No, They Are Cruel People*

I enjoy reading Felix Salmon, and I generally agree with him, but a few days ago, he had a high level and sort of (no names) off the record briefing senior Treasury Department officials, including Timmy, and they revealed that the failure that is HAMP is actually a success because by stringing desperate home owners along, they managed to milk a few more mortgage payments, and delay foreclosures for a while:

Treasury told Waldman — and told my group of bloggers, too — that HAMP, even if it was a failure, was a success. It might not have helped much in terms of its ostensible stated aim of permanently modifying millions of home loans. But it did help in at least three other ways: it gave temporary tax and payment relief to millions of homeowners; it massively reduced the rate at which homeowners in default were being foreclosed on; and, in the words of Waldman, “it helped banks muddle through what might have been a fatal shock”.

We had to save the banks, so if we destroyed a few lives, it was worth it. This is contemptible.

Maybe Andrew Breitbart should cover this, that would get Geithner fired, because Obama trembles at Breitbart's fury.

Truth be told though, the definitive account is by Steve Waldman, and his account of this exchange is even more damning:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

(emphasis mine)

I think that he is wrong. They are cruel people, and they are evil people, and they know the evil that they do, but they think that the preservation of Wall Street, and its excessive bonuses to be worth perpetrating a fraud on desperate families grasping at straws.

These people were drowning, and they knowingly threw them anvils.

^*That is what Atrios said.

A Court Case to Watch on HAMP

A federal court in California has ruled that a borrower is an intended 3^rd party beneficiary of the HAMP program, and so has standing to sue the bank for acting in bad faith:

This is getting interesting. A judge in U.S. District Court, Southern District of California, has issued an order that may just answer a few prayers of many homeowners. Here’s what happened…

A San Diego homeowner, by the name of Ademar Marques, was applying for a loan modification, and, although it might be hard for many readers to believe, his servicer, Wells Fargo, dba, America’s Servicing Company, wasn’t being very nice about it, or even cooperating at all. It seems that Wells Fargo wanted to just skip all of those messy and time-consuming formalities required when considering someone for a loan modification, and just jump straight into foreclosure.

Mr. Marques filed a lawsuit against Wells Fargo’s America’s Servicing Company because he read about the Home Affordable Modification Program (“HAMP”) and the program’s guidelines said that his servicer was “REQUIRED” to screen him for a hardship, and consider him for a loan modification. He also alleged that he qualified for the loan modification program based on all of the published guidelines, and that his servicer, a participating servicer in HAMP never said that his loan could not be modified, they just refused to modify it, and instituted foreclosure proceedings.

Well, I never! The gall of some servicers. Have you ever heard of such a thing? Actually, I have. But not more than 30-40 times a day for the last two years.

The court ruled that as a participant in HAMP, the bank was obligated to review Ademar Marques case, and in not doing so, they breached their HAMP contract, and so do not have the right to foreclose.

Here is the money quote:

Are you digging this? Best I can make out, if you’re the intended third party beneficiary to a federal contract you can sue for breach of contract. So, if it says in the contract that the servicer “MUST” do something, and that servicer doesn’t do it… you the borrower may be able to sue the servicer for breaching that contract.

If Wells appeals, and if I were them, I wouldn't, because settling in this one case loses them a mortgage, and if the court of appeals rules against them, it becomes case law for a large swath of California, but bankers are not know for cutting their losses.

If there is an appeal, and Mr. Marques prevails, then it is certain that Wells Fargo will appeal to the Supreme Court, and I would bet 5 to 1 odds that if it gets that high, then the Obama administration will argue for the malefactor banks, because that's how they roll.

How Barack Obama Made People Stop Believing in Government

Do you remember the history HARP?

Barack Obama and Timothy Geithner, said that they had a program to help distressed homeowners, when it was actually a program that consistently screwed homeowners in order to "foam the runway" for the banksters by allowing them to puff up their balance sheets.

Well, people remember this, and now that Obama is (allegedly) trying to provide real aid to homeowners, they are finding that have no takers because the homeowners in question do not trust the government to help them any more:

We all remember the fable of The Boy Who Cried Wolf. The moral of the story: Lie one too many times and nobody will believe you, even when you’re telling the truth. Now we have a case of The Government Who Cried Wolf, showing how the failure of the Obama administration’s foreclosure mitigation programs haunt them to this day.

The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, wants to help around 676,000 homeowners it has identified as eligible for refinancing under the government’s Home Affordable Refinancing Program (HARP).

………

But these remaining homeowners appear to have no interest in the program, and Watt explained why in Chicago. “We have written to them. We have called them, and they're saying this is too good to be true,” he said.

Why would homeowners exhibit so much skepticism in a government program that they feel inclined to turn down thousands of dollars in free money? You can track it back to all the promises made over the past five years to help homeowners, and the unfortunately sorry results.

In 2009, when the foreclosure crisis was most acute, President Obama promised to save 4 million homes through the Home Affordable Modification Program (HAMP). Today, only around 900,000 hold active permanent HAMP modifications, while millions of others either re-defaulted or were rejected by the program. Mortgage servicing companies, which had a greater financial incentive to foreclose over modifying home loans, quickly figured out how to game the system, using it to pile more bad debt on borrowers for their own reward.

The process devolved into a horror show for homeowners. Servicers prolonged trial modifications well past the three-month period set out in HAMP guidelines so that they could rack up late fees. They deliberately lost borrower’s income documents to extend the default period, even shredding documents and purging records to do so. They pursued foreclosure while negotiating the modification, against HAMP rules. They granted modifications that folded servicer fees into the principal of the loan, increasing the unpaid principal balance — and thus their profit — while pushing the borrower further underwater. And they trapped borrowers after denying modifications, demanding back payments, missed interest and late fees, with the threat of foreclosure as a hammer.

This sometimes forced borrowers into “private” modifications with the servicer, usually on worse terms than the status quo. Or it led to many of the 5.6 million foreclosures we’ve seen since the collapse of the housing bubble. One set of employees at Bank of America testified that they were given bonuses like Target gift cards for pushing homeowners into foreclosure.

Subsequent government programs, like the “Hardest Hit Fund” directed at states with the most nagging foreclosure crises, similarly failed to deliver. The failure to restructure mortgages and avert foreclosures is seen as the biggest policy mistake of the Great Recession.

It's easy to prove to people that government cannot work, you just have to do things like HAMP, and lie to people and design programs to fail when view through the lens of their professed goals.

On the far side, however, when you actually want to help people, they no longer trust you, forever and ever.

Note that Obama and His Evil Minions^™ had a completely free hand in designing these programs, so they own the fallou, or as Atrios notes:

Plenty of things are genuinely beyond Obama's control, but we have an example of something which was 100% in his control. And it was horrible.

Least Surprising Data Point: Of The Day

Using OCC data, the Federal Reserve Bank of Chicago, the Office of the Comptroller of the Currency, the Columbia Business School, Ohio State University, and the University of Chicago crunched the numbers to find the number of unnecessary foreclosures, and 800,000 homes were foreclosed on that should not have been:

But while evidence of these problems was pervasive, it was always hard to quantify the damage. Just how many more people could have qualified under the administration's mortgage modification program if the banks had done a better job? In other words, how many people have been pushed toward foreclosure unnecessarily?

A thorough study released last week provides one number, and it's a big one: about 800,000 homeowners.

The study's authors — from the Federal Reserve Bank of Chicago, the government's Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago — arrived at this conclusion by analyzing a vast data set available to the OCC. They wanted to measure the impact of HAMP, the government's main foreclosure prevention program.

What they found was that certain banks were far better at modifying loans than others. The reasons for the difference, they established, were pretty predictable: The banks that were better at helping homeowners avoid foreclosure had staff who were both more numerous and better trained.

Unfortunately for homeowners, most mortgages are handled by banks that haven't been properly staffed and thus have modified far fewer loans. If these worse-performing banks had simply modified loans at the same pace as their better performing peers, then HAMP would have produced about 800,000 more modifications. Instead of about 1.2 million modifications by the end of this year, HAMP would have resulted in about 2 million.

That's still well short of the 3-4 million modifications President Obama promised when he announced the program back in early 2009. But it's a big difference, and a reasonable, basic benchmark against which to compare the program's failings.

………

The report does not identify these poor performing banks, but it's not hard to ID them. A “few large servicers [have offered] modifications at half the rate of others,” the authors say. The largest mortgage servicers are Bank of America, JPMorgan Chase, Wells Fargo and Citi.

Bank of America in particular (the largest of all the servicers when HAMP launched) has been far slower to modify loans than even the other large servicers, as other analyses we've cited have shown.

These are the banks that we bailed out, either directly, or by bailing out their counter parties, and they responded by f%$#ing home owners, and by extension, the the real estate market and the entire country.

This is why not prosecuting the banksters was such a bad thing.  People who know that they have impunity, and know it, it does not produce ethical, or competent, behavior.

I Gotta Read This Book

Neil Barkofsky's book on his experiences monitoring the TARP, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, and the Bush administration comes off better than the Obama administration:

The Huffington Post described a scene in a forthcoming book by Neil Barofsky, the former Special Inspector General of TARP, where Treasury Secretary Timothy Geithner delivered a string of F-bombs during a discussion about transparency. I’ve read the book, and while that’s an amusing diversion, it’s nowhere near the headline story.

The important moment in the book for me comes conveniently after Barofsky recounts this FDL News item, one of my HAMP horror stories. Barofsky shows how HAMP’s faulty design led to all sorts of problems like this, with trapped borrowers, extended trial payments, no-doc modifications, and eventually unnecessary foreclosures. Barofsky mused that Treasury didn’t care about the suffering of borrowers under HAMP, and the issue came up in a meeting with the Treasury Secretary, which was also attended by Elizabeth Warren, then the head of the Congressional Oversight Panel, another TARP watchdog.

Warren asked Geithner repeatedly about HAMP. After several evasions, Geithner said about the banks, “We estimate that they can handle ten million foreclosures, over time… this program will help foam the runway for them.”

This is a revelatory moment for Barofsky in the book, and should be for everyone reading. Geithner’s concern, first of all, was with how the banks would respond to the program, not how homeowners would respond to it. In fact, homeowners are quite besides the point. Regardless of their situation, they will be one of the 10 million foreclosures, in Geithner’s construction. His goal was merely to space out the foreclosures and give the banks time to earn their way back to health, mostly through the other parts of the bailout, that enabled them to earn profits.

I will note that the Cossacks work for the Czar, and notwithstanding all the turnover on the economic side of his cabinet, Geithner has been a constant.

This is going on because this is what Obama wants.

2 Years Too Late, Timmeh

So, the US Treasury is finally taking action against banks who have not engaged in HAMP in good faith:

As the nation’s housing market continues to teeter, the Treasury Department on Thursday penalized three of the nation’s largest banks for subpar performance in administrating a government-sponsored program to modify mortgage loans for distressed homeowners.

As part of a new assessment of mortgage servicers, Treasury officials said they would withhold incentive payments for the three banks — Bank of America, JPMorgan Chase and Wells Fargo — until the problems are resolved. At that point, those payments would be made, a Treasury spokeswoman said.

In May, the three banks received $24 million in incentives as part of the modification program.

The Treasury Department has previously withheld payments from mortgage servicers, but Thursday’s action focused on some of the biggest players in the program. Called the Home Affordable Modification Program, or HAMP, it is voluntary for mortgage servicers. Nearly all of the nation’s largest banks have signed contracts to participate.

Only, as Yves Smith observes, this is not accountability, it's accountability theater, from the folks who so f%$#ed up HANP so badly that, "HAMP was so clearly a disaster that Treasury Department officials didn’t try very hard to defend it in a meeting with bloggers that I [Yves Smith] participated in last August. The best they could do was claim that it helped the housing market by spreading out foreclosures over a long time period," so in this bit of atmospherics, the banks still get their money, they just won't get it today.

Someone must have informed Timothy "Eddie Haskell" Geithner that even if Barack Obama would never fire him,^* if the voters fire Obama, he's still out of job.

^*This fact that Geithner is unfirable makes a pretty argument against a 2^nd Obama term.^†
†We now have revelations that Larry Summers was more on the ball than he.

No, And What Is He Smoking?

James Pethokoukis, whose work I have not followed, but appears to have a fair amount of respect from the blogs that I read, is reporting that a number of sources in the Obama administration saying that the GSEs (Fannie Mae and Freddie Mac), will, at taxpayer expense, engage in a massive program of principal reduction to underwater homeowners:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. ……

The motivation, apparently, is electoral politics:

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. …

If you go to the article, and I suggest that you do, because I am just relying on my gut, you also see that investment bankers are talking to their clients to insurance themselves against such a possibility.

I take the statements of investment bankers with a grain of salt. Their job is to make people buy and sell securities, since they profit each time.

That being said, here is my take:

• HAMP is an abject failure, because, once again, Barack Obama, as well as Tweedle Dum and Tweedle Dumber (Geithner and Summers) decided that banks were their "partners", and they just needed some incentives and no oversight.
• Additionally, the abject failure of HAMP is not beginning to hit the news, which might lead to damage control.
• Obama is concerned about losses in November.
• Notwithstanding what the teabaggers say, Obama is NOT a socialist, he is very much a corporatist, and the idea of this sort of massive government bailout to ordinary people is an anathema to him. He honestly does not want the government to be that activist.
  
• Obama is, and remains, terrified of Republican accusations of socialism.

So, it ain't gonna happen. We may see something to fix HAMP, my suggestion would be bankers arrested and made to do the perp walk, but it will be something relatively minor.

Devaluing the dollar, as Roosevelt did, or massive debt forgiveness is simply not in the cards.

Heck, he can't even bring himself to bring back bankruptcy cramdown for home mortgages.

Here is No Surprise

In a lawsuit, Bank of America^* has been accused of giving bonuses to staff for foreclosing on people:

Bank of America Corp. (BAC), the second-biggest U.S. lender, rewarded staff with cash bonuses and gift cards for meeting quotas tied to sending distressed homeowners into foreclosure, former employees said in court documents.

Mortgage workers falsified records and were told to delay U.S. loan-assistance applications by requesting paperwork that the Charlotte, North Carolina-based bank had already received, according to statements from ex-employees filed last week in federal court in Boston. The lender improperly disqualified applicants to the Home Affordable Modification Program, or HAMP, according to a May 23 statement from Simone Gordon, a loss-mitigation specialist who left the company in 2012.

“We were regularly drilled that it was our job to maximize fees for the bank by fostering and extending delay of the HAMP modification process by any means we could,” Gordon said. Managers instructed staff to “delay modifications by telling homeowners who called in that their documents were ‘under review,’ when in fact, there had been no review,” she said.

Bank of America, which has spent more than $45 billion to settle claims tied to its 2008 takeover of Countrywide Financial Corp., is being sued by homeowners who didn’t receive permanent loan modifications after making payments under trial programs, according to court papers. Statements from seven former loan employees were included in a filing last week as part of plaintiffs’ attempt to gain class-action status. The lender has denied the allegations.

(Emphasis mine)

Seriously, why we haven't put banksters in jail, particularly, the former CEO of Countrywide, Angelo Mozilo, who created the mess that BoA is trying to sweep under the carpet?

Also, why did the Obama administration set up HAMP as a Petri dish for mortgage servicer abuses?<sup>†

*</sup>Full disclosure, it is my bank.
^†Actually, we know why. Geithner^‡ wanted to let the banksters to cheat homeowners so as to protect the bank.
^‡Laying it all at Geithner's feet is not completely fair, because as I often say, the Cossacks work for the Czar.

The Definitive Word on Hamp

David Dayen summarizes it in a paragraph:

This is just a truism based on the Treasury Department’s own design for HAMP. Every trial modification payment reads as a default to the credit reporting companies. The Treasury Department could have set it up so that didn’t happen; they chose not to intervene in that reality. All of the money between the trial modification and the original payment that borrowers don’t pay during their trial period gets tacked on as part of the unpaid principal balance at the end. The servicers also tack on late fees. Treasury could have banned that. They chose not to intervene. The servicers can proceed with foreclosure operations during the trial period, arguing that the borrower is in default. They can’t actually foreclose (also in some cases they have). But they can go through the legal process. Treasury could have put a stop to that. They didn’t. Borrowers keep getting told they have to miss a payment to be eligible for HAMP. Treasury actually didn’t put that into the design. But they haven’t sanctioned a single servicer for this or any other violation of the program guidelines. They could have done something. They didn’t.

(emphasis mine, though inspired by Big Tent Democrat's similar exercise.)

I think that Mr. Dayen is far more forgiving than I am. He implies that it was combination of incompetence and timidity.

I think that it was actual malice. I think that the Treasury Department deliberately chose to deceive homeowners, because they thought that it would give the banks some breathing space.

Interesting Insight

As I have noted earlier, much of the push-back against student debt relief comes from people who see it as a challenge to their elite status. 

One of the things that I missed, and that  Lindsay Owens and David Dayen noticed in all of this is that much of the opposition from nominally Democratic economic figures is a hangover from the Obama Administrations fixation on the sanctity of debt, even when that debt was the product of fraud or other dishonest practices.

This is what got ten million of people foreclosed on, and damaged the Democratic Party for at least a generation.

They did so because they saw the debt as a failing of the debtors, rather than a problem created by an unjust society and dishonest actors in that society:

President Biden’s long-awaited decision to wipe out up to $20,000 in student debt was met with joy and relief by millions of borrowers, and a temper tantrum from centrist economists.

Moments after the announcement, former Council of Economic Advisers Chair Jason Furman took to Twitter with a dozen tweets skewering the proposal as “reckless,” “pouring … gasoline on the inflationary fire,” and an example of executive branch overreach (“Even if technically legal I don’t like this amount of unilateral Presidential power.”). Brookings economist Melissa Kearny called the proposal “astonishingly bad policy” and puzzled over whether economists inside the administration were “all hanging their heads in defeat.” Ben Ritz, the head of a centrist think tank, went so far as to call for the staff who worked on the proposal to be fired after the midterms.

Histrionics are nothing new on Twitter, but it’s worth examining why this proposal has evoked such strong reactions. Elizabeth Popp Berman has argued in the Prospect that student loan forgiveness is a threat to the economic style of reasoning that dominates Washington policy circles. That’s correct. But President Biden’s elegant and forceful approach to tackling the student loan crisis also may feel like a personal rebuke to those who once worked alongside President Obama as he utterly failed to solve the debt crisis he inherited.

………

Summers and Treasury economists expressed more concern for financially fragile banks than homeowners facing foreclosure, while also openly worrying that some borrowers would “take advantage” of cramdown to get undeserved relief. This is also a preoccupation of economist anger at student debt relief: that it’s inefficient and untargeted and will go to the “wrong” people who don’t need it. (It won’t.)

For mortgage modification, President Obama’s Federal Housing Finance Agency repeatedly refused to use its administrative authority to write down the principal of loans in its portfolio at mortgage giants Fannie Mae and Freddie Mac—the simplest and fastest tool at its disposal. Despite a 2013 Congressional Budget Office study that showed how modest principal reduction could help 1.2 million homeowners, prevent tens of thousands of defaults, and save Fannie and Freddie billions, FHFA repeatedly refused to move forward with principal reduction, citing their own efforts to study whether the policy would incentivize strategic default (the idea that financially solvent homeowners would default on their loans to try and access cheaper ones).

Virtually everyone involved with the housing system was stunned that the options of cramdown and principal reduction weren’t taken. Banks literally held meetings in expectation of Obama’s team requiring writedowns, until they didn’t.

Instead, the Obama administration rolled out the industry-backed Home Affordable Modification Program (HAMP), relying on the voluntary cooperation of servicers to modify mortgages. The program was, even by the administration’s own modest objectives, a failure, ultimately reaching less than a quarter of the three to four million homeowners it hoped to target. In the critical first two years, the administration did not even spend 3 percent of what they were allotted to save homeowners.

………

But it was much worse than that. The mortgage servicers used HAMP like a predatory lending program, squeezing homeowners for as many payments as possible before canceling their modifications and kicking them out of their homes. These companies had financial incentives to foreclose rather than modify loans. In one particularly excruciating example, the servicer arm of Bank of America offered its employees Target gift cards as a bonus for placing borrowers into foreclosure.

This was also by design, or at least benign neglect. Then–Treasury Secretary Timothy Geithner candidly told officials that the program was intended to help banks, not borrowers. The purpose was to “foam the runway” for the banks, Geithner said, with homeowners and their families being the foam crushed by a jumbo jet in that scenario. If the goal was just to let the banks use HAMP for their own benefit, it’s not surprising that would come at homeowners’ expense.

………

President Biden’s approach has been markedly different and, if well implemented, is poised to be extremely effective. The simplicity of the program design, with its straightforward cancellation thresholds ($10,000/$20,000) and eligibility criteria (Pell status and household income), means the policy should deliver nearly 90 percent of its relief dollars to those making less than $75,000 a year. Will some small amount of relief dollars land in the bank accounts of borrowers who will make higher incomes in the future? Absolutely. Is preventing that outcome more important than delivering relief to 43 million borrowers? Of course not.

It’s not just the policy design that is a rebuke to the old guard’s theory of debt relief; it’s also the rhetoric. Notably, in his 20-minute speech announcing the rollout of the student loan relief program, President Biden didn’t mention “bad debtors” once. He didn’t spend a single breath on the individual failings of borrowers, make any reference to their poor decision-making, or nod to a handful of unscrupulous debtors trying to game the system.

………

Biden has flipped the Beltway consensus on policy design around debt forgiveness and modeled a path for viewing student debt as a national crisis, rather than an individual failing. It’s a stunning reversal of the Obama-era consensus and one that casts that failed legacy of mortgage debt relief in an even darker light. Biden has shown us there was an easier, softer way all along.

The Obama Administration was fixated on preventing the "Wrong Sort" of people from getting relief even if this crippled the economy and even if the percentage of people getting undeserved relief was vanishingly small.

This is a punitive and small minded approach to the public wheal, so taking the old adage that, "A fish rots from the head," the sociopathic group think that dominated their thinking probably came from the sociopath-in-chief.

This is a Feature, Not a Bug

At Salon, David Dayen observes that it, "Turns out much-hyped settlement still allows banks to steal homes,' even after the much hyped mortgage settlement.

This is not an oversight.  The Obama administration has aggressively allowed banks to cheat customers an investors since day one.

Basically, they see this as a way of making sure that the banks appear solvent.

See my writings on HAMP. Here is one quote:

Warren asked Geithner repeatedly about HAMP. After several evasions, Geithner said about the banks, “We estimate that they can handle ten million foreclosures, over time… this program will help foam the runway for them.”

By "them", he means the banks.

By foaming the runway, he means that it allows them to delay writing down bad loans, and continue to extract payments and fees by cheating the public.

The suggestion that this is anything but deliberate policy is simply naive.

2 Years???? 2 F%$#ing Years?!?!?!?

Yep, it's that misbegotten bastard child of Timothy Geithner, Larry Summers, and Barack Obama^*, the Home Affordable Mortgage Program, HAMP, where the Treasury has finally decided to require a single point of contact for homeowners participating in the program:

Mortgage servicers must provide a single relationship manager to borrowers being evaluated for a Home Affordable Modification Program trial by Sept. 1, according to guidance released by the Treasury Department Wednesday.

The guideline is required of the 20 largest servicers participating in HAMP, and it is one of the largest adjustments to the program since its inception in March 2009. Since then, more than 670,000 borrowers received a permanent loan modification, and more than 1.8 million trials have been extended.

"Over the past two years, two of the biggest complaints we received from borrowers were servicers are losing documents and they can't connect with anybody who can actually track them down. Every time they call they can't get a hold of someone with access to their case," Laurie Maggiano, director of policy at the Treasury's homeownership preservation office, said in an interview with HousingWire Wednesday.

The relationship manager must be an employee of the bank and cannot be a contractor. This manager will be assigned when the servicer makes successful contact with the delinquent borrower. The borrower must meet the initial criteria of the program, such as owner-occupancy and a 31% debt-to-income ratio.

The program has been in place for about 2 years, and since day 1, the complaints have been about no one being a point of contact, meaning that you had repeatedly lost paperwork, changing conditions, dual tracking, where when you were talking with one bankster, another was in the process of foreclosing, etc.

People have been screaming about this.

The press has been screaming about this.

Congress has been screaming about this.

But nothing was done until the 2012 election loomed, because, after all, this was not a program to help people, it was a program to cheat people, and help the banks.

^*Who knew that bad programs were conceived by three beings?  For the rest of nature, it's either parthenogenesis (Amoeba, lobbyists) or some sort of sexual reproduction involving only two participants. There are echos here of the Asimov novel The Gods Themselves.

Felix Salmon Has A Talk with Treasury Officials

And determines that they are still the banks bitches, working for them, rather than the citizenry.

In truth, Mr. Salmon did not say that Geithner and His Evil Minions^™ see themselves as nothing more than a way to support the banksters, but that is the basic take away that I see here:

Well done to Shahien Nasiripour, who did the best job of anybody, at the Treasury blogger meeting yesterday, at getting Treasury’s officials to commit news. Specifically, he asked about Sheila Bair’s sensible idea that mortgage principal write-downs can help keep homeowners in their homes while also maximizing the value of the mortgage to the issuing bank. And he was told, quite clearly, that Treasury has been talking to Bair about this idea, and that if it makes sense at the bank level, it probably makes sense at the federal level, too, as part of the HAMP program to make mortgages affordable.

Except that once the meeting was over, its main architect, Treasury flack Andrew Williams, emailed Nasiripour to walk that particular idea back, saying that Treasury was NOT (his all caps) going to do anything “major” in terms of principal write-downs, and that any moves in that direction would be no more than “tweaks”.

………

It seems to me that insofar as Treasury has a problem with principal write-downs, that’s clearly a function of the fact that it’s worried about the consequences for banks’ balance sheets. We’re prosecuting a muddle-through strategy right now, where the government artificially props up house prices by providing substantially all of the mortgage finance in the country, in the hope that with economic recovery will come enough of a natural rebound in house prices to let the government slowly remove its support without them falling dramatically again.

(emphasis mine)

Unless the Treasury is banking on 6% inflation a year for the next 8 or 9 years, this is not going to happen.

House prices are still over valued, whether you use price to income, or rent to own (and rents are dropping too), and we are not going to see a recovery until house prices

This is complete regulatory capture, pure and simple.

What the Shrill One Says

Paul Krugman, in discussing the response of the Obama administration to the foreclosure fraud crisis, a go slow and protect the bankster response, notes that it's the same response that they have to every crisis:

As NAME ISSUE HERE has come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.

Whether it has been an excuse for inaction, such as financial reform, or the fraud perpetrated on desperate home owners with the HAMP, or the avoidance of the good for the mediocre, as with healthcare the administration seems to have a deep and abiding fear of effective action and good policy, even when it is good politics.

Economics Update

It's jobless Thursday, and initial claims fell back to what seems to be its sweet-spot, 473,000, with the less volatile 4-week moving average rising by 3250 to 486,750, and continuing claims falling by 62,000 to 4.46 million, though emergency claims, which are not counted as continuing, rose by 268,000 to 5.86 million, so we are still seeing a jobless non-recovery, with initial claims about 100,000 more than what would be required for a recovery in the job market.

In real estate, foreclosures fell, but delinquencies rose in the 2^nd quarter, which likely indicates that people are still doing worse, but the various moratoria, as well as what Atrios accurately calls the, "Treasury's predatory lending program," aka HAMP, is pushing the problem down the road.

Oh, and the Dow is below 10K again, which means nothing in the greater scheme of things.

Brains…Brains…Brains…Brains…

Paul Krugman laments the fact that failed economic ideas are now the conventional wisdom:

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

……

Yes, politics is the art of the possible. We all understand the need to deal with one’s political enemies. But it’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.

Go read.

It is a good analysis, but I think rather incomplete.

He seems to think that Barack Obama, in his attempts to appease Republicans, has given them cover to promulgate these failed ideas.

I think that this is too Byzantine an explanation. The simpler explanation is that Barack Obama gives lip service to these failed ideas because he actually believes in these ideas.

It explains his unwillingness to prosecute the banksters, their fraud against consumers in the HAMP, their attempts to water down financial reform, etc.

This is not cowardice.  This is corporatist thinking to a degree that makes Bill Clinton looks like Karl Marx.

And the Obama Administration's Response to the Widespread Foreclosure Fraud by the Banks Is…

To take the side of the big banks who are ignoring the law, with Obama proxy David Axelrod on Face the Nation saying that he hopes that this, "moves rapidly and that this gets unwound very, very quickly," meaning allowing the banks to continue breaking the law, while an "administration source is saying that, "the administration was also seeking the servicers' help with modifying the home loans of millions of borrowers to help them avoid foreclosure."

The translation here is that because the administration was perpetrating a fraud on homeowners on behalf of the banks with the HAMP, they couldn't be expected to pursue them when they broke the law.

The most egregious quote is from Federal Housing Administration Commissioner David Stevens:

We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market

(emphasis mine)

So, even if the banks broke the law, it is the victims who have to pay for this, because the banks own Barack Hussein Obama.

I would suggest that you read Yves Smith here, here, and here. She touches all the bases, and does it better than I am.

This is a Google Adsense On Drugs, Any Questions?

One Step Forward, One Step Back

Well, Google™ Adsense™ gets one right, for a change.

I live in Maryland, and I am a Democrat, and in any case Robert "Bad Hair" Ehrlich is a complete prat.

I would also note that in 2004, I exchanged about 20 words with Martin O'Malley, and was convinced that he would be president one day.

He is an impressive candidate, and I think that it is likely that he will throw his hat into the ring in 2012 2016.

This ad takes you to Martin O'Malley/Anthony Brown campaign's home page.

But after they get one right, they put up an ad for the Freedom Works teabagger AstroTurf 9/12 rally. (sorry, no link to those evil f%$#s, not even with the "nofollow" tag.)

I wonder why about 95% of the political ads that show up on my page are all about conservative causes though.

As for the rest, they seem to be HAMP scams.

**sigh**

Barack Obama, Go Cheney Yourself

So while talking at a $30,000 a plate fundraiser in Connecticut, he joked that the Democratic Party base is a bunch of whiny bitches:

Democrats, just congenitally, tend to get -- to see the glass as half empty. (Laughter.) If we get an historic health care bill passed -- oh, well, the public option wasn't there. If you get the financial reform bill passed -- then, well, I don't know about this particular derivatives rule, I'm not sure that I'm satisfied with that. And gosh, we haven't yet brought about world peace and -- (laughter.) I thought that was going to happen quicker. (Laughter.) You know who you are. (Laughter.) We have had the most productive, progressive legislative session in at least a generation.

Well, Glenn Greenwald (at link) nails it when he makes it clear that Obama has failed big time in many ways he has not just fallen short, but embraced failure he condemned as a candidates, whether on state secrets, the rule of law on terrorism suspects, the surveillance state, using HAMP as bunco scheme to cheat desperate home owners, state sanctioned assassinations, gay marriage, DADT, or any move at all in support of organized labor.

All this is going on, and there is not even a moment of regret about what might have been. It's like trying to appeal to the conscience of a house cat.

I am so ready to work my butt off for anyone who is willing to run against him in 2012.

The Cossacks Work for the Czar

After spending trillions bailing out banks, and billions paying the banks to pretend not to foreclose on people under the HAMP program, it now turns out that the Treasury Department is refusing to cut loose any money for legal aid for people facing foreclosure:

Treasury Secretary Timothy Geithner has authorized big payouts to banks in an effort to encourage mortgage modifications, but is preventing borrowers in danger of losing their homes from accessing legal assistance under the Obama administration's foreclosure relief plan -- even when banks are wrongfully or fraudulently attempting evictions.

As of August, the administration's foreclosure prevention program -- which had paid a total of $231.5 million to banks -- had paid nothing specifically for borrower's legal fees, despite the urging of congressional Democrats who say legal funding is critical to easing the crisis.

Democrats from foreclosure-battered states are pushing new legislation that would overrule Geithner's edict, but the legislation is doomed this session with apathy from leadership in both parties and a packed lame duck calendar.

It's easy to blame Timothy "Eddie Haskell" Geithner for all of this, but the reality is that he is Barack Obama's man, and he is where he is because Barack Obama wants him there, coddling bankers and defrauding homeowners.