In February, the Obama administration launched the Home Affordable Modification Program, an ambitious program that will use up to $75 billion dollars to prevent up to four million homeowners from going into foreclosure. The program works by underwriting some of the costs of modifying unaffordable loans so that homeowners are not paying more than 31 percent of their gross income toward their total mortgage expenses.
To sweeten the deal, the program provides payments to servicers (the good folks who take your mortgage payment and pass it along to the lenders and investors), or loan originators (sometimes originators and servicers are one and the same). According to the Making Home Affordable Web site, servicers receive an upfront incentive payment of $1,000 for each eligible modification, plus $1,000 each year for three years if the borrower stays in the program. In cases where the borrower is in trouble, but not yet down the foreclosure road, lenders can qualify for a $1,500 one-time payment for modifying a loan that is still current while servicers can collect $500.
OK, it costs money to do the modification and the current incentive structure for servicers and lenders is decidedly not in the interest of the borrower, so we do need a federal program to realign incentives with the goal of reducing foreclosures.
Well, I’m shocked, just shocked to hear that many of the companies responsible for the worst of the subprime mortgage crisis might be making a few bucks — actually a few billion bucks — cleaning up the mess they made
A report by John Dunbar published recently by the Center for Public Integrity, You Broke It, You Fix It? Subprime Players Get Tax Money To Fix Subprime Mess, that was based on an analysis of public records, states that “of the 25 top participants in the program, at least 21 were heavily involved in the subprime lending industry.”
At the top of the list? Countrywide. They stand to make over $5 billion from HAMP.
Last June, the SEC charged the company’s former CEO Angelo Mozilo and two other senior executives with fraud, but not all Countrywide alums were treated so harshly. Last year, PennyMac (Private National Mortgage Acceptance Company) http://www.pnmac.com/, burst on the scene. A self-described “specialty asset management firm created to address the dislocations in the U.S. mortgage market,” PennyMac acquires and manages residential mortgage assets for private investors.
As reported on Rooflines in March 2009, Among the “mortgage industry veterans” that lead this Calabasas, Calif.-based venture are Stanford L. Kurland, a 27-year veteran of none other than…Countrywide! Kurland rose to the position of CEO there until his resignation in 2006.
Come to think of it, I guess I’m not so shocked after all!