Inspector General bashes TARP Program

By Steve Beede,

Through the 2009 Troubled Asset Relief Program (”TARP”), the American taxpayers invested hundreds of billions of dollars in hundreds of financial institutions, the auto industry, and certain markets for asset-backed securities. To oversee this, Congress established a Special Inspector General as a watchdog to protect those investments and report on their performance. In practice, this has meant prosecuting those financial institutions that commit crimes involving TARP funds and to make recommendations to the Department of Treasury.

For real estate owners, the TARP monies fund the HAMP loan modification program, HAFA short sale/Deed in Lieu program, and the HARP refinance Progam, plus many other programs. On October 27, 2011, the Special Investigator released a 306 page Quarterly Report to Congress which unveiled several important facts affecting the real estate industry:

1) Only $2.5 billion - or 5.4% 0 of the $45.6 billion in TARP funds earmarked for housing support programs has been spent. Calling the lender participation in the HAMP program “disappointing”, the Report indicates that as many as 600,000 eligible homeowners will be left out. For those who have been struggling with getting lenders to respond to their HAMP applications, this Report suggests that the problem was in part a lack of willingness of the government to push the lenders to act. The Inspector General made four recommendations to Treasury to improve servicer performance which could keep more people in their homes. Treasury has refused to act on any of the recommendations. As stated in the Report, “Treasury is giving up a chance at meaningful change and sadly, it is struggling homeowners who have the most to lose”.

2) The lenders who received the TARP bailout money are required to particpate in these housing programs. Given the huge number of homeowner complaints the Investigator has received, the Special Investigator urged Treasury to set benchmarks for servicer performance and to impose fines and withhold payments to violators. However, Treasury is leaving it up to the lenders to voluntarily comply and refuses to compel the lenders to do so. As the Report points out, “Compliance with program guidelines is not, and must not, be voluntary”.

3) As of September 1, 2011, the 20 largest loan servicers (including BofA, Chase, Wells Fargo, and Ocwen) are required to designate a Single Point of Contact. The single point of contact, referred to as the “relationship manager,” will have the sole primary responsibility for communicating with the borrower (or the borrower’s authorized advisor) about options to avoid foreclosure, his/her status in the process, coordination of receipt of documents, and coordination with other servicer personnel to promote compliance with timelines and requirements. This single relationship manager will be responsible for managing the borrower relationship throughout the entire delinquency or imminent default resolution process, and if the loan is subsequently referred to foreclosure, must be available to respond to borrower inquiries regarding the status of the foreclosure. The relationship manager’s proactive responsibilities end when a homeowner completes a loan modification or when all loss mitigation actions have been exhausted.

4) Many homeowners are denied a HAMP modification because they fail the “Net Present Value” (NPV) test. The NPV test is used to enable investors to determine whether they would recover a better value from modifying the loan or from foreclosing. This has caused great confusion and questioning as to what data was used for the test. Now homeowners can run this test themselves online at www.CheckMyNVP.com. This can be used to check data after an NVP denial or even before applying for HAMP.

There is a lot more information within the pages of the Report which I’ll be sharing in subsequent postings. In the meantime, if you have been wrongly denied a loan modification or other relief allowed under the TARP program, contact your Representative or Senator and demand that they take action to compel lenders to comply with TARP requirements. Otherwise, at least 600,000 more homeowners are likely to lose their homes.

If you are a California property owner, consider our $200 Attorney Consult program that will help you determine all of your options and choose the best strategy to enable you to move forward as intact as possible. To learn more, contact me at sjbeede@bpelaw.com or call us at 916 966-2260.

The information presented in this Article is not to be taken as legal advice. Every persons situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

WHAT’S ALL THE HYPE ABOUT HARP ?

We have had questions on what HARP is (since the enhancements were just announced), so here you go:

On Monday, October 24th, 2011, The Federal Housing Finance Agency (FHFA) announced their enhancements to the Home Affordable Refinance Program (HARP). The HARP program came about during the credit crisis to help borrowers refinance who may be “under water” on their homes.

What's Really New?

First, it's important to realize that the president's proposal is not a new program, but a revision to the current Home Affordable Refinance Program (HARP). However there are some big changes that you can let people know if they ask you.

Refinance…No Matter How Underwater

Now homeowners can refinance no matter how underwater they are! Before homeowners could only refinance if they were 25% or less underwater, and even then many banks only let people who were 5% or less underwater refinance.

No Appraisal Necessary?

With the program's revision, it's possible that an appraisal won't have to be performed. That's great news because it can help people save time and money. But this is only the case if Fannie Mae or Freddie Mac can electronically estimate the value through their valuation models.

But Keep in Mind…

These updates to HARP apply only to people whose mortgage is currently secured by Fannie Mae or Freddie Mac...and whose loan was securitized by Fannie Mae or Freddie Mac prior to May 31, 2009. So the chances are that people who have refinanced since May 2009 will not qualify to refinance under the HARP revision.

What's Next?

As of now, the revisions to HARP have been proposed by President Obama and the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac. This directive has been given to Fannie Mae and Freddie Mac, and they now have until November 15, 2011 to give guidance and details regarding how these changes will be run.

Check out these websites to see if a loan is owned by Fannie or Freddie http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/.



Link to the FHFA press release:

http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf .