The White House is today touting progress on its foreclosure prevention plan. The administration says mortgage servicing firms—the largest of which are owned by the big banks—have offered approximately 55,000 “trial modifications” to struggling borrowers since early March, and have sent letters urging another 300,000 borrowers to apply. These are good numbers, relative to the disastrously low bar set by previous initiatives: The Hope for Homeowners program created by Congressional Democrats last year had modified exactly one loan as of March.
But we’ve got a long, long way to go before hitting a more meaningful mark on fixing these bad loans. In April, for the second month in a row, at least 340,000 households got foreclosure notices—that’s one in every 374 housing units. It’s also a 32 percent increase over April of last year. In short, the problem is still growing exponentially—and at a considerably faster clip than the modification offers are rolling out.
Further, it’s important to note that, contrary to some media reports today, the White House’s 55,000 stat counts *offers made*, not completed loan modifications. As I’ve reported, the high-volume, low-cost business models upon which the banks’ servicing divisions are built leave them with neither the personnel nor the systems necessary to successfully walk a borrower from offer to modification. The White House notes some progress on this front, as well, pointing out that Chase—one of the big three servicers, which control half of the market—has added 1,000 people to work on loss mitigation. It’s unclear whether these new hires are loan modification specialists—a rare and expensive skill—or people to answer the phones.
Now, to be sure, this is all an awful lot of boring detail. And I’m increasingly of the belief that’s the point, politically. We all drowned in the technical details of weapons of mass destruction and “embedded” reporting on the war, missing the larger, more straightforward point: The grounds for going to war were shaky at best. Similarly, there’s a larger, simpler point with foreclosure: Washington has steadfastly refused any policy that forces the banks and their servicing firms to fix the problem they created.
As long as we’re counting the number of letters Wells Fargo mailed in April, we’re not counting the number of homes it mindlessly, needlessly foreclosed upon. And we’re not paying attention to the fact that Congress and the White House rolled over as industry lobbyists killed the single proposal that would have forced them to do better business—bankruptcy reform—rather than handing them billions more tax dollars to pursue the same, failed business model. It’s high time we all saw this as a political, rather than economic conversation.
—KAI WRIGHT