Home Affordable Modification Program – a Deception

07 Jan Home Affordable Modification Program – a Deception

Many of our clients facing foreclosure in Illinois and Wisconsin speak only Spanish. So when I tell them that the Obama Mortgage Modification Program has been a great disappointment, it comes out “gran decepción”. And after explaining to my clients how disappointed I have been with the mortgage “modification” program, I couldn’t help thinking that the entire program is indeed a great deception.

Our president ran on the platform that mortgages needed to be modified. He ran on the platform that the bankruptcy code needed to be amended to allow for reduction of principal of upside-down mortgages in chapter 13. But when the banks balked, he caved. The Senate couldn’t even come up with a majority to support a watered down mortgage modification bill passed in the House last year. Now mortgage modifications in bankruptcy are dead in the water.

People can send in their “trial payments” on their “trial modifications” and mortgage companies merrily proceed with their foreclosures as though nothing is happening. In all too many cases, the “trial modifications” are just a way of sucking out another three mortgage payments from already strapped debtors who are almost certainly going to lose their houses.

We can talk all we want about HAMP regulations and procedures. But basically, the programs are voluntary. They offer carrots but absolutely no sticks to the lenders.

Most regrettably, we can anticipate more foreclosures and less modifications in the years to come – and this is only going to further depress home prices in our beloved country.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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