The great and good Yves Smith of Naked Capitalism writes brilliantly today about President Obama's new "Shock and Awe" effort to force banks to make more HAMP loan modifications. Here I try to reframe the entire loan mod mess simply by pointing out that, on the basis of my own 24-month experience as a HAMP applicant, the President's battle may not be with the banks alone - unconscionable as they have been - but, quite possibly, and more essentially, with note holders Fannie Mae and Freddie Mac, which are wholly-owned entities of the federal government over which the President presides.
Obama may lack authority over commercial banks, but he and Congress do, I should think, have considerable authority over Fannie and Freddie.
I am certain that it was not GMAC, my bank, but Freddie Mac, my note holder, that rejected at least one of my five HAMP applications - after GMAC may have approved it. Details below.
[my comment to Yves' post] I hate to disagree with Yves – this is such a thoughtful post of hers – but I do feel compelled to try to reframe the entire issue of the mortgage mod problem on the basis of my 24-month experience as a HAMP applicant. I may be right or I may wrong: the truth will be known only when I find out whether my HAMP experience has been exceptional or commonplace.
Yves frames the mortgage mod problem as a matter of the President’s authority (or lack of it) over the banks. My HAMP experience suggests that the President’s battle is not with the banks alone – they have been unconscionable – but with the note holders, Fannie and Freddie, that are wholly owned entities of the government over which he presides.
So here’s my experience. After 16 months of trying to get GMAC to explain its conflicting reasons for turning down my five HAMP applications, a succession of GMAC agents began telling me that it was not GMAC but Freddie Mac, my note holder, that had denied one or more of my HAMP applications – AND that Freddie had denied at least one of them after GMAC “may have” approved it. This raises the possibility that banks like GMAC pass on their recommendations to Freddie and Freddie for a final decision.
Five GMAC agents have now confirmed that Freddie Mac denied my application using guidelines that are not HAMP guidelines. Indeed, GMAC wrote me as follows in its most recent letter of denial: “We service your loan on behalf on an investor [Freddie Mac] or group of investors that has not given us authority to approve your loan modification under the program [HAMP] requested.”
The big question: is my HAMP experience exceptional or commonplace? If the latter, then the entire mortgage mod problem would have to be reframed along these lines:
THE WHITE HOUSE HAS YET TO PREVENT WHOLLY-OWNED GOVERNMENT ENTITIES (FREDDIE & FANNIE) FROM USING THE BANKS AS SHIELDS AND FLAK-TAKERS SO THAT THESE ENTITIES CAN SUBVERT WITHOUT DETECTION GOVERNMENT PROGRAMS (HAMP/MFA) MANAGED BY THE TREASURY DEPARTMENT AND CREATED BY ORDER OF THE PRESIDENT OF THE UNITED STATES.
This points to a solution of the mortgage mod problem: for the President to discipline both the banks and Fannie and Freddie, which own 90% of U.S. mortgages.
I’ve shared with Yves the possibility that Fannie and Freddie are in fact the hidden, furtive and covert culprits behind mortgage mod mess. She hadn’t heard of this deliciously conspiratorial possibility but she is passing it on to people who may be able to confirm or dismiss it. I sure look forward to getting a clear answer!
I wonder how many other HAMP applicants have taken the time to find out exactly who made their loan mod decision. All it takes is a bunch of phone calls.