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Tuesday, June 19, 2018

by Paul Kiel, ProPublica.


Yesterday, we published “The Great American Foreclosure Story,” our latest Kindle Single. The narrative gives readers a comprehensive look at the foreclosure crisis. Part of that story is the government’s inadequate response, particularly its Home Affordable Modification Program, HAMP. In the excerpt below, Chris Wyatt, a former employee of Litton Loan Servicing, then a Goldman Sachs subsidiary, tells what it was like at the company during the program’s first, crucial years.

In 2009, during the first few months of its participation in the program, Litton put tens of thousands of homeowners into trial modifications. That was easy, because nothing had to be documented. Under the agreements, if the borrower made the lowered payments for the three-month trial period, they’d receive permanent modifications.

The hard part was for Litton to collect the borrowers’ papers and crunch the numbers to verify the terms of the permanent modifications. That, he says, “turned out to be a total disaster.”

Wyatt led Litton’s “Executive Response Team,” which was charged with handling customer complaints. Litton employees, overwhelmed and undertrained, frequently made basic errors when calculating a homeowner’s income, he says. HAMP guidelines often weren’t followed, because Litton was “way understaffed” and couldn’t keep up, he recalls. But the worst part was the way Litton dealt with homeowners’ documents, he says.

When homeowners faxed their documents, they didn’t go to Litton, Wyatt says. They went to India, where a low-cost company scanned and filed the documents 2014 but often misfiled or lost them. Wyatt says Litton routinely denied modifications because homeowners had not sent their documents when, in fact, they had.

In a process internally referred to as a “denial sweep,” Litton’s computers would automatically generate denial letters for every homeowner who, according to Litton’s records, hadn’t sent their documents. But untold numbers of those documents had been lost on another continent. Wyatt complained about the practice in multiple meetings with senior management, he says, but managers were chiefly worried about reducing the overwhelming backlog.

One Response to Excerpt: At Goldman Sachs Servicer, ‘Total Disaster’

  1. As an example of how little the regulatory mechanisms, built up around the home mortgage market, in order to avoid just such disasters, had utterly failed during the 2001-2009 administration, readers should set aside some reflection time, to consider not only what this story ‘says’, but also what it means, for those still doggedly determined proponents of ‘smaller government’. Like Enron, most of the mortgage ‘originators’ refused to even consider they would be scrutinized, once they ‘floated’ all these many deals up-river, to the ‘consolidators’ of mortgage ‘packages’, which would then be bundled & sold as derivatives. Out of site, out of mind. Or so the saying goes. But the off-book accounting of the 2001-2009 executive, similar to those used by Enron, masking & concealing the true nature of a failing national economy, which inevitably would effect the job market, sending millions of homeowners into the unemployment lines. But the homeowner certainly didn’t agree to have their premiums ‘explode’ beyond their ability to pay – once their mortgages were ‘RESOLD’ & refinanced at higher rates, w/out the benefit of negotiation. The story of regulation during this period is an ugly, tragic affair, exposing the nature of incompetence, ranging from allowing criminals to attack New York, D.C. & Pennsylvania (prevented) in 2001, to the theft of (more/less) $12 billion from planes delivering ‘CASH’ (??? in an age of electronic fund x-fers!!!) to Iraq, intended for reconstruction, to the economic collapse of 2008 & its players (Madhoff, BeareSterns, etc.). This is as much a story of failed morality as it is about the failure of government to do its duty in a time of ‘intended’ crisis. This may be redundant, but it also goes to the heart of what WE expect & NEED from those who represent us, in government. There are 2 primary philosophies commanding our politics. Only 1 has shown the proven capabilities to provide able, stable, dynamic leadership 2day. If Americans can’t figure this out by now, the ‘excuses’ next time will be well beyond the ability to repair, since we have yet to ‘repair’ this last debacle, nor had the fortitude to demand the criminal enablers to stand down & let the ‘repair work’ proceed…

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