Felix Salmon

HAMP failure of the day

By Felix Salmon
September 10, 2010

David Lazarus manages to prompt one of the great moments in bank public relations today, which would almost be funny if it wasn’t so infuriating. He’s telling the story of Mike and Ellen Kahara, who signed up for a HAMP mortgage-modification program through their lender, Wells Fargo. They made all their HAMP payments in full for the three-month trial period, and then continued to make payments as Wells dawdled over whether or not to make the loan-mod permanent.

Eventually, on August 11, Wells Fargo sent the Kaharas a letter saying that the bank had rejected their application for a permanent loan modification. That’s bad enough — but the bank made matters infinitely worse by then turning around and selling the Kaharas’ house, in a foreclosure sale, just five days later, on August 16. Without even bothering to notify the Kaharas that they were foreclosing in the first place.

When Lazarus called up Wells flack Jennifer Langan to ask what on earth was going on, he got this priceless response:

She said the bank shouldn’t have told the Kaharas that their home wouldn’t be sold within 30 days. “It was clearly a mistake that we put that in the letter,” Langan said.

Evidently, refusing to give the Kaharas a permanent loan modification, or foreclosing five days after rejecting their application — that’s just fine. The main mistake that the bank made, in its own eyes, was in telling the Kaharas that they could stay in their home for another 30 days, when in fact they couldn’t.

I’m hoping that pretty soon public records are going to come to light allowing us to find out exactly what the purchase price was: how much money Wells Fargo got for selling the Kaharas’ home from under them. In an ideal world, the buyer, Pacifica, would make a healthy return on its investment by renting out the house to the Kaharas for the $1,400 a month they were paying on their modified mortgage, but that doesn’t seem to be the case. Instead, they’re telling the Kaharas that they have to be out of the house immediately.

It’s a dreadful story, which is being played out in many other homes around the country. And it’s a clear indictment of HAMP, as well as of Wells Fargo.

6 comments so far | RSS Comments RSS

“Evidently, refusing to give the Kaharas a permanent loan modification, or foreclosing five days after rejecting their application — that’s just fine…”

Actually it is just fine. They would probably have re-defaulted anyway and the bank should make it’s own decision as to how to get the most they can from the situation – that’s what happens when you don’t pay your mortgage. Sorry anyone loses their home but there’s no painless way out of this mess.

Posted by Mr.Do | Report as abusive

I meant to add the bank is obviously in the wrong telling them 30 days and then not sticking to it. They should compensate the owners. But there is no entitlement to keep a house on whatever terms you can afford.

Posted by Mr.Do | Report as abusive

Lazarus had it right here: “You could say the Kaharas have only themselves to blame.” Time for people to grow up and make adult financial decisions. They bought the house in 2004 and the payments jumped “soon after”. They should have exited this situation years ago.

Posted by readerx | Report as abusive

Just fine. It just bullying and stealing by an entity that bigger. They enter into an agreement. They tried to make a fair amendment with said entity and got brutalized.

Posted by Croma13 | Report as abusive

The Kaharas were loyal to their community and trusted their bank. As a military veteran, Mr. Kaharas serve his country in time of war. They always paid their taxes and were very charitable and help out in their community. Falling on hard times and as reasonable adults, the Kaharas weighed their options, and decided the home modification offered through their bank was a respectable PlanB. God knows, Plan C., borrowing from a family member was a burden they wanted to avoid. Of course Plan D., was still an option, Mrs. Kaharas was willing to take a job with her former employer. I can not think of any reason why Plan E. or Plan F., would need to be reconsidered. Yes, the knew their bank would not steer them wrong. If for some reason, they were to be denied the modification, they would consult the bank, to be sure they were aware of all options and possibilities. Really, this too would pass.

Posted by 6pence | Report as abusive

I am amazed that there are people who blame people for falling behind in mortgage payments. With snide remarks like making adult financial decisions. In a perfect black and white world I would tend to agree. But, because we have situations that change, loss of work, wages etc. It happends, falling behind. Then why doesn’t anyone point out the fact that procedures and banking/servicers behavior are not accountable for their actions and wrong doings? Its not alway black and white, and servers are in the business of making money when your behind in payments – with many of them keeping you in their sweet spot. Someone should produce a report about the revenue that is generated from these fees and compare that to the insentive the goverment HAMP program provides to the servers – common people where is the accountablity? Where is the partneship? This certianly doesnt feel like America. I am ashamed of the capitalism that has rapped our country from within our borders.

Posted by JoeSituation | Report as abusive

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