The special inspector general of the TARP, Neil Barofsky, released a blistering report yesterday, including pointed criticism of Treasury’s AIG doings and the Obama administration’s failed mortgage-modification plan called HAMP. So how did the press cover it? Not very well.
The New York Times has a story on the AIG angle, but it doesn’t have anything about the HAMP angle. Weirdly enough, it even has a story on the status of the mortgage-modification program, but it’s based on Treasury Department numbers. There’s no mention of Barofsky, though there is a quote from a top Fed official slamming the program.
The Washington Post has a piece on the AIG angle but misses the HAMP part.
The Wall Street Journal has an even bigger hole in its coverage today: There is none. It somehow completely missed the SIGTARP’s report. Oops.
CNNMoney does a good job, though. It hits both the AIG and HAMP angles. Here it is on HAMP:
The inspector general’s report also said Treasury took too much credit for helping homeowners who did not ultimately benefit from Treasury’s Home Affordable Modification Program.
Treasury has said several times that its mortgage modification program has “helped” more than 1.3 million homeowners by reducing their monthly mortgage payments, calling each of these a “success,” the report said.
However, Barofsky’s team took issue with the level of success, saying more than 700,000 of the modifications ultimately failed and another 173,000 remained in limbo.
“They say for example that they’ve helped more than 1.3 million people through mortgage modifications, but more than half of those have failed,” Barofsky said. “Then, they go and say, ‘ Well, each one of those had a significant benefit for the homeowner.’ And that’s just not true.”
But for the most part, to learn about this story, we turn to the blogs, as we so often have to do these days. Yves Smith of Naked Capitalism and Arthur Delaney and Shahien Nasiripour of The Huffington Post do a better job reporting on this than anything I’ve seen in the mainstream press. Smith pulls an anecdote from page 172 of Barofsky’s report on one of Tim Geithner’s “successes”:
“I entered into an agreement with [my servicer] through the Making Home Affordable program in April 2009. I have made every payment on time; that, they said, would result in the modification becoming permanent after six months. They have had us…submit the same paperwork seven times in the last two year. Now they have, in their words, ‘decided not to go forward’ and put a notice on the house of a sheriff’s sale….a negotiator (who has never contacted me) made the decision to stop the modification with no reason as to why. I have not been late or missed a payment in 13 months.”
The HuffPo pulls this quote from Barofsky:
People who apply for modifications via HAMP sometimes “end up unnecessarily depleting their dwindling savings in an ultimately futile effort to obtain the sustainable relief promised by the program guidelines,” the report notes, putting the imprimatur of the federal government on a claim long made by housing experts and homeowner advocates. “Others, who may have somehow found ways to continue to make their mortgage payments, have been drawn into failed trial modifications that have left them with more principal outstanding on their loans, less home equity (or a position further ‘underwater’), and worse credit scores.
“Perhaps worst of all,” it continues, “even in circumstances where they never missed a payment, they may face back payments, penalties, and even late fees that suddenly become due on their ‘modified’ mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent.”
And GOP bulldog Darrell Issa gets to the core of what’s wrong with the administration’s program and with its assurances that it’s working:
“It is downright immoral and cruel for this administration to continue this charade of offering false hope and false promises in the form of a program that is nothing more than false-advertising that is prolonging the inevitable,” Rep. Darrell Issa (R-Calif.), the ranking member of the House Committee on Oversight and Government Reform, said in a statement.
And here’s evidence that it’s failing:
Thus far, 728,686 struggling homeowners have been kicked out of the program; just 640,300 remain.
Through the first nine months of this year, “when HAMP has been at its apex,” according to SIGTARP, nearly 2.7 million homes have been subject to foreclosure notices, the report notes, citing data from research firm RealtyTrac.
“At that pace, foreclosure notices will have been sent to more than 3.5 million homes by the end of the year, an increase of 26 percent over the 2.8 million homes in 2009 and nearly five times the comparable 2006 number,” SIGTARP said.
The Los Angeles Times doesn’t have anything on the Barofsky report, either, but it does have a piece on how homeowners are ramping up lawsuits against the banks for playing Three-card Monte on these mortgage modifications:
For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.
“It was just ‘extend and pretend,’ ” said Wilcox’s lawyer, Anthony Lanza of Irvine. “And it was like they had the fax machine hooked up to a shredder.”
Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm’s suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.
Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was “to get some kind of money out of them” while stalling actions to seize the homes.
The LAT reports that some suits are trying to get class-action status because they claim the problems are so widespread.
We need to see more reporting on this.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.