Loan Servicers: The Face of Corruption
A Glance at HAMP
The Home Affordable Modification Program, HAMP, was a policy that went into effect during Obama’s presidency. As the administration and financial institutions ( its creators) would proclaim, it was designed to relieve the foreclosure crisis. But, what most won’t tell you, is that there was a great deal of corruption going on behind the scenes – all of which greatly hurt homeowners, and explains why despite Obama’s promises that 3 to 4 million people would receive loan modifications, that number struggled to creep above one million, even 5 years after the policy was adopted.
HAMP was created to give incentives to mortgage companies to modify loans of homeowners who were at risk of going into foreclosure; further it gave all of the power to these mortgage companies to approve or deny homeowners for modifications.
How Your Loan Servicer Became God Almighty When HAMP Was Adopted
In order to grasp just how much power your loan servicer was given when the government passed the bill for HAMP, one must realize that mortgages are not handled by their lenders.
During the housing bubble, many home loans were sold to middle-men, packaged into securities, then sold to bond investors. Banks hired loan servicers to: collect mortgage payments, provide customer care to borrowers (the homeowners) and to dole out the earnings to investors.
The loan servicers handled everything. So, surely, it made sense to give them the added power of approving and denying homeowners for loan modifications when HAMP was contrived. Right?
All of the power was put into the hands of a small group of people. Loan servicers played a pivotal role in the success/ failure of HAMP.
With great power comes great responsibility.
HAMP granted loan servicers with an inordinate amount of responsibility in handling the foreclosure crisis. Typically, the best way to save a home from going into foreclosure is through attaining a loan modification. Thus, the loan servicers had all of the power in controlling the rate of home foreclosures because they were the ones who dictated approving or denying people for loan modifications, on top of a plethora of other responsibilities. The loan servicers were incredibly ill-equipped to deal with the volume of work that was laid on their laps. They were flooded with millions of individual requests for modifications. But, most companies were understaffed, and the employees they did have were not adept at handling loan modification approval. The only way they could keep their heads above water was by slashing customer care. Even if they wanted to provide customer service, they didn’t have the manpower to do so.
The Servicers Learned How To Profit
Overwhelmed with work, and with little profit to be made doing things by the books, the loan servicers manipulated the system and found a way to make HAMP work for them.
They would intentionally “lose” paperwork that the homeowners were sending into them, as to extend the time the loan was in default. (Click here to read about Paula, whose bank lost her husband’s death certificate, paystubs and more)
They stretched out the period of time for the trial modifications. This enabled the servicers to continue collecting payments and late fees, typically while proceeding through the foreclosure process, unbeknownst to the borrower. This sneaky maneuver allowed the services to then deny the homeowner of a loan modification, and additionally require the borrow to pay back payments, missed interest, and late fees; if they didn’t comply to these stipulations, the servicer could dangle the risk of foreclosure over the homeowner’s head. (Click Here to read about Ross, whose bank agreed to a loan mod, then foreclosed on his home)
Bank Of America Scam
Bank of America’s mortgage servicing team brought to light the wrongdoings of their department in a class-action lawsuit. Employees testified that Bank Of America instructed them to lie to customers, purposefully throw-out documents sent by the borrowers, and deny homeowners for modifications for no reason whatsoever without providing any explanation to the borrower.
Bank of America took it one step further by rewarding subservient employees with bonuses.
The corruption was far-reaching, Bank of America is just one of the many banking institutions who engaged in such despicable behavior.
No matter what they did, the homeowners couldn’t win.
Little to their knowledge, no matter how hard the homeowners tried to save their homes from foreclosure, the loan servicers made it impossible. All of the people whom the homeowners believed to be helping them, were in fact working against them.
The scenario recycled itself over and over again: the borrower begins making payments, gets denied for a loan modification, the home goes into a foreclosure that could have been avoided.
In a report from the Government Accountability Office about 2 years ago, 64% of all loan modification applications were denied. It continues to be a problem today because no one is willing to take accountability, and, no one is being punished for their actions, even the loan servicers who caused much of this catastrophe are not held at fault for their actions– there are no laws governing bad behavior like this.
Much of the corruption that was going on behind the curtains of the foreclosure crisis caused for a whirlwind of financial ramifications which the middle class bore the burden of, and continues to bear today. No one wants to step up to the plate and take the blame for this corruption; so many people’s hands are dirty in this situation, and its the middle class who is suffering through the wrongdoings of those they trusted.
It’s highly likely that you may have experienced first-hand the corruption of loan servicers; but that is no reason to give up; there are still options out there to save your home.