If it’s not completely obvious by now, banks are more willing to repossess a home through foreclosure than they are to rewrite a home loan and keep them paying each month at a new, affordable interest rate. Without going into too much detail, there are reasons why banks prefer to shut the door on delinquent homeowners. One reason is that banks do not “lend” money from their existing assets when they create a mortgage for a consumer’s home purchase. The money for a home loan comes from the Federal Reserve Bank and is printed out of thin air and transferred to the major commercial banks it sponsors. For every dollar a commercial bank holds in its reserves from depositors, about nine times that amount can be used for consumer loans, including mortgages. This is called a fractional reserve loan; although it should be called fractional reserve “impression”.
Commercial banks like Chase, Wells Fargo, Bank of America, etc. they are simply marketing weapons for the Federal Reserve itself. These banks can create mortgages with this “fun money” at no cost and charge interest on it. That’s a pretty good position to be in, don’t you think? Banks invariably waste time and money on human resources and lawyers helping struggling homeowners with loan modifications; which explains why banks prefer to execute them instead. It’s faster, easier, and more profitable for a bank to take a home and sell it after foreclosure than to help homeowners who are struggling to pay their monthly mortgage note.
It must be remembered that the US government has chosen to help the banks, using all US taxpayers as the “vessel” to do so. Remember the taxpayer-assisted bank bailout? Behind the scenes, the rescue has gained strength, but this time in a much more discreet way, under the name of HAMP; intentionally limiting the number of troubled homeowners who are eligible to receive a modified permanent home loan. The Obama Administration’s Home Affordable Modification Program (HAMP) is smoke in the mirrors, designed to keep banks in the green while homeowners try to corral a concrete, finalized and elusive mortgage loan that they can to pay. Less than 5% of struggling homeowners will get a HAMP modified home loan and here’s why:
HAMP guidelines apply to a strong economy and low unemployment.
The monthly payment on a modified loan must not exceed 31% of a family’s monthly income. The Congressional Oversight Panel that evaluated the HAMP program concluded last October that “It increasingly appears that HAMP is targeting the housing crisis as it existed six months ago, rather than as it exists now.” Fifteen percent unemployment was unheard of when current troubled homeowners took out their now unaffordable home loans. While an out-of-work person can theoretically get a loan modification under HAMP by demonstrating eligibility for at least nine months of unemployment benefits, the program is not set up to handle someone without stable income, a situation many homeowners face. This day.
The HAMP program places little emphasis on reducing the total amount a person owes on their home.
It should be noted that home prices were buoyed by liberal lending guidelines in an unregulated banking industry. Banks encouraged lending and consumers obliged, wiping out the supply of available housing units and driving prices through the roof. When banks stopped lending so liberally in 2007, consumers were stuck with mortgages that reflected much higher property values created in the mortgage boom years. The few homeowners who have received permanent modifications through HAMP have seen their homes sink deeper under water. According to FOXBusiness.com, “Only 0.01% of mortgage modifications under the program got principal reductions. That means only 120 of the nearly 121,000 troubled loans got the reductions that would best ensure people stay in their homes.” .
A trial period was established to disguise the legal vacuum of the banks.
The first three months of a mortgage modification are a trial period for homeowners. While HAMP’s trial period appears to be a time when homeowners can prove to their mortgage servicers that they can handle the new loan terms, the trial period is really an escape clause for banks that may opt out. not help a homeowner in difficulty. Very few owners are getting out of their probation because banks are using the owner’s probation to gamble. The trial period is only supposed to last three months, but mortgage servicers are extending the period for more than a year in some cases before kicking homeowners out of the program, even if they met the HAMP guidelines and made all their payments. test.
There is no one patrolling the banks.
In a December 2009 article, Time magazine reported that less than 1% of trial loan modifications become permanent; 0.3% to be more precise. This is because there is little government oversight. Looking at the story above, which is just one of millions of disgusting stories with similar results, you can see why the show is such a flop. On March 12, 2010, the Treasury Department released a statement saying that 90,000 borrowers had been dropped or kicked out of the program. The total number of borrowers in trial modification plans as of March 2010 was 835,194. Wells Fargo, our nation’s second-largest mortgage servicer, said it “canceled deals with 19,000 borrowers on trial plans” as it “intensified efforts to make final decisions in trials where customers have made all required payments.” “. Translation: Because we can do whatever we want because of the loopholes within HAMP, and because it’s more profitable to turn a blind eye to the problem, we’ll continue to collect on people’s houses on top of all the interest they paid us over the years. ; it’s much more profitable that way; furthermore, what we are doing is not illegal. The trial period is our loophole where we can make excuses for not having to modify a home loan; although the government did a good job of making homeowners think that the trial period was their stage to prove that they could handle the payments on a modified loan if we chose to end it.
If there were a system of checks and balances, or if the government really was on the side of the American owners, these statistics would be quite different:
– Bank of America, our nation’s largest mortgage provider, has modified 22,303 mortgages through March 2010. That’s just 2.1% of the 1,020,000 delinquent mortgages they service.
– JP Morgan Chase has modified 20,450 mortgages; just 4.6% of the 437,323 struggling homeowners they face.
Was the HAMP plan designed to fail? You be the judge; But as you ponder this probability, consider the safety of our airline industry. The government works cohesively with airlines to limit catastrophes involving some of the world’s most technologically advanced machines, and as a result, both entities have a near-perfect track record over the last 10 years (and throughout history if you look at it). consider the number of accidents). there is compared to all the flights made). Also consider that through fractional reserve banking practices, banks put up absolutely nothing of their own for the purpose of lending to homeowners. What is more valuable to them, a paltry $1,000 reward included in the HAMP legislation for modifying a loan or taking a home from a struggling homeowner? HAMP was intentionally designed by political scientists to be obsolete, but to satisfy enough owners to say that it “worked”. It’s a politician’s attempt to put on a friendly face as a knife slowly penetrates the heart of a homeowner by the bank. There are no checks and balances, which is why this program is a failure.