650,000 Trial Mods may be a sham

The Obama administration is “basking in the glow” of some impressive numbers of loan modifications during the June-September timeframe. The “trial modification initiative kick-started the fledgling Making Homes Affordable Program and its modification section called Home Affordable Modification Program.

The numbers out today claim the Program has now reached one in five eligible homeowners, but most of those borrowers are on these temporary trial plans that were instituted in June.

As of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, had signed up for trials lasting up to five months, The modifications reduce monthly payments to more affordable levels. To make the change permanent, borrowers must complete their loan mod application in the usual fashion.

Some skeptics charged that disingenuous banks were offering the trial mods just to satisfy the administration and to pry loose some additional payments from homeowners before resuming foreclosure. Icky, huh?

I just got off the phone with one of the dozens of my clients who are grateful recipients of the trial mods. They were so delighted when they were granted a trial mod – it offered them hope to be able to get through their decrease in income (due to health problems) and enable them to keep their home. They are nearing retirement age and were in dread of becoming renters at this life stage.

This morning Indy Mac changed their attitude toward this client. Now, they report they will NOT do what they promised to do in July – they will not grant the mod. In fact, after scooping two more payments from this client, they now recommend they get started on short sale listing of the property. Nothing changed in the borrower’s financial status.

If this trial mod effort turns out to be just another sham, all the goodwill and calm generated by the three month respite will come to an abrupt end. Heck, even if it is just ONE homeowner gets scammed in this political game, it’s unconscionable. I propose that “Operation Loan Lies”, the much ballyhooed Federal and State crackdown on foreclosure scammers, be expanded to include an investigation of the most dangerous predators of all – the lenders and servicers of our mortgages. That’s where we are being fleeced.