Snap Fact #309
President Obama Fights to Help Families Save Their Homes – and He Wins For 1.2 Million!

Imagine that you had lost your job in the lumber mill because of cutbacks in sales due to the depressed new home market. You were only able to get seasonal work as a commercial crab fisherman to keep food on the table, the lights burning, and minimally keep up whatever payments you could.

You are in great distress because you are 20 months behind on your mortgage payments and the bank is about to foreclose and throw you out of your home. You had tried to work with the bank to get your mortgage modified but because your income was so low you could not get approved.

Now imagine that the postman has just delivered a certified letter from your mortgage holder, JP Morgan Chase. This was the real life situation with a hard working, law abiding, middle class couple, Michelle and Bob Irwin, from Washington State.

“…When the letter arrived, Michelle's heart sank. "I saw a FedEx envelope on the porch from Chase and I thought, 'Oh no, that can't be good,'" she said. "Then I opened it and read it... I felt like I won the lottery. I ran out into the front yard, screaming like a kid."

The letter informed them that although they still are responsible for $100,000 on their home. However their monthly mortgage payment would now be an affordable $601 a month rather than the $830 they just couldn’t afford. Unsolicited, Chase had dropped their interest rate on their mortgage to 2.8% from their current rate of 6.5% for the next five years and then it would adjust up to a fixed 3.9% for the remaining 18-year term of their loan.

While millions of struggling homeowners, including the Irwins, have had to jump through all sorts of hoops trying to refinance their mortgages, Michelle and Bob Irwin barely had to lift a finger this time. The couple was one of thousands that Chase has sent similar letters to. They had no idea they were even under consideration for new loan terms.

How did this miracle occur? It surely did not come at the largess of the bank who has been making unfathomable sums by forcing folks out of their homes and taking over the ownership of the properties, with government subsidies to further sweeten their pot.
The answer is Home Affordable Modification Program (HAMP) The Program is part of the Making Home Affordable Program which was created by the Financial Stability Act of 2009 and recently revised, June 2012, to broaden the eligibility requirements. The purpose of HEMP is to assist distressed mortgage-holders following the financial meltdown.

The Program was very slow to get off the ground with much resistance but a $25 billion mortgage settlement that was finalized in April between the nation's five biggest banks and the state attorneys general and federal government, Chase pledged $4.2 billion in mortgage relief for tens of thousands of borrowers by either reducing the interest rate or the principal owed (or both) on their loans.
The settlement is a win/win and speedy resolution is rewarded. Borrowers who are delinquent on their loans or owe far more on their homes than they were worth win by holding on to their homes. Banks win because they are just passing on the cheaper cost of the money they borrow while keeping their spread and chalking up credits from the government.

The banks get more credit for modifications that are completed in the first year so the banks are trying to move quickly. In one case, Chase moved out ahead of the settlement and created an infrastructure to handle the paperwork even before the settlement was inked.

The CNN Money story concludes, “The bank identified thousands of borrowers who fit the bill and mailed them letters asking them to call the bank to discuss a modification of their loan, according to spokeswoman Amy Bonitatibus. Yet, getting customers to respond was more difficult than the bank thought. It heard back from only about half the customers it contacted.

Hoping to get more mortgages modified more quickly. Chase has streamlined the process. It now reworks the loan terms and simply lays out the new payment plan in a letter to its borrowers – the same letter that sent the Irwin’s hearts from seizure to soaring. The borrower sees the new rate, or how much principal has been taken off their balance, and what their new payments will be. All they have to do is sign the letter approving the new terms and send it back to the bank.

According to a preliminary report on the progress of the settlement issued by its official monitor, Chase claimed $369 million in credits for modifying 3,086 mortgages between March 1 and the end of June. The bank has offered modifications to another 11,500 borrowers (for credit worth up to $1.2 billion) but those had yet to be completed.”
Ironically, Yahoo news reported that 800,000 more families could have taken advantage of this program and avoided foreclosure had the banks acted expeditiously from the start. There was a great difference in the preparedness, and perhaps motivation among the banks.

Most of the mortgages are in the hands of banks that are understaffed and undertrained for the task. It is believed that if all the banks involved in the program were as equal to the task as Chase, that 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.

The President had set a goal for the program of 4 million. Even if everyone had performed at the maximum level the result to date would have only produced half of the goal that the President set. A significant part of the problem has been the precipitous fall in home prices that but many too far underwater to swim out. So judge for yourself whether this glass is half full or half empty. The Rational Majority views it that without this initiative 1.2 million, and counting, families are still in their homes and have not lost one of their most precious possessions, their homes.