Bringing Up the Rear: IT'S A TIE: Ex-Fannie Mae Chief Credit Officer Edward Pinto & Michael Young, Vice Chairman of the Mortgage Bankers Association

by 25 Nov 2009
It was late last July when mortgage servicers participating in the Home Affordable Modification Program (“HAMP”) were summoned to attend a meeting in Washington D.C. The administration had decided it was unhappy with servicer performance as related to loan modifications, both in general, and specifically as related to HAMP, and they were calling the servicers to a summit meeting so they could be read the riot act. There was a new sheriff in town and his name was Timothy Geithner.
After the meeting the statements from Treasury made most people believe that Tim had indeed laid down the law… or at least we were led to believe that he was rather irritated. He set a wonderfully arbitrary goal for 2009: 500,000 HAMP modifications by year’s end.
Then, I remember hearing numbers going up almost daily. Within a week, Bank of America announced that it had initiated tens of thousands of modifications. Not to be out-fibbed, Wells Fargo, Chase, and the others followed suit and I remember thinking to myself… “Wow, that’s much too fast. They should be lying slower.”
Well, now the ex-Fannie Mae Chief Credit Officer, Edward Pinto has come out attacking Treasury’s claim that 500,000 homeowners have entered the HAMP loan modification program. He doesn’t buy it. According to Pinto, HAMP is rapidly becoming, “I will pretend to modify your loan if you will pretend to make the payments.” Lovely… isn’t that just friggin’ lovely, especially when you consider that he’s talking about a $375 billion federal program?
Even though there were 200,000 loans in the trial modification phase as of late July, and Secretary Geithner announced that the industry has exceeded its goal of reaching 500,000 by year’s end, Pinto says that to-date there are only something like 1,200 borrowers that have received permanent modifications. The rest are in the “trial” phase… the phase wherein homeowners usually find their homes in foreclosure, regardless of whether they make their trial payments as agreed.
Further, according to Michael Young, Vice Chairman of the Mortgage Bankers Association, 99% of the loan modification packages are incomplete, which has led to speculation that many of the 500,000 will never submit the documentation required to qualify. 
Okay… time-frigging-out over here. Everyone just stop whatever else you’re doing as you’re reading this. Re-read the last two paragraphs. The part where it states: “99% of the loan modification packages are incomplete,” and that 1,200 borrowers have been granted real modifications. (The rest, as my Grandmother used to say, is BUPKES, which is a Yiddish word meaning something worthless, absurd or anything stated publicly by Timothy Geithner.)
Now, I realize that some of my readers don’t agree with my position on the whole loan modification thing. But,  if this isn’t starting to make any of you realize that we, the American people, are being fed endless lines of unadulterated horse manure… well, I just don’t know what to say. “99% of the loan modification packages are incomplete?” I’d like to say a few words in response to Young’s and Pinto’s assertions: “It’s your industry… either do something productive about the problem, or shut the f#@k up.”
How was that? Clear enough? I’m not being too technical, am I?  Going too fast for your obviously diminutive brain, Mick? If there’s a God… and I’d like to think there is… then one day soon Ed and Mickey will be on some sort of panel discussion and I’ll be in the audience. Be afraid, Ed and Mickey… and they should be very afraid, because no one gets away with saying things that mind-bogglingly stupid with me around.
If 99% of the loan modification packages are “incomplete,” you jackass, then who’s fault would you say that is, Mr. Vice Chairman? Must be those good-for-nothing borrowers, right? Or maybe it’s those horrible attorneys or mortgage professionals who charge for their services, but just can’t seem to get it right, even after submitting and receiving approval on literally thousands of loan modifications in the past. , is that what you’re asking us to believe, Michael? 
Does that even sound possible to anyone in this country? The only way that 99% of 500,000 submitted loan modification packages could be incomplete is if the lenders and servicers are coming up with new requirements after the fact, which I have no trouble believing.
Young says the industry is also concerned about the “expected dropout of a sizable number of qualified borrowers who fail to make all the payments required during the trial period”. Is that what the members of the Mortgage Bankers Association are concerned about? Really? Boy, I’d love to see the actual data on that, not that it will ever be published.
Young also says that this fear of borrowers not making their trial period payments has been heightened by the concerns of some servicers that “borrowers will use the trial period to game the foreclosure process and delay their own foreclosures by another 5 or 6 months”. Borrowers will “game the foreclosure process”? Are you friggin’ kidding me? Who will game the foreclosure process? Borrowers? The borrowers are going to “game the foreclosure process”? Not the servicers… nah… they wouldn’t game anything, right? It’s the borrowers that are gaming the system, don’t you know. 
Pinto’s math states that ultimately only 100,000 to 200,000 of the 500,000 trial modifications will become permanent, and that’s assuming a re-default rate of 50%, only 50,000 to 100,000 performing loans will result.
Okay, so we can agree that this guy’s no math major, right? A difference of 100,000 to 200,000 is a difference of… hmmm… quite a bit… wait… carry the three, divide by seven… 100%? That’s like describing a suspect as being six to twelve feet tall, weighing 150-300 pounds.
Why in the world would anyone assume 50% to be the re-default rate of HAMP modifications? HAMP modifications take into account the borrower’s income and expenses and are supposed to result in a monthly payment that’s no more than 31% of the borrowers gross monthly income, right? I’m not personally involved in loan modifications, but I think that’s right.
Memo to the Mortgage Bankers Association, et al: A loan modification is when the amount of the borrower’s monthly payment goes down… not up, morons. You know how we can all know that? Because if I were to line up 10 million American homeowners from coast to coast and ask them whether a loan modification meant that a mortgage payment went up or down, it’s extremely likely that not be a single person would check the box for “up”. Get it, you slimy, lying, manipulative covet of number crunching clowns?
Anyway… so, Mr. Pinto’s ultimate point is that, based on his industry’s obviously highly scientific projections, the Obama Administration’s stated goal, which is to keep 3-4 million homeowners in their homes by modifying their mortgages instead of foreclosing, would require 15-30 million homeowners in trial period modifications. Or, in other words, half a million trial mods isn’t going to cut it, and 1,200 is one heck of a long way away from 3-4 million.
The irony is that Mr. Pinto, Mr. Young and yours truly all agree that the Obama Administration’s plan to stabilize the housing markets by stopping foreclosures has absolutely no chance whatsoever of succeeding is certainly not lost on me, nor on you the reader, I would imagine. However, we come to the same conclusion as a result of traveling very different paths marked by very different assumptions along the way. 
Mr. Pinto believes that in order to make the program work, we should have more homeowners in trial modifications than there are homeowners at risk of losing homes to foreclosure. Mr. Young seems to think that borrowers being unable to qualify is the problem. I, on the other hand, believe that mortgage servicers simply have to stop being the unscrupulous liars and war profiteers they have thus far proven themselves to be, and start modifying loans in the best interests of investors and our nation as a whole.
Come on people… it’s almost midterm election time… time to send a message. So, what’s it going to be... fork or pitch fork?

Martin Andleman


Should CFPB have more supervision over credit agencies?