Understanding the FHA mortgage probe and the foreclosure crisis

Chase CEO Jamie Dimon recently made comments about the banks problems with foreclosure procedure, including the use of robo-signers and improperly reviewed foreclosure files.  In his comments, he stated that no-one is losing their home when they shouldn’t be because of these problems.

His comments are directed at whether people are losing their homes because of mistakes.  But as the Federal Housing Administration’s recent probe into this mess clarifies, that isn’t the thing we should be looking at.  The FHA has plainly stated that five large mortgage servicers (i.e. banks) are not following the proper procedure to work with people to keep them in their homes, especially helping people to qualify for a loan modification that they are entitled to under FHA rules.  In short, the servicers are failing to help people get loan modifications they should be getting.

Does that ring a bell?  We’ve seen a huge number of stories about the endless impediments people experience when trying to get a loan modification with Chase.  In fact, Chase’s own reporting of both the number of temporary modifications and especially permanent modifications granted (it isn’t many compared to the number of loans in trouble) clearly points the finger at either a broken or intentionally difficult process.  Furthermore, Chase’s admission that they practice parallel foreclosure when someone applies for a loan modification clearly shows their interest is not in helping the borrower.

The FHA isn’t specifying who the five servicers they’ve found in violation of the rules, but I suspect that Chase may be one of them.

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