As I noted in my post on March 12th, “Stealing Home: Main Street’s Final Sacrifice,” one of the most notable economic failures of Tim Geithner’s Treasury Department over the past 2-1/2 years has been its inability–for whatever reasons that may be claimed by the Treasury Department in their press releases–to live up to the administration’s supposed commitment to keep homeowners in their homes via the Home Affordable Modification Program, a/k/a “HAMP.”
Perhaps the very best statistical support (available just about anywhere) for this inconvenient truth may be sourced over at the Pulitzer Prize-winning investigative journalism site, ProPublica.org. Here’s my commentary on this from my diary, linked above…
From the Pulitzer Prize-winners over at ProPublica: "By the Numbers: A Revealing Look at the Mortgage Mod Meltdown."By the Numbers: A Revealing Look at the Mortgage Mod Meltdown
by Olga Pierce and Paul Kiel
ProPublica, March 8, 2011, 12:37 p.m.
For the past year, we've been digging into the administration's fumbling efforts . We've crunched a lot of numbers along the way, and now we're sharing what we found – including loads of previously unreported data.
Using new Treasury Department figures, previously unreleased documents obtained through Freedom of Information Act requests, and new analyses of state and industry data, we have assembled the most detailed look yet at how the the mortgage industry  and the government's main effort, the Home Affordable Modification Program (HAMP), have failed homeowners. It provides crucial context to the ongoing government investigation into mortgage servicing practices, which might lead to reforms  of how banks and servicers handle homeowner requests for modifications...
...Here's what we learned:
•Only a fraction of struggling homeowners are getting help.… 
•Mortgage servicers are only reaching a small fraction of struggling homeowners.… 
•The largest servicers, especially Bank of America, have left most struggling homeowners in limbo without either modifying or foreclosing. 
•HAMP itself hasn't made much difference: It hasn't led to an increase in modifications.… 
•Just over one in five homeowners who applied for a HAMP mod have received a permanent modification… 
•And in one quarter of rejections, mortgage servicers - notorious for losing documents - have cited missing documents as the reason. 
•Here are your overall chances of getting a mod with each of the top servicers. 
•Treasury claims servicers are improving, but its own data show otherwise. 
•When servicers offer a mod, it's generally more affordable than mods used to be.… 
•But instead of mods, servicers have recently been offering more repayment plans, which actually increase struggling homeowners' payments. 
•In the end, most government funds set aside to help homeowners are still unused. 
Copyright 2011. ProPublica.org
At the very end of the ProPublica post, we learn the following…
The Treasury Department set aside more than $37 billion from the TARP for two programs meant to help struggling borrowers, but little more than $1 billion has been spent.
Bold type is diarist’s emphasis.
We’re also told that a report from the Congressional Oversight Panel has determined that the Treasury Department would only spend about $4 billion after everything was said and done, over a five-year period.
Of these funds, approximately $7 billion was set aside for the “…Hardest Hit Fund, which provides subsidies to states for various foreclosure prevention programs. That, too, has been slow to get off the ground. Only $104 million has been spent so far.”
All of this data is available at ProPublica’s bailout database. (Diarist’s note: This database, alone, is quite enlightening for all those that believe the false meme that Wall Street’s “repaid” U.S. taxpayers.)
In an of itself, these facts, noted above, are a travesty of the first order. But, when one looks closer at what’s actually happening, as I noted in my diary on February 3rd, “Endgame,” there’s much more going on here than meets the eye.
As Naked Capitalism Publisher Yves Smith explained, yesterday, in "Wall Street Co-Opting Nominally Liberal Think Tanks; Banks Lobbying to Become New GSEs," the faux Democratic wing of the Democratic Party is now teeing-up what I can only refer to as "the ultimate Wall Street clusterf**k." It is beyond brilliant in its deviousness.
What's being very seriously proposed--and, IMHO, I think it maintains more than ample "spinnability" to make it through to actual legislation that our president will support--is, for all intents and purposes, relinquishing Fannie Mae's and Freddie Mac's roles (i.e.: the GSE's, or government-sponsored entities' roles) in the housing industry to Wall Street, while permanently backstopping the too-big-to-fail banks in much the same manner that our government has funded and supported the GSE's up until now. IMHO, if it becomes the law of the land, it would be the ultimate privatization of profits and socialization of losses for our nation's status quo, and virtually insure the ongoing domination of our society by Wall Street, perhaps, for many generations to come.
Putting it even more succinctly, what's being proposed…is the wholesale, virtually permanent, institutionalized sell-out of Main Street to Wall Street.
Click THIS LINK for more on this story from Alternet.org.
This is all very much playing out before us now.
Events this week just reinforce these truths; and, for lack of a better word, this situation becomes more pathetic by the day.
As Yves Smith notes, farther down below, the Treasury Department, in an effort to show they’re “getting tough” with the banks as far as their abuses of the HAMP program are concerned, has just announced that it is delaying $24 million in payments to Bank of America, JPMorgan, and Wells Fargo.
(Wow! A whole $24 million dollars…in delayed payments to BofA, JPMC and Wells? That’ll teach ‘em!)
…That averages $8 million each. And since this is merely a delay, the cost to the bank is the cost of not having the money sooner. Since they can borrow at pretty much zero, the economic cost is so miniscule as to not be worth presenting to the public. The abusive late and junk fees on a single abused borrower (which are ultimately paid to the bank out of the foreclosure sale) are bigger than the monthly cost per bank of the embarrassing sanction imposed here…
Some of developed world’s leading economists (from not just the left side of the political spectrum, but the center) are speaking out more vociferously about this now-rapidly-developing, twisted affront upon our nation’s middle and lower classes.
As M.I.T. economist Simon Johnson just noted at the New York Times’ Economix blog, on Thursday, the Treasury Secretary is now totally revising our recent corporate kleptocratic history. (Sad to say, I wonder how many people reading this even remember what they had for dinner last night, never mind what caused our nation’s economic crash and burn over the past decade.)
The Banking Emperor Has No Clothes
By Simon Johnson
Baseline Scenario Blog (first published at the NY Times Economix blog)
June 9, 2011 6:10AM
In a major speech earlier this week to an American Bankers Association conference, Treasury Secretary Tim Geithner laid out his view of what went wrong in the financial sector prior to 2008, how the crisis was handled 2008-10, and what is now needed with regard to implementation of reforms. As chair of the Financial Stability Oversight Council and the only senior member of President Obama’s original economic team remaining in place, Mr. Geithner’s influence with regard to the banking system is second to none.
Unfortunately, there are three major mistakes in Mr. Geithner’s speech: his history is completely wrong; his logic is deeply flawed; and his interpretation of the Dodd-Frank reform does not mesh with the legal facts regarding how the failure of a global megabank could be handled. Added together, this suggests one of our most powerful policymakers is headed very much in the wrong direction.
On history, Mr. Geithner places significant blame for the pre-2008 excesses on the UK and other countries that pursued light-touch regulation. This is reasonable – apart from the fact that he is apparently unaware that the US led the way in lightening the touch of regulation, at least since 1980. A senior British official retorted immediately, “Clearly he wasn’t referring to derivatives regulation because as far as I can recollect, there wasn’t any in America at the time” (Financial Times, June 8, p.1).
More broadly, Mr. Geithner seems to have forgotten how big banks were saved – by government intervention, at his urging…
And, here’s Krugman from Friday…
Rule by Rentiers
By PAUL KRUGMAN
NEW YORK TIMES
June 10, 2011
The latest economic data have dashed any hope of a quick end to America’s job drought, which has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. Yet there is no political will to do anything about the situation. Far from being ready to spend more on job creation, both parties agree that it’s time to slash spending — destroying jobs in the process — with the only difference being one of degree.
Nor is the Federal Reserve riding to the rescue. On Tuesday, Ben Bernanke, the Fed chairman, acknowledged the grimness of the economic picture but indicated that he will do nothing about it.
And debt relief for homeowners — which could have done a lot to promote overall economic recovery — has simply dropped off the agenda. The existing program for mortgage relief has been a bust, spending only a tiny fraction of the funds allocated, but there seems to be no interest in revamping and restarting the effort.
What lies behind this…policy paralysis? I’m increasingly convinced that it’s a response to interest-group pressure. Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense…
In a post over the past 24 hours, I’ve reiterated and detailed some inconvenient truths (facts) about where the Treasury Department stands on matters relating to urgently-needed job creation on Main Street.
Tonight, I want to make note of the latest (pathetic) “move” that the Treasury Department has made to supposedly ameliorate the suffering of those projected 14 million American souls (approximately six million homeowners) that are currently dealing (have dealt) with the foreclosure process (between 2008 and 2014).
(We won’t even touch upon the projected 30+/- million homeowners—which translates into roughly 60-70 million Americans--that are projected to be underwater, owing more on their mortgages than their homes are worth, by the end of 2011! What do you think this will do—and is already doing—to our economy’s “demand” problem?)
Of course, as I noted in my recent diary, entitled: “You Can’t Eat Your House,” our Treasury Secretary is all but on-the-record--through his actions if not his words--as supporting the concept that those facing foreclosure on Main Street certainly can!
And, today, via Yves Smith at Naked Capitalism, once again, we’re reminded: “Yes. You. Can…” (…Eat Your House!)
(Diarist’s Note: Naked Capitalism Publisher Yves Smith has authorized diarist to reprint her blog’s posts in their entirety for the benefit of the DKos community.)
Treasury Waves Wet Noodle at Big Banks Over HAMP Mortgage Mod Abuses
Friday, June 10th, 2011 1:23AM
This latest move by the Treasury Department to appear to Do Something about Big Bad Banks is so off the charts pathetic that I am straining to find an adequate description. It isn’t merely ineffectual; it looks instead like a deliberate thumbing of the nose at the financier-afflicted public, with the Treasury and the mortgage industrial complex elbowing each other in the ribs and laughing uncontrollably at how they’ve made their point, that the public be damned, while observing proper bureaucratic forms in the process.
The latest measure is to withhold (as in merely delay) $24 million in payments to three big banks, Bank of America, Wells, and JP Morgan, for their abuses under the Obama mortgage modification program know as HAMP. That averages $8 million each. And since this is merely a delay, the cost to the bank is the cost of not having the money sooner. Since they can borrow at pretty much zero, the economic cost is so miniscule as to not be worth presenting to the public. The abusive late and junk fees on a single abused borrower (which are ultimately paid to the bank out of the foreclosure sale) are bigger than the monthly cost per bank of the embarrassing sanction imposed here.
To give you an idea of how utterly insulting this penalty is, we need to give a bit of background. If you’ve been paying any attention to the mortgage crisis, you’ve probably taken note of efforts by the Bush and Obama Administrations to pretend to be doing something about foreclosures. The problem is that neither was keen to do all that much. Both were unwilling to apply real pressure mortgage servicers to make more mortgage modifications. Yet nobody’s soft touch vulture investor Wilbur Ross has reported good success with deep principal mods, Indeed, the overwhelming majority of mortgage investors would greatly prefer them if borrowers were screened to eliminate those hopelessly beyond redemption. After all, a 30% to 40% loss on a mortgage mod is a hell of a lot better than a 50% to 75%+ loss on a foreclosure. And the damage to investors is only getting worse as more borrowers fight in court. I know of disputed foreclosures where the loss was 400%.
So instead, we’ve had a series of mod programs that have largely failed because they worked within a rigid and badly malfunctioning securitization model. The worst, in terms of collateral damage, was HAMP, because it was bloody clear servicers gamed the program. The banks falsely told borrowers they had to be in default to participates, kept losing paperwork of those who got trial mods, kept them at a lower payment level longer than the stipulated three months, never notified borrowers they would have to make up the shortfall plus late fees if they did not get a permanent mod, and led many borrowers who were rejected for permanent mods to believe they were going to be approved. And there was a common horror story too: borrowers who had been approved for permanent mods who nevertheless lost their homes because the servicers were using the so-called “dual track” approach, continuing to process the foreclosure while the modification was under consideration. Borrowers were advised to ignore legal notices when they called their servicer. Yet the notices were valid, and many borrowers lured into inaction by their bank lost their home unnecessarily, since the department that was handling the mod could not be bothered to call off the area grinding forward with the foreclosure, even when distraught borrowers pleaded for intervention.
HAMP was so clearly a disaster that Treasury Department officials didn’t try very hard to defend it in a meeting with bloggers that I participated in last August. The best they could do was claim that it helped the housing market by spreading out foreclosures over a long time period. Given that home prices continue to fall in the overwhelming majority of markets in the US, even this alleged benefit was at best temporary in nature, and hardly an offset to the borrowers who were struggling but able to stay current who participated in HAMP and lost their home as a result.
The insulting bit is the latest move. To encourage banks to participate in HAMP, it was a voluntary program with no penalties for non-compliance save the Treasury could claw back incentives. And in that blogger meeting, Treasury fell back on the pathetic excuse that it could really had no power over servicers (Geithner made the same claim before the Congressional Oversight Panel, and it did not go over very well, see the testimony starting at 101).
But that’s ridiculous. The states of Arizona and Nevada are suing Bank of America over its actions under HAMP, which violate consent decrees, and Arizona (and I assume Nevada, their lawsuits were broadly similar) ALSO sued Bofa for consumer fraud (SEE: BofAComplaint.PDF). Coming up with litigation strategies is over my pay grade, but truth in advertising is a Federal matter, and I’m sure there were other threats of litigation against servicers that Treasury in conjunction with other Federal agencies could have made if it had any real interest in bringing the banks to heel. I’m sure if Treasury had put on its thinking cap, it could have come up with a basis for inflicting some real pain on the banks over this cynical misconduct. Or they could threaten to audit servicers for compliance under the RESPA and the Truth in Lending Act. I’m certain they are a cesspool of violations.
Other observers were equally unimpressed. Alan White at Credit Slips’ headline to his post on the detailed report was “Too Big to Comply.”
From the Shahien Nasiripour story at Huffington Post on this travesty:“All this appears to be is that, after the servicers seemingly violated their agreements with Treasury with impunity, Treasury’s sole response is to give them a temporary time-out before paying them in full,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program. His critical reports on the bailout earned him plaudits in Congress for looking out for taxpayers, but enemies at Treasury, which administered the TARP.
“It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” added Barofsky.
But it’s worse than that. This sick joke of a “penalty” looks to be a message by the banks via its minions in the officialdom:Think you can lay a glove on us? Dream on. The most you can impose on us is symbolic punishment, and as we continue to cement our control, pretty soon you won’t even be able to do that.
Last night, in my post detailing the Treasury Department’s pathetically rightwing sentiments (for Main Street) with regard to supporting jobs growth, I ended the diary with a quote from Krugman’s blog, from 24 hours prior. Tonight, it’s all about the Treasury Department’s actions as they relate to our nation’s foreclosure fraud and mortgage nightmares; and, I’ll close with Krugman’s closing from his op-ed in Friday’s NY Times (link provided up above)…
…No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios.
And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it’s the class that has personal access to policy makers — many of whom go to work for these people when they exit government through the revolving door. The process of influence doesn’t have to involve raw corruption (although that happens, too). All it requires is the tendency to assume that what’s good for the people you hang out with, the people who seem so impressive in meetings — hey, they’re rich, they’re smart, and they have great tailors — must be good for the economy as a whole.
But the reality is just the opposite: creditor-friendly policies are crippling the economy. This is a negative-sum game, in which the attempt to protect the rentiers from any losses is inflicting much larger losses on everyone else. And the only way to get a real recovery is to stop playing that game.
Bold type is diarist’s emphasis.