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Only putting the banksters in jail can restore trust in government

David Dayen in (sigh) The Fiscal Times shows why:

The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, wants to help around 676,000 homeowners it has identified as eligible for refinancing under the government’s Home Affordable Refinancing Program (HARP).

These homeowners currently hold mortgages with interest rates that are at least 1.5 percent above the current market rate, and would save roughly $200 a month if they used HARP to refinance.

Any money homeowners save from smaller mortgage payments could be spent on other needs, providing a modest stimulus to the economy.

But these remaining homeowners appear to have no interest in the program, and [FHF head Mel Watt] explained why in Chicago. “We have written to them. We have called them, and they're saying this is too good to be true,” he said.

And why?


In 2009, when the foreclosure crisis was most acute, President Obama promised to save 4 million homes through the Home Affordable Modification Program (HAMP). ....

The process devolved into a horror show for homeowners. Servicers prolonged trial modifications well past the three-month period set out in HAMP guidelines so that they could rack up late fees. They deliberately lost borrower’s income documents to extend the default period, even shredding documents and purging records to do so. They pursued foreclosure while negotiating the modification, against HAMP rules. They granted modifications that folded servicer fees into the principal of the loan, increasing the unpaid principal balance — and thus their profit — while pushing the borrower further underwater. And they trapped borrowers after denying modifications, demanding back payments, missed interest and late fees, with the threat of foreclosure as a hammer.

The HAMP debacle has caused a breakdown of trust between mortgage servicers and their customers, and the government did this no favors by failing to police servicer behavior. The Treasury Department, which gave incentive payments to servicers for successful HAMP modifications, could have sanctioned them at any time for violating their contractual obligations, up to and including clawing back those incentive payments. Yet it never did so, despite documented evidence of fraud and abuse. One temporary withholding of incentive payments in late 2011 was quickly terminated. Treasury paid every servicer in full, regardless of the violations.

The FHFA wants to literally give free money to homeowners, and they simply can’t trust that it won’t send them into a downward spiral. That credibility gap really harms the ability of liberal government to function.

Mission accomplished?

NOTE The issue is that thieves and looters have impunity. While they do, there is nothing that can be done. We need to see banksters in orange jump suits doing the perp walk.

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