How Mortgage Servicers Have Bungled Foreclosure Prevention

For those of us who remember, in 2009 HAMP was touted as the foreclosure prevention savior that would help three to four million homeowners remain in their homes.  But that never happened.  Here we are in 2010 and only 8 percent of all foreclosures in 2009 were stopped by the HAMP program.  That’s 230,000 permanent mortgage modifications, falling way short of the program’s stated goals.  Meanwhile, mortgage servicers continue to receive incentives for every person they sign up for a temporary mortgage modification with no true incentives for mortgage servicers to convert them to permanent  modifications that can save a homeowner from foreclosure in the long-term.  But that isn’t the only problem; let’s look at a few other ways that mortgage servicers have bungled America’s foreclosure prevention efforts:

  1. Massive waste of public funds by creating and sustaining ineffective and inefficient bureaucratic red tape when processing mortgage modification applications submitted by homeowners facing foreclosure.
  2. Failing to thoroughly examine each homeowner before placing them into temporary mortgage modifications. This failure to investigate the suitability of each homeowner placed in the temporary mortgage modification created an environment where a mass number of homeowners failed to qualify for the permanent modifications they needed to escape foreclosure.  Many of the homeowners didn’t really qualify for the mortgage modification program and should have filed bankruptcy instead; but because of the incentives available, mortgage servicers were motivated to place them in the temporary modification program anyway.
  3. The mortgage service industry dragged their feet when it came to implementing “borrower portal” technology that would have made it easier and more efficient for homeowners to apply for the mortgage modification program.  This once again allowed a system to persist that was known for losing applications and delaying borrower’s access to much needed foreclosure prevention assistance.