Treasury Impotent To Penalize Wrongfully Denied Loan Mods

For all its tough talk, the Treasury can’t do jack to reign in lenders who are wrongfully denying home owners loan modifications. After seeing reports that some banks were basically modifying no loans at all, Treasury staffers huddled up to talk about withholding payments and levying fines on the baddest of the bunch. Unfortunately, they were told by their own lawyers that they don’t have that power. ProPublica reports, “staffers were walked back by Treasury lawyers, who said the government was only party to a commercial contract with servicers and not acting as their regulator.”

“At some point, Treasury needs to ask itself what value there is in a program under which not only participation, but also compliance with the rules, is voluntary,” said a new report (PDF) from the TARP’s (Trouble Asset Relief Program) special inspector general. “Treasury needs to recognize the failings of HAMP [Home Affordable Modification Program] and be willing to risk offending servicers. And if getting tough means risking servicer flight, so be it; the results could hardly be much worse.”

HAMP isn’t just hampered, it’s hamstrung, and it’s the Treasury doing the stringing. The department now says that only when the servicer has given a modification incorrectly and taken a payment can the department withhold incentives or take back payments.

But that view strikes law experts and consumer advocates as being overly narrow to , who question the Treasury’s timidity. Check out the ProPublica investigation for a more in-depth look at why.

Govt’s Loan Mod Program Crippled by Lax Oversight and Deference to Bank [Pro Publica]
SIGTARP Quarterly Report to Congress, January 26, 2011 (PDF) [SIGTARP.gov]

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  1. Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

    For all its tough talk, the entire government can’t do jack.

    • Tim says:

      Yet the Republicans are accusing the government of doing all sorts of things … way more than jack, actually.

      • ubermex says:

        That’s what cracked me up about them freaking out about “Obamacare”. The stuff they were alleging is way beyond the capabilities of civil servants.

    • ARP says:

      Because when we talk about actually giving the government the power to Regulate, then we get the people who think all regulations are bad and try to dilute them; lobbyists do the same thing (and they’re almost always successful). What you’re left with is usually ineffective at solving the problem it was orginally intended to solve. Or its not properly funded so it can’t be enforced. So, the government tries to institute rule-making to make up for the shortcomings in the original legislation and we get all sorts of bizzarre rules. Of course, those who opposed the legislation, got it watered down, or defund it, then point to it as evidence that government doesn’t work. No, it was sabotaged from the beginning so that it can’t work properly.

      • danic512 says:

        Or the agencies are headed by people who believe that the agency shouldn’t exist in the first place. That’s my favorite trick right there.

    • Awesome McAwesomeness says:

      Apparently, the only jack they could do is bail out the banks and save their asses. When it came down to it, the banks aren’t returning the favor by helping to save their customer’s asses. Another version of trickle down not working. The banks refusing to pass it on breaks the whole chain that was supposed to get our economy rolling again. If they pass it down to customers, the customers will be able to save their homes and have more money to put into the economy, etc… Since they haven’t done that, it’s put a real kink in things. The government should have put some legal strings with all of that money.

    • YokoOhNo says:

      they can, and do, do a shitton to an human person….it’s the corporate persons who they can’t do shit to.

  2. Rebecca K-S says:

    Well, that’s disappointing.

  3. FatLynn says:

    I, for one, am totally shocked that our government bailed out big banks on the banks’ own terms! Since when are big corporate interests more important to our politicians than their actual constituents?

    • AllanG54 says:

      When HAVEN’T corporate interests been more important that constituents. Remember, they’re the ones supplying PAC money and such while the average guy sends in a few dollars if anything at all.

    • YokoOhNo says:

      Your outrage is 2 years too late…though it doesn’t hurt to keep this feeling out there!!

      Therefore, I too am outraged by the conduct of our politicians selling out Americans for obscene profits and bribes!

  4. FireJayPa says:

    Meet the new boss, same as the old boss.

    • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

      You mean we’ve been fooled… AGAIN?

      • FireJayPa says:

        I wasn’t fooled. As a cynic I’ve come to expect nothing but the worst from people and anything the slightest bit different is a pleasant surprise.

        I knew this was nothing but talk. It’s like that mom in the mall that says “Johny, I’ll give you to the count of three. 1…..2…..2 1/2 ….. 2 3/4….. Johny I’m serious”

        The government doesn’t care. Politicians have one interest in mind, getting reelected. It’s why no one will propose getting rid of social security or medicare or cutting back on welfare, because it’s political suicide. No one in power cares about anyone or anything but themselves.

        This isn’t an Obama issue or a Bush issue…a democrat or republican issue. This is a politics is a bunch of nonsense issue.

        • danic512 says:

          I think cynics like you are the worst because you actually see the problem yet are content in sitting back and telling everyone how you saw it coming.

          How about next time you actually speak up and get those around you to do the same? Have you ever thought that maybe you could actually do something about the situation?

          • not-gonna-tell-ya says:

            That’s novel on the surface, but anyone who proposes cutting underfunded impossible entitlements is instantly demonized as wanting to kill old people. Or insert whatever. The problem is that when you state the obvious such as Medicare/SSI/etc are unsustainable, the discussion shouldn’t be about me and my truthful statement. It should be how do we fix it. Everyone knows that these programs will fail miserably.

            • danic512 says:

              Actually, the problem is that the FICA tax stops on income just over $100,000. If it were to be expanded to all earned income, it would pay for itself easily. There’s no good reason for this tax to stop being applied at that income level.

              These programs don’t fail, they’re quite successful in plenty of nations. Sure, you can change the rules to allow medicare the ability to bargain on prices of prescription drugs, but if your only plan is to just cut the programs back without being willing to discuss how the funding actually works, then you do deserve to be accused of wanting the old and the poor to suffer.

              • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

                “Actually, the problem is that the FICA tax stops on income just over $100,000″
                and is not NEED BASED.

                • danic512 says:

                  Making it need based could help, though you’d end up with people claiming, “well I’m never going to use it, why should I pay it?” The reason in my mind that SS still exists is that everyone pays in and everyone demands to cash out.

                  There are a lot of folks out there that don’t realize the value to society to not having a permanent underclass of the old and infirm that cannot take care of themselves. If folks were more willing to understand this, I would be more in favor of means testing.

                • not-gonna-tell-ya says:

                  But I think the reason that it stops at that amount is to establish a needs basis. Anyone needing the program can live off the benefits they receive for contributing at the 100,000 mark. If I make 40 million a year, I likely won’t need the program, but if I blow it all and do need SSI, the amounts provided at 100k will suffice. The only reason to tax for SSI at an unlimited rate is to further punish high wage earners in order to cover up the fallacies of the program.

                  If I were able to contribute my SSI funds to even a moderate fund, I would have TONS more than what SSI provides. Why not give me that choice? If people are worried about what the retirees will do, then phase out the contributions to SSI. This would be a great option because as it stands now we have no idea what the cost of the program is going to be. If we freeze it in increments, then the cost/loss can be defined. Once the cost is defined, it can be addressed and elminiated through attrition.

            • FireJayPa says:

              And there’s what I was going to type. Every time I propose something like privatize social security I’m told I’m a monster because too many Americans are stupid and would lose all their money….despite my counter-argument that it’s not my job to babysit people.

              Same goes for Welfare, Unemployment benefits, etc. I understand that we should provide a safety net to people in this nation, but there are fiscal consequences to these programs. When social security was brought about, no one forsaw the baby boomer generation living to be this old…No one thought that the average household size would decrease thus decreasing the amount of money going into the system. Right now social security is a ponzi-scheme I’m paying in and I’ll never see a dime back.

              • danic512 says:

                You completely ignore how a simple change to the taxes would fix everything!

                And please don’t give me this “no one could have predicted increasing life expectancies!” It’s not like someone suddenly discovered the fountain of youth here. Life expectancy has been rising steadily for decades now, and all it would take is a decent actuary and the discipline to fund SS properly to take care of the situation.

                Also, you need to understand the difference between “babysitting” and “preventing whole swathes of society from being taken advantage of via Wall Street”. They aren’t the same thing.

              • Pax says:

                Social Security would be in much better shape, if Congress hadn’t spent thelast 30+ years raiding the Fund (at zero percent, even!!) to offset the Deficit.

                • Me - now with more humidity says:

                  Wrong. There’s no “raid” on the trust fund. Rather, the funds are invested in Treasury securities. Whole different thing.

          • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

            Meh, “Nobody ever listens to me”

          • Awesome McAwesomeness says:

            I spoke out waaaaaaaay in advance about all of this crap to everyone I knew. People laughed at me and said I was wrong. People don’t listen. Most people get REALLY angry at the truth when it doesn’t jive with what they want.

      • not-gonna-tell-ya says:

        Not everyone was fooled. I’m not saying I’m a sage, nothing near it. After the Inet bubble at the turn even lowly me could see that anyone was being given a loan of any size. I even remember thinking that these people must be financing their daily extavagance on debit, and that even a minor imbalance in the cost of living would disrupt things. Then the gas prices went through the roof. The house of cards collapsed.

        Everything that has happened since the collapse has been merely a bandaid to delay the inevitable. The consumer mortgage mess is still going on (although slowed) while we wait for the business realestate market to crash.

        Then we have the gas prices. People are going to get hammered again, and we will cycle through the same problems again that are at the root which is that they have too high a debt to income ratio and won’t be able to pay their mortgages.

        • AnthonyC says:

          Absolutely- and it’s going to cause a lot of pain. It’s going to be deeply unfair, penalizing people who did nothing wrong.

          But keep in mind- while lots of wealth is going to be wiped out on paper, much of it was an illusion in the first place. All the goods and services- homes, land, factories, employee skills and knowledge- still exist. Their true value- the ability to output useful products- is the same as ever. That’s the silver lining, I suppose.

  5. Judah says:

    All the highest placed people who work at the treasury department know who their real bosses are — the companies they used to work for before being political appointees.

  6. Mold says:

    Weren’t ‘government attorneys’ the same ones that said it wasn’t torture if Cheney liked the pics? All those bush political appointments had to go somewhere….why not here…to continue the work of Dear Leader.

  7. banndndc says:

    rein not reign

  8. YokoOhNo says:

    The bribed are impotent against the bribers? No shit, next someone’s going to suggest that the receptionist at goldman sucks can’t force morality on the organization!!

    banks make more money from these incentives by foreclosing than by mosifying and it is their FIDUCIARY RESPONSIBILITY TO ACT the way they do.

    Leniency toward a homeowner deprives shareholders of value thereby removing any incentive to help “the bigger picture” of America.

  9. yessongs says:

    It took me 4 tries to get my loan modified, They tell you right out that they don’t even have to do it. Sort of like doing it out of the “kindness of their heart”

  10. mac-phisto says:

    imo, the biggest problem with the whole system is that the servicers hold all the strings, yet bear little of the loss when a loan goes bad. they retain the ability to levy fees virtually at will on delinquent loans & typically hold a power of attorney for the lender to negotiate all loan terms with the borrower. it is virtually impossible for a borrower to even find out who their lender is, let alone negotiate a modification of payment terms with them directly that would benefit all parties.

    it’s sad really, b/c there are still hundreds of thousands of homeowners on the brink, which means lenders are still looking at the potential for massive loss in the near future. & servicers? they’re likely to bank a fortune in fees along the way for doing nothing whatsoever to mitigate the problem.