Bailouts for Big Business, Bankruptcies for the Middle Class

While the Obama administration has been busy bailing out irresponsible financial institutions and big business, individual homeowners have been left with little relief, with many forced to file for bankruptcy. About the only relief Obama has doled out for the rest of us is the Home Affordable Modification Program (HAMP). Launched in early 2009, it has been a complete failure. The program was meant to lower mortgage payments by decreasing interest rates and extending loan repayment terms for mortgagors undergoing financial difficulties. A GAO study released in May found serious problems with the program, from loan servicers losing documents to taking too long to make decisions and miscalculating homeowners' income.

76% of borrowers had a “negative” or “very negative” experience with the program, and fewer than 9% found it “positive” or “very positive.” Almost half of applicants waited longer than seven months to receive a decision on their application. Nearly 75% of the time loan servicers lost documentation – which they then used to turn down applications. A Congressional oversight panel labeled the program a failure in December 2010. The Treasury Department has asked loan servicers to fix the problems but has not bothered to penalize servicers who don't comply. One Congressman, David Schweikert (R) of Arizona, is opening up the first loan modification assistance program in the country to specifically assist mortgage holders who are being given the runaround on this program by their banks.

Homeowners everywhere are applying for HAMP due to being laid off and unable to find work in this economy – no fault of their own. Meanwhile, the Treasury Department continues to bail out the banks for their poor investment decisions. Even more egregiously, the banks receiving the bailouts are not revealing how they spent the money. It is certainly not being spent to assist many homeowners with modification of their mortgage payments. Bank of America has been propped up with bailouts since 2008. They have received $210.4 billion in aid, and have only paid back $19.7 billion. States like Arizona and Nevada are now suing BofA for loan modification fraud. Goldman Sachs’ Litton Loan Servicing LP is one of the lenders being investigated after a whistle-blower’s letter reported that Litton had cleared its backlog of HAMP applications by denying all applications in one fell swoop.

Rachel Alexander Follow @twitterapi

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