Tomorrow the House Financial Services Committee, under the leadership of Chmn. Barney Frank, will grill mortgage servicers as members examine the "response to the mortgage foreclosure crisis." This is all about how banks are converting all those trial modifications under the government's Home Affordable Modification Program into permanent modifications.
Today, as a little precursor, the servicers were called over to Treasury for some browbeating and sandwiches, sorry, "to discuss the urgent need to convert eligible homeowners in trial modifications to permanent modifications," according to a Treasury spokesperson.
After the meeting, I sat down with Jack Schakett, of Bank of America . He used to be chief of operations at Countrywide, which B of A inhaled after the crash of the banking system as we know it. Now Mr. Schakett is "credit loss mitigation strategies executive" at B of A.
Mr. Schakett told me that of the 65 thousand trial modifications set to expire Dec. 31st with B of A, a full two thirds of the borrowers, while current on their payments, have not submitted the full documentation required to turn a trial mod permanent under the HAMP guidelines.
"We don't really know the major reason why the customers are not returning the documentation," Schakett claims. Well I can tell you why (and I'm sure he knows this too). The trial modification process only requires oral verification of income to begin, but to go permanent, you need to prove your income, submit your tax returns, and basically come clean with all your finances. I'm guessing a lot of folks who took out their initial loans with false or non-existent documentation, aren't eager to let the government know that.