Fat Cat Banks, Do They Want To Help?

August 31st, 2010

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What is HAMP? It is the “Home Affordable Modification Program”. But what is it actually?

What is HAMP?

It is the current administration’s attempt at a federally backed refinance to help people who may not fit the traditional underwriting parameters, for example those homeowners that have no equity or are underwater. In March 2009, banks were authorized to begin modifications under the plan immediately.

It was originally touted by the administration that the $75 billion program would help 3-4 million distressed homeowners. But, and this is a total surprise, it has suffered from mismanagement according to independent analysis by the GAO (Government Accounting Office) and the Treasury Department’s Inspector-General. I didn’t see that coming.

Does it work?

To date the HAMP program has seen well over a half million mortgage assistance applicants rejected, compared with 350,000 accepted. That is a 41% approval rating, not very good, huh? And 350,000 is about 10% of the total the administration estimated they’d help, not very good, huh?

Now I am not sure, cuz I am just a poor, country mortgage broker, and my lil’ ole’ calculator does not go that high. But I believe that $75 billion spread out over 350,000 loans is $214,285.71 for each loan. Wow, that sure sounds costly. I hope they plan on helping a whole lotta more folks with this money. At $214,285.71 each loan, they probably could have paid down, or paid off a lot of those loans!

How is the process?

And anyone that has gotten a HAMP loan can attest as to what an agonizing process its been. We all have heard of a process afflicted by lost documents, repeated requests for documents already sent in, delays, lack of transparency, lack of feedback, slow, inept and a generally chaotic process.

Does it help people, or the banks?

And now the rumor mill is churning, saying that maybe HAMP was not set up so much to help individuals, as it was to help banks! Even if numerous HAMP borrowers default (which is happening) maybe HAMP was only supposed to stop massive foreclosures, at a time when banks could not have handled it. Who cares if teeny, tiny little individuals are helped in the long run or not, right?

Taxpayers have bailed out banks?

I have heard other bloggers call this “extend and pretend”. In other words, the program was setup to extend distressed homeowners time in the home, pretend it was helping things, and ultimately kick the can down the road. So maybe taxpayers have bailed out banks, again, not even knowing they did it! Maybe HAMP was all about the US Treasury and the administration, bailing out their bank friends? Helping the taxpayer, whether it worked or not, was secondary? So didn’t the taxpayers just help pay for the banks do something that the banks would have had to pay to do ON THEIR OWN anyway?

This reminds me of when the government told us Wachovia Bank had to be bailed out, and the US Government was brokering (i.e. forcing) a deal between Citibank and Wachovia. And it turned out Wachovia could cut a better deal for itself with Wells Fargo! So how necessary was the deal in the first place?! Should we always question government’s motives when they spend our money? If your child came and asked you for $1,000, wouldn’t you want to know what it was going towards, and why?

Am I being too much of a conspiracy theorist? I don’t know. I report, you decide.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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