Understanding why desperate people do stupid things

[Judge Roy Bean]

The absurdity of the HAMP program is finally being exposed, and if you want to understand what it's like down in the trenches with people who have been abused, consider this:

An attorney in Michigan attempting to arrange a short sale with Litton Loan (now owned by Goldman Sachs) reports, the voice mail warns: “If you leave more than one message, you will be put at the end of the list of people we call back.”

What a great system - no wonder desperate people pay scammers to try stupid things.

[ErsatzAnatchist]

I have been tempted to put that on my voice mail.

Since my clients can fire me (unlike the homeowners in the HAMP circumstances that have no choice who their HAMP "counselor" is), I decided that would be a bad idea.

Seriously, part of the problem is that each "counselor" has so many files that getting multiple messages from the same homeowner (who is no doubt very stressed and needy) is a serious time suck. Also, many callers are just going to be told "you are #328 in line and I will not even look at your file until next week." Instead of returning 48 messages (each call will result in a 5-10 minute call in which the caller will not get the h#ll off the phone and tell the counselor a tale of woe/whine), the counselor can just get the work done and contact people who actually need to be contacted.

However, HAMP is just a dumb-ass bureaucratic boondoggle. Congress should have passed a mortgage modification amendment to Chapter 13 of the bankruptcy code. Case would have been handled by attorneys (who are heavily regulated and subject to career ending discipline), fees would have been subject to oversight by the courts, and borrowers would have had to have strong incentives before they would file (today everyone is filing for a HAMP modification, clogging up the system).

BAH!!

[Prof]

I have been tempted to put that on my voice mail.

Since my clients can fire me (unlike the homeowners in the HAMP circumstances that have no choice who their HAMP "counselor" is), I decided that would be a bad idea.

Seriously, part of the problem is that each "counselor" has so many files that getting multiple messages from the same homeowner (who is no doubt very stressed and needy) is a serious time suck. Also, many callers are just going to be told "you are #328 in line and I will not even look at your file until next week." Instead of returning 48 messages (each call will result in a 5-10 minute call in which the caller will not get the h#ll off the phone and tell the counselor a tale of woe/whine), the counselor can just get the work done and contact people who actually need to be contacted.

However, HAMP is just a dumb-ass bureaucratic boondoggle. Congress should have passed a mortgage modification amendment to Chapter 13 of the bankruptcy code. Case would have been handled by attorneys (who are heavily regulated and subject to career ending discipline), fees would have been subject to oversight by the courts, and borrowers would have had to have strong incentives before they would file (today everyone is filing for a HAMP modification, clogging up the system).

BAH!!

This bankruptcy lawyer could not agree more.

[Harvester]

Sweet. I'll stop paying my mortgage and signup

[Prof]

Harvester, stear clear.
None of this is funny and neither are your comments.

For those of you with an interest, current 11 USC sec. 1322 (b) (2) denies a bankruptcy judge jurisdiction to modify loans secured by a lien on a primary residence. This means that a bankruptcy judge cannot write down a mortgage debt to the current value of the house/collateral nor can he or she change the interest rate or other terms. While the parties can negotiate such changes, the judge cannot decree such changes based upon current interest rates and collateral values. Within limits, a judge could decree changes on a debt secured by a car, for example.

Conversely, in an individual chapter 11, a home mortgage obligation could be re-written, as is done with commercial real estate obligations. There is a provision which protects lenders from a write down followed by a later run-up in value. 11 USC sec.1111 (b).

Similar legislation was suggested to amend chapter 13; it did not get enacted.

This would have been a simple fix for most mortgage debt problems if the person who needed the help had enough income to support the revised debt/interest.

[jg]

Who benefits from designing the program as it was legislated?
In other words, why did we end up with an ineffective solution when another effective solution was available?

How did we get where we are?
Better yet, how do we avoid getting the same, less than optimal, result in the future?

[Prof]

Who benefits from designing the program as it was legislated?
In other words, why did we end up with an ineffective solution when another effective solution was available?

How did we get where we are?
Better yet, how do we avoid getting the same, less than optimal, result in the future?

Republican opposition, from the same folks who brought about the anti-consumer changes in '05 to cure consumer "abuses" that did not exist. (With 34 years experience in the bankruptcy courts in every capacity except trustee/US Trusee, I can tell you that the amount of consumer abuse is very minimal with one exception which the '05 amendments do an excellent job of fixing -- serial filing to avoid foreclosure is now well-regulated). The rest of the amendments are useless, insulting or stupid. For example, all individual debtors now have to attend a consumer credit course before filing, which costs about $100, is conducted over the phone or on line for an hour or less, and has never -- to the very best of my knowedge --resulted in a recommendation to the consumer that he or she or they not file.

[jg]

Republican opposition, from the same folks who brought about the anti-consumer changes in '05 to cure consumer "abuses" that did not exist. ....

OK, thanks for the how we got to that solution.
But, political posturing was the driving force ?

The legislation is all about how the politicians are perceived ?

No one actually talks to those involved and those involved do not inform the Congress?

How can we prevent such debacles ?

[Prof]

Having watched consumer and bankruptcy legislation being debated, etc., for about 40 years, the thrust is always provided by the current economy and the party in power. While there are strong consumer voices, there are equally powerful anti-consumer interests.

For example, look at the history of "tort reform" in any state. Business interests or MD's push against trial lawyers or consumer advocates with horror stories of Dr's leaving the practice or companies failing due to harsh, expensive verdicts for torts -- malpractice, products liability, etc. Business interests organize and elect a Republican majority. Or, consumer advocates/plaintiff's lawyers organize to stop the rape of the consumer by evil businesses or incompetent Dr's or whatever, and elect a Democratic majority. The resulting legislation goes too far, one way or another.

Unfortunately, that is the nature of our political process. I see few statesmen in either party who are willing to reach out, achieve a reasonable compromise on some matter, and step back and see if that compromise works.

Look at the debate about "pay day" and "car title" loans going on today. Republicans think that 294% per annum interest is ok -- people need access to cash. Democrats would put all small loan companies out of business, denying any credit to the poor from anyone but illegal/loan shark operations.

A pox on both of their houses.

[Judge Roy Bean]

Who benefits from designing the program as it was legislated?
In other words, why did we end up with an ineffective solution when another effective solution was available?

How did we get where we are?
Better yet, how do we avoid getting the same, less than optimal, result in the future?

If you're talking about HAMP it was designed by mortgage servicers for mortgage servicers.

How we got where we are is a long story involving the casino Washington set up at Wall Street's bidding.