Banks Find Foreclosure More Efficient than Loan Modification?

In this paper they search for the underlying reasons for the foreclosure crisis and WHAT should be done to stop it. What I find interesting is their comments concerning the reasons for the low number of Loan Modifications to date. And here they conclude…

“Regarding the small number of loan modifications to date,we show, both theoretically and empirically, that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modificationsthan contract frictions related to securitization agreements between servicers and investors.”

So the Servicers excuses that their PSA’s (Pool Servicing Agreements) with the Investor’s were preventing them from modifying more home loans is apparently not true. The real reason for the low number of loan Modifications versus Foreclosures is apparently because it’s more efficient to Foreclose than to modify a Loan!

But WHAT does more efficient mean? Easier to Foreclose on a Home than to negotiate a loan Modification? It certainly isn’t MORE profitable for the Investor.

A.M. White in his paper Deleveraging the American Homeowner: The Failure of 2008 Voluntary Mortgage Contract Modifications, stated. “Servicers are incurring huge losses for investors by foreclosing. The average foreclosure loss on a first mortgage in November 2008 was $145,000 or about 55% of the average amount due. In comparison, for the modified loans with some amount of principal or interest written off, the average loss recognized was $23,610. This seven-to-one difference between foreclosure losses and modification write-offs is striking, and lies at the heart of the failure of the voluntary mortgage modification program.

So Why do Banks Foreclose when they can Modify a loan? Foote and Willen write:

“Estimates of the total gains to investors from modifying rather than foreclosing can run to $180 billion, more than 1 percent of GDP. It is natural to wonder why investors are leaving so many $500 bills on the sidewalk.”

So if the Investors are losing 7 to 1 more money in Foreclosure then WHY IN GOD’S NAME are they Foreclosing on Homes? It’s Insane! It makes NO SENSE, But logical thought in the Banking Business in my humble opinion is NOT RECOMMENDED!

What’s truly lacking in ALL of the Professor’s studies and papers on the Foreclosure Crisis is the LACK or ABSCENCE of compassion for the Borrower. Their studies are ALL numbers and percentages, graphs and formulas. Like some Military Generals acceptable collateral losses on the battlefield. But this crisis is about real people and families being destroyed and not just numbers for the Federal Reserve to study! What the studies really should be focusing on is what the process of a loan modification is really like and the way in which the Banks are presenting them. Until you uncover how they are being processed in the interests of the Bank first, Borrower last we’ll never improve the percentages of homes saved.

In reality the Banks really DON’T want to do Loan Modifications. They aren’t in the business of lowering payments and loan balances. They have Great PR and arrive to speak to the President over lunch on their efforts to help the Homeowner, but the numbers of those receiving help are well short of their promises. It will take a Herculean effort to change the Banks cultural attitude about this Foreclosure Crisis. Until the Government makes the Loan Modification programs mandatory and not voluntary the results in avoiding Foreclosure will be dismal. And millions will continue to lose their homes.

Uppitybanker

Congress Clears Dodd and Conrad of Wrongdoing

Surprise! Surprise! Surprise!

>>>WASHINGTON – Senate Banking Committee Chairman Christopher Dodd, D-Conn., was cleared by the Senate Ethics Committee from a year-long investigation about whether mortgages he obtained from Countrywide Financial violated the Senate’s rules on gifts. “While the committee finds no substantial credible evidence as required by committee rules that your Countrywide mortgage violated Senate ethics rules, the committee does believe that you should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator,” the report said<<<

And HOW did the Ethics Committee FIND this conclusion? “While the committee finds no substantial credible evidence as required by committee rules that your Countrywide mortgage violated Senate ethics rules…

Here are the committee rules: House and Senate rules bar members from knowingly receiving gifts worth $100 or more annually from companies that use registered lobbyists.

Countrywide allegedly gave cheap, sweetheart mortgages to Sen. Kent Conrad (D-ND) and Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking committee who reportedly saved $75,000 on his inside deals from Countrywide.

NO substantial credible evidence? Really

It’s absolutely IMPOSSIBLE for the Senator’s to NOT KNOW they were getting a deal. They had to have SIGNED the Loan Documents and HUD1 Closing Statement with all of the fees. Except THEIR FEES WERE MISSING! I’m Sorry but a SAVINGS of $75,000 in a Loan File EXCEEDS $100.00 gift restriction!

The Committee also found: “the committee does believe that you should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator,”

In Other Words: Don’t Get Caught Next Time…

And the U.S. Congress WONDERS WHY the Citizens of this Country are livid with the Bailouts for the Banks and the Payoffs to the members who approve the Bailouts!

“Friends Of Angelo VIP Program”

Sen Dodd Sen Conrad Angelo Mozillo

Senator Dodd D-CT and Senator Conrad D-ND are being investigated for ethics violations in CLOSED SESSION by The House Oversight and Government Reform Committee and the Senate Ethics Committee. Apparently they DIDN’T KNOW they were VIP’S?

>>Both senators have said that at the time the mortgages were being written they didn’t know they were getting unique deals from Countrywide Financial Corp., the company that went on to lose billions of dollars on home loans to credit-strapped borrowers. Dodd still maintains he got no preferential treatment<<<

>>Dodd got two Countrywide mortgages in 2003, refinancing his home in Connecticut and another residence in Washington. Conrad’s two Countrywide mortgages in 2004 were for a beach house in Deleware and an eight-unit apartment building in Bismarck in his home state of North Dakota.<<

>>Robert Feinberg,who worked in the Countrywide’s VIP section, told congressional investigators last month that the two senators were made aware that “who you know is basically how you’re coming in here.”<<

>>”You don’t say ‘no’ to the VIP,” Feinberg told Republican investigators for the House Oversight and Government Reform Committee,according to a transcript obtained by The Associated Press.<<

Barbara Boxer who is Chairman of the Senate Ethics Committee doesn’t have to grill Robert Feinberg of Countrywide, to find FRAUD in the Senators loan applications. If she would just subpoena the actual Fannie Mae Form 1003 and the HUD1 Closing statements she would have all the proof she needs, but WHO says she wants to find Fraud?

Senator Dodd applied for BOTH loans as OWNER OCCUPIED. So on one application he checked Primary Residence instead of Investment Property. That’s Loan Fraud for you and me, but an oversight for a Senator! That little check mark saved him 1.5% in closing costs there for not being an investment property. Add in the WAIVEDorigination fees at 1% and it adds up to be a sweet deal! Senator Dodd SIGNED the loan application declaring that he lived in BOTH properties so how can he now claim HE didn’t know he was getting preferential treatment? I guess you can become Chairman of the Senate Banking Committee and not know what loan fraud constitutes?

Senator Conrad got quite a unique treatment which can only be truly identified as IMPOSSIBLE for the average borrower who is not a member of the U.S. Senate. Countrywide financed an 8 Unit Apartment Bldg for Conrad, the Chairman of the Senate Budget Committee. As a Mortgage Broker I could not do a loan above 4 units with Countrywide. Countrywide was a residential mortgage lender and was restricted to finance only up to 4 residential units. So Countrywide funded a loan for the Senator that were not allowed to fund and would have refused to do for anyone else! I would love to see the HUD1 closing statement for that loan just to see how much of the fees Countrywide paid for the Senator.

>>Conrad initially said in June 2008, “If they did me a favor, they did it without my knowledge and without my requesting it.”<<

>>The next day, Conrad changed course after reviewing documents showing he got special treatment, and said he was donating $10,500 to charity and refinancing the loan on the apartment building with another lender. He also said then it appeared Countrywide had waived 1 point at closing on the beach house.<<

So let’s sum this up simply as if you are a Senator and a FRIEND of Angelo Mozillo, ex CEO of Countrywide you get your loans for FREE! And if you get caught Play Dumb!

information source: http://www.breitbart.com/article.php?id=D99N143G3&show_article=1#idc-ctools