to receive the incentive payments described below.
If you need a mortgage modification due to a hardship, ask your servicer to help you modify your mortgage. Do not be discouraged if your servicer is not listed as an “official” participant in the HAMP program.
To find out if your lender or servicer participates in the program, call your loan servicer or visit the Making Home Affordable website.
Once your servicer has agreed to participate, you must determine whether your mortgage meets certain criteria.
You must:
- Be the owner-occupant of a one to four unit home;
- Have an unpaid principal balance that is equal to or less than $729,750 (higher limits apply for dwellings with 2-4 units)
- Have a first lien mortgage that was originated on or before January 1, 2009;
- Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31 percent of your monthly pre-tax income; and
- Have a mortgage payment that is not affordable due to a financial hardship you can document.
Why would servicers or lenders participate?
Earlier, similar programs did not provide incentives for lender participation. These programs were not terribly successful.
Consequently, HAMP offers lenders and servicers incentive payments from the government for every mortgage they successfully modify. Some of these incentives are described below:
HAMP Incentive Payments
Lenders are eligible to receive:
- A bonus incentive of $1,500 for any loan modified while the borrower is still current (including less than 30 days delinquent), subject to some restrictions.
- Reimbursement for part of the difference between the “new,” modified mortgage payment and the “old” mortgage payment. The government would pay this to the lenders for up to five years.
- Some compensation to offset losses on previously-modified loans
Servicers (including lenders who service their own loans) are eligible to receive:
- An initial payment of $1,000 for each successful modification.
- Annual payments of up to $1,000 for the first three years following successful modification if the borrower stays in the program.
- A bonus incentive of $500 for any loan modified while the borrower is still current (including less than 30 days delinquent).
Borrowers are eligible to receive:
- Principal reductions of $1,000 for each year they make mortgage payments on time under the program.
- This applies for the first five years of the borrower’s program participation.
- For more information, see the Department of the Treasury website.
July 23, 2009 Senate Judiciary Subcommittee Hearing: “Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?”
July 20, 2009
The Senate Committee on the Judiciary / Subcommittee on Administrative Oversight and the Courts will hold a hearing entitled “The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?” on Thursday, July 23, 2009 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.
The hearing will be open to the public and seating is first-come, first-served.
Click here to watch a webcast of this hearing.
(Links to webcasts appear two hours before hearings begin, and video begins streaming live once the hearing is called to order.)
Webcast archives are accessible within 24 hours of the completed hearings. For a complete archive of Judiciary Committee webcasts, click here.
HAMP Effectiveness Reviewed by Senate Banking Committee
July 20, 2009
This post is parially excerpted from the MortgageOrb article “Senate Banking Committee Focuses on Hamp” by John Clapp.
On July 28, 2009, there will be a meeting between Treasury officials and servicers participating in the government’s Home Affordable Modification Program (HAMP).
In anticpation of this meeting, the Senate Banking Committee held a hearing Thursday morning (July 16) in an effort to help lawmakers gauge HAMPÂs progress – or lack thereof – since its introduction in February.
The hearing included testimonies from the Treasury, as well as Wells Fargo and Bank of America servicing execs. It highlighted the programÂs administrative obstacles and shortcomings.
In recent weeks, lawmakers have increasingly expressed concern that HAMP, originally projected to save up to 4 million homes, is both underperforming and being implemented too slowly.
Committee members also focused heavily on the inconsistent application of HAMPÂs guidelines. Several senators noted cases of borrowers being denied entry into HAMP despite meeting eligibility requirements.
Participants also discussed the TreasuryÂs recently announced plan to release performance data in early August.
The data will be broken down according to servicer, and thus will presumably highlight those servicers who are underperforming in their HAMP implementations.
Since the department announced its intentions to release this data, HAMP administrators have seen increased activities from certain servicers.
National Aribitration Forum (NAF) to Cease Credit Card and Other Consumer Arbitrations
July 19, 2009
The following is partially excerpted from the BusinessWeek article “Big Arbitration Firm Pulls Out of Credit Card Business.”
In a surprising turn of events, the National Arbitration Forum (NAF) has agreed to stop accepting consumer credit card arbitration suits, Minnesota Attorney General Lori Swanson said on Sunday, July 19.
The Minnesota AG sued the firm on July 14 for consumer fraud, deceptive trade practices, and false advertising.
Under the terms of the settlement, NAF by the end of this week will stop accepting new consumer arbitrations of any kind.
Housing Counseling Services (D.C.) Announces Foreclosure Prevention Clinic Dates for August 2009
July 18, 2009
The following is partially excerpted from The Housing Complex blog.
Housing Counseling Services Inc. is a nonprofit foreclosure prevention group in Washington, DC.
This week it announced it will start holding foreclosure prevention clinics once a week due to the increase in client demand in Washington, D.C.
[RealtyTrac recently reported foreclosures had jumped 39.46 percent between May and June 2009 in DC.]
Foreclosure prevention clinics will be held at Housing Counseling Services at 2410 17th Street, N.W., Washington, DCÂ 2009.
Following are the scheduled clinic dates:
Wednesday, August 5th, 12:00 P.M.
Wednesday, August 12th, 12:00 P.M.
Wednesday, August 19th, 12:00 P.M.
Wednesday, August 26th, 6:00 P.M.
For more information, contact:
Housing Counseling Services Inc.
www.housingetc.org
2410 17th St NW # 100
Washington, DC 20009-2724
(202) 667-7006
Get directions
Maryland Consumer Rights Coalition Urges Attorney General to Investigate National Arbitration Forum
July 15, 2009
The following is excerpted from a Maryland Consumer Rights Coalition blog post.
The Maryland Consumer Rights Coalition today asked Maryland Attorney General Douglas F. Gansler to investigate the practices of the National Arbitration Forum (NAF.)
The Minnesota Attorney General sued NAF yesterday for allegedly using illegal and dishonest practices that harm consumers.
NAF also operates in Maryland and its practices affect many people in our state, though most are unaware of its existence.
Many credit card companies, retailers, banks, and communication companies insert into the fine print of their agreements Âmandatory pre-dispute arbitration clauses, whereby consumers waive their right to have their day in court if a dispute arises.
Instead, typically without knowing it, the consumer agrees that any dispute will be resolved by an arbitration forum selected by the credit card company or other creditor. Increasingly, credit card companies, banks and others require that consumers arbitrate disputes through the National Arbitration Forum, which allegedly stacks the deck against the consumer.
The letter to Attorney General Gansler states, in part, ÂMCRC asks that you use your good offices to protect Maryland consumers from unfair, deceptive and illegal arbitration practices. This is an issue that most Marylanders are not aware of, but which has a significant impact on nearly every resident of our state because it touches nearly everyone who uses a credit card, signs a cell phone contract or opens a bank account.Â
Download the letter here.
For additional information on mandatory arbitration, visit www.fairarbitrationnow.org.
To read the Minnesota AGÂs press release, click here.
To download the Minnesota complaint, click here.
Maryland Foreclosure Prevention Project: Foreclosure Solutions Workshop on Wednesday, August 19, 2009 in Baltimore County
July 14, 2009
There will be a Foreclosure Solutions Workshop on Wednesday, August 19, 2009 in Baltimore County from 5:00 p.m. to 8:30 p.m. hosted by the Baltimore County Office of Community Conservation.
Homeowners who pre-register are guaranteed a free legal consultation. Homeowners should pre-register by calling (410) 887-3124.
Homeowners should bring:
- All paperwork related to current and former mortgages (including loan application, settlement paperwork and lender statements);
- All foreclosure notices or threats of foreclosure received; and
- Information about monthly household budget (income/expenses).
Date: WEDNESDAY, August 19, 2009
Time: 5:00 p.m. to 8:30 p.m.
Location: New Town High School, 4391 New Town Blvd., Owings Mills, MD 21117***
Preregistration: Homeowners should pre-register by calling (410) 887-3124.
***This location is handicap accessible.
Minnesota Attorney General Files Suit Against National Arbitration Forum
July 14, 2009
The following is excerpted from a NACA email alert. Visit NACA here.
Today the Minnesota Attorney General filed a lawsuit against the National Arbitration Forum alleging “consumer fraud, false advertising and deceptive trade practices by ‘misrepresenting its independence’ and hiding its ‘extensive ties’ to the collection industry.”
Below are two links to articles on the lawsuit.
NACA plans to use the Minnesota Attorney General’s complaint as well as the 2008 complaint filed by the City of San Francisco against NAF to help push the Arbitration Fairness Act through Congress.
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