By her own account, Lynette Neidhardt has been an Oakland homeowner for the past 23 years. Unfortunately, like many others, she found herself caught up in the tsunami that is the mortgage foreclosure process.
As she tells the story, she approached her lender, U.S. Bank, for a loan modification to save her home. She said that she submitted all of the documentation requested, but the bank balked at the part-time jobs of which her income was comprised.
So, Ms. Neidhardt did what most Oakland residents would do – she organized a protest march.
On November 12, 2010, she was joined in her blockade of the downtown branch of the bank by the Alliance of Californians for Community Empowerment. (Don’t be impressed – ACCE is just the new incarnation of ACORN, which changed its name after scandals involving embezzlement and voter fraud.)
In any case, the protest worked. After a few choruses of “Stop the auction, stop the sale today!", U. S. Bank Regional Manager Helen Anderson cancelled the foreclosure sale scheduled for that day. Ms. Neidhardt now has another opportunity to save her home.
If I get a vote in the matter, I say give Lynette Neidhardt her loan modification. In the end, it probably won’t do her any good.
Neidhardt is attempting to renegotiate her mortgage under the Home Affordable Modification Program (HAMP). Unfortunately for her, HAMP has mostly failed in its goal of keeping owners in their homes.
The Congressional Oversight Panel (COP), created by Congress to oversee the handling of the $700 billion given to the US Treasury to stabilize the U.S. economy, has the responsibility to issue regular reports on the Treasury’s performance. During a hearing held by the COP in December, HAMP was branded as having been unsuccessful in preventing foreclosures. The COP criticized the Treasury Department for failing to collect and analyze data that would explain HAMP’s shortcomings. And according to the COP, Treasury does not even have a way to collect data for many of HAMP’s add-on programs. Treasury has also refused to specify meaningful goals by which to measure HAMP’s progress, while the program’s sole initial goal — to prevent three to four million foreclosures — has been repeatedly redefined and watered down.
The Panel now estimates that, if current trends hold, HAMP will prevent only 700,000 foreclosures — far fewer than the three to four million foreclosures that Treasury initially aimed to stop, and vastly fewer than the eight to 13 million foreclosures expected by 2012.
Neidhardt may not even qualify for the modification under the requirements HAMP has established, regardless of U. S. Bank’s intentions. Among the rules governing the lenders seeking to modify a mortgage, the banks are required to not only verify the current income of the borrower, the lender must also ensure continued eligibility. Neidhardt alleged that U. S. Bank did not put much faith in her part-time income – HAMP could be why.
HAMP actually has a two-part approval program. First, the debt of the borrower may not exceed 31% of the proven income. And, second, if the lender has to significantly reduce the interest rate, or extend the maturity date of the loan, or reduce the principal in an effort to comply with the 31% debt ratio, but a foreclosure will provide a greater recovery for the lender than a loan modification, then the lender cannot approve the loan modification and must foreclose and sell the property.
So even if U. S. Bank wanted to craft a modification, HAMP might prevent the bank from doing so.
However, let’s be optimistic – let’s assume that U. S. Bank can and does approve the modification. Neidhardt is home free, right? Wrong.
According to the September 2010 report on loan modifications, 12 months after the modification of the mortgages catalogued (as of the end of the third quarter of 2009, the most recent data available) 20.6% of the modified loans are 90 days past due and 25.4% of the modified loans are 60 days past due.
In addition, about half the 1.4 million temporary or “trial” modifications granted since the program’s March 2009 inception have been canceled, according the U.S. Treasury Department. Only 466,708 borrowers have received permanent modifications. Further, about one in five of the canceled modifications is either in foreclosure or bankruptcy.
The main question is – are the modifications helping? Not much.
In California the number of homes in modification or trial modification was 147,891 as of September 2010, but, per DataQuick, a mortgage data information source, the number of notices of default issued during the third quarter was 83,261. This is just for the three months ending September 30, 2010 – not for the entire year. We are clearly bailing out the sinking boat with a teaspoon.
So, with the odds stacked against her, should Ms. Neidhardt receive her loan modification? Yes. Let her have her shot at saving her home. But chances are she and her friends will be chanting in U. S. Bank’s lobby again within a year.
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