Look, let’s be honest, banks are in business to make money and they are doing very well. Glance at any downtown city and the tallest building is a bank. These edifices tower over us, with their bevy of branches on almost every corner – their names bathed in neon for us to behold and take notice. So it is puzzling and arguably disingenuous, when banks whine and complain like my 3 years olds – that they cannot afford to modify mortgages for those who fall behind on their payments. It would “break them.”
Really? Take a look through the encyclopedia-like volumes of mortgage papers you signed when you purchased your house. You didn’t read them either? Were you distracted by the warm cookie the title agent left next to the pen? Well, while you were dazed and confused, you just signed a 30 year 5% fixed rate mortgage, and borrowed $100,000. The bank’s take – nearly the same amount you borrowed in interest, about $93,000! So don’t feel too sorry for the banks, after all, it’s not like they are taking a loss.
Come on, what’s the big deal – the bank takes the late mortgage payments, puts it on the back end of the mortgage – and then covers its losses. Wait, what about – I can’t believe I am going to say this – lowering the interest rate! Everyone is happy – right. Well before you say, “Why should I care – it doesn’t affect me” – think about it this way – because it does affect everyone. If a home is worth $100,000 and it is surrendered or foreclosed upon the value of that property goes down. Many times birds of a feather flock together so hard economic times can envelop a narrow strata of people – ergo neighborhoods. So when those neighborhoods have multiple foreclosures, the neighborhood values go down the tubes. As neighborhoods tumble the grocery stores, the local dry cleaner, the gas stations lose customers and go bust. Do you see where I am going with this? We need to help each other.
To this end – or maybe no end – the federal government has stepped in with a home loan modification program called HAMP – The Home Affordable Modification Program. It is should stand for “Homeowners Angry about Modifying their Property.” Does it really work – on paper maybe – in reality – I am not so sure. The government report card in my opinion is deplorable. In Texas, as of January 2012, of the 55,866 homes that applied for and started a trial home modification, less than 2% ever get into an active modification. The Dallas area ranks 2nd in Texas regarding total trial modifications, yet only 1.9% eventually turned into active modifications. Why so low – good question.
My dad said life is about people helping people. It’s easy to fault the homeowner for not being responsible to pay their debts – what is harder and a greater challenge is forcing the banks and other financial giants to swallow their bottom line by taking responsibility for their bad behavior and for once – work with all of us – not against us – to make it right.
Bennett Cunningham is a Bankruptcy Attorney licensed in Texas and is a former Investigative Reporter for the CBS Television Station in Dallas. Mr. Cunningham has garnered 7 Regional Emmy Awards, including the Best Investigative Reporter in Texas 2 years in a row, as well as several National Awards for his exposés into the mismanagement of taxpayer dollars and government waste.
This blog is not meant to give you legal advice. If you need to seek legal advice, you should consult a licensed attorney in your jurisdiction.