So your lender tells you that you don’t qualify for a loan modification under HAMP. Then they offer you their cash for keys program. That’s because you are getting your own tax dollars back, from the US Government to leave your home!
Yes, you heard that correctly. Lenders are being compensated by your own government when you turn your home back over to the lender,( a deed in lieu of foreclosure). According to the US Treasury Department press release on modification program guidelines, Lenders are getting money to kick you out of your home and you thought they were just being nice ! http://www.treas.gov/press/releases/reports/modification_program_guidelines.pdf states on page 15, “Compensation will be provided to servicers and borrowers in order to facilitate short sales or deed-in-lieu of foreclosure in those cases in which borrowers either fail the net present value (NPV) or fail to qualify for, default under, the modification program.”
This means that servicers have a win-win situation. If they modify, they will get compensation from the government and the same applies if they don’t. Most borrowers, in trouble, however, have no idea that the cards are this stacked against them. The question then becomes, how do servicers/lenders avoid one of the requirements of HAMP, which states, “Under HAMP’s loan modification guidelines, mortgage servicers are prevented from “cherry picking” which loans to modify in a manner that might deny assistance to borrowers at greatest risk of foreclosure.” Who is monitoring the servicers to make sure there is not a bias when offering modifications?
It is now understandable, how lenders are benefiting from leading borrowers on. Many borrowers have wondered why they have not gotten a answer for months on the status of their modification, or how suddenly, they receive a denial of modification that is based on a “servicing agreement,” which was in place from the beginning of the loan. In a letter from Brandon Latman, First Vice President of IndyMac Mortgage Services, that denied a mortgage modification based on the servicing agreement and HAMP, it states, “we encourage you to call us….to discuss possible participation in our short-sale or cash for keys program. If course you encourage borrowers to do this! It financially benefits the servicers.
This also explains why, sevicers are also benefiting from those that default under the modification program. Many news reports have been out this year, touting the re-default rate under HAMP, Home Affordable Program, to be as high as 30%. This also means, that the percentage that do default also provide the lender with money from the US Government according to the modification program guidelines.
The more one digs into the HAMP, (Home Affordable Modification Program), or as I call it, “Hurting Any Modification Possibility” Program, the more you feel that this program was never really designed to give borrowers a real opportunity to keep their homes. But instead, seems to reward the bad behavior that got us into this mess in the first place. Not only did lenders get bailed out by US taxpayers, but they are continuing to benefit from a near financial collapse of our economy and free market system.