FULL VERSION - July 4 1010 Open Letter to President Obama (revised and resent Aug 17)

8/9/2019 FULL VERSION - July 4 1010 Open Letter to President Obama (revised and resent Aug 17)

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[Update 9/4. No response as yet from the White House. I will shortly supply a list of additional recipients to whom Ihave sent this open letter.]

September 4, 2010 [Originally sent July 4. Resent July 12, August 17. Revised, most recently 9/3.]

Re: Systemic LENDER MENDACITY in your Making Home Affordable

(MHA) program and its Home Affordable Mortgage Program (HAMP)

President Barack ObamaThe White House1600 Pennsylvania Avenue NWWashington, DC 20500

Dear Mr. President:

I am writing to delineate key elements of the organizational structure created by one lender(GMAC) in order to facilitate what I call the systemic lender mendacity that pervades your

MHA/HAMP programs. I write from my own 16-month experience in applying for a HAMPmodification with GMAC. This letter, I hope, will help you address and correct the problem oflender mendacity. I am a former Realtor, a current college English instructor, and a Harvardalumnus (64).

I have coined the term lender mendacity to describe GMACs handling of my HAMPapplication. While news media have made much of this problem in general terms, lendermendacity has not to my knowledge been described with the specificity I attempt here.

As you are surely aware, many and conceivably most of MHA/HAMP applicants are being

victimized by their lenders.Mr. President, lender mendacity is therefore a political and

economic disaster for you and the nation. As awareness of it spreads among MHA/HAMPapplicants and their families and neighbors and among members of the financial and

government communities as well, lender mendacity is causing tens of millions of Americans

to mistrust the integrity of the nations financial institutions, the administration that

created MHA and HAMP, and government itself.

After delineating key elements of GMACs HAMP application process I will further describeand document it by taking you inside the belly of GMACs HAMP beast, so to speak, as I myselfhave seen it.

Before delineating this process, it must be said that two flaws in HAMP itselfhave

unfortunately made HAMP an enabler (unwitting, I hope) of GMACs intent to deny. These are1) the absence of a clear and common set of guidelines used by lenders and applicants alike and,2) the regrettable fact that HAMPs creators have unaccountably made HAMP guidelines all butinvisible to HAMP applicants. It took me months to find the March 4, 2009 HAMPguidelines and months more to find the Treasury Departments Supplementary Directives

to them. Not even the federal, state and non-profit agencies I spoke with could direct me tothese crucial documents. Combined, these two flaws have made it impossible for the vast


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Sewall Lender Mendacity - 2 - August 17, 2010

majority of HAMP applicants to verify any of GMACs constant professions of adherence toHAMP guidelines.

Only when I finally had the guidelines in hand and had tried (without success) to get GMACcustomer service agents to respond to them could I see exactly how GMAC has realized,

furtively in its constant professions of adherence to HAMP guidelines - its intent to denyHAMP modifications to qualified applicants.

The invisibility of HAMP guidelines to most HAMP applicants has thus enabled GMAC toexploit and subvert, in more or less Orwellian fashion, the HAMP guidelines created by theTreasury Department presumably to ensure HAMPs integrity. From government sources youhave heard, I am sure, that information supplied to HAMP applicants by HAMP lenders is oftenconfusing and contradictory. This confusion is no accident. It is, rather, the very lifeblood of aHAMP application process that GMAC has designed expressly in order to deny loanmodifications to qualified applicants. To do make its denials furtively, GMAC has taken fivesteps:

1. GAMC has first denied its hundreds of customer service agents any access whatsoever toHAMP guidelines.

2. GMAC has then supplied its agents with its own self-serving guidelines and instructionsdesigned initially to get applicants engaged and committed to HAMP until GMACguidelines start contradicting themselves, again and again, so that GMAC can realize,again and again, its intent to deny.

3. GMAC has then trained its agents to ignore any references to specificHAMP guidelinescoming from HAMP applicants.

4. With HAMP guidelines now 100% off the table, GMAC agents can readily (and usuallyunwittingly)presentGMAC guidelinesto HAMP applicants as HAMP guidelines. It isprecisely this hollow profession of adherence to HAMP guidelines, constantly

repeated by GMAC agents, that constitutes the mendacity of GMACs HAMP

process.5. With these deceptions in place, GMAC agents can and do constantly cite HAMP

guidelines in order to justify HAMP denials on grounds that demonstrably violate

HAMP guidelines or are nowhere to be found in them.

I have documentation of each of these five steps. Yet GMAC acts with relative impunitybecause, as one observer tells me, Sadly, there is no way to enforce HAMP since it is not a

law. The regulators have tried to beg, scream and expose by the monthly reports to shame

then into doing more modes. But there is no way to force them - only Congress can make

laws and HAMP is not a law.

Before we venture inside the belly of the GMAC HAMP beast, be aware that GMAC presents itsHAMP process to applicants as a hierarchy of five phases beginning with an initial, non-profitphase (seemingly independent of GMAC yet in fact funded by GMAC and other lenders)followed by four phases, or tiers of GMAC agents:


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1. The non-profit agencies to which GMAC refers HAMP applicants for an in-depth reviewof an applicants financial situation. Counselors at these agencies, after completing thisreview, encourage applicants to think they may qualify for a HAMP modification.(HAMP was designed to help homeowners just like you.) These agencies, however, arefunded in part by lenders like GMAC.

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Tier I GMAC Customer Service Agents who supply initial guidelines intended to engageapplicants in HAMP and get them committed to it.3. Tier II GMAC Supervisors who handle complaints from HAMP applicants whose

applications have been denied.4. Tier III GMAC Loan Resolution Specialists who handle persistent complaints and who

speak for5. The (unreachable) Tier IV GMAC Case Officers who review applications and issue

denials by mail or by phone call from Tier II or III agents.

Now to venture inside the belly of GMACs HAMP beast. GMACs HAMP applicant processresembles the customer service processes used by cell phone service providers. And like them, it

is structured to prevent me from speaking with the same GMAC agent twice. And again likethem, GMACs process is unified by a log of contacts maintained by each agent I speak with.But unlike the logs maintained by cell phone agents, my GMAC log is radically incomplete: ithas no record whatsoever of any of the GMAC guidelines/instructions Ive previously

received from multiple GMAC agents, often in great detail and over periods of manyweeks. The log is silent on them.This silence paves the way for GMACs intent to deny. Itallows the agent I speak with today to deny any knowledge whatsoever of past guidelinessupplied by GMAC agents. Again and again, agents simply apologize for the misinformationIve received from previous agents. Then they supply me with new, often blatantly contradictoryguidelines, always allegedly HAMP guidelines, but always leading to denial by GMAC. At thispoint agents insist (incredibly) thatthe guidelinesthey give metodayhave ALWAYS beeninplace andTHERE NEVER WERE anyothers! The process works like magic. Bottom line:

virtually nothingthat GMAC has said in the past ever applies today - yet always GMAC is

working within HAMP guidelines!

There you have it. My HAMP experience is summed up in the Post Script below anddocumented in three binders of notes and correspondence between GMAC and governmentofficials.

Mr. President, GMAC is running a shell game. It is making a mockery your promise of

HOPE to at-risk homeowners. And for it, GMAC appears to be accountable to no one, not

even to the various state, federal and non-profit agencies charged to maintain HAMPs

integrity. For months I have been in contact with six such agencies and public officials.Although several freely acknowledge GMACs dissembling, none can hold GMAC to account.Three months ago, two of the six agencies I am in contact with escalated my case to theHAMP solution Center. I have yet to hear a word from this Center.

I stress that GMAC has been unwilling to refer to a specific HAMP guideline over the past

16 months. Nor has any GMAC agent I spoke with had access to, or could direct me to, the

4/4/09 HAMP guidelines or the Treasury Departments HAMP Supplemental Directives to


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them. Nor, amazingly, could any of the government agencies or elected officials I spoke

with. Out of this Orwellian fog five questions arise:

1. What role did HAMP service providers have in developing HAMP guidelines?2. Why are HAMP guidelines virtually hidden from HAMP applicants?3.

Why are HAMP lenders and applicants not working from the same setof HAMPguidelines?

4. Who at GMAC is responsible for a HAMP process that trains thousands of its agents toobstruct and prevaricate in the manner described above?

5. Are other HAMP lenders using similar processes?Summing up: GMACs HAMP process is a lenders delaying mechanism designed to lead

applicants on a wild goose chase whose planned outcome is foreclosure or short sale aftermonths of full mortgage payments extracted from gulled applicants.From what I read,HAMP service providers are gulling millions of at-risk homeowners in this manner.

W

hat can be done to stop lender mendacity? Short of eliminating MFA programs that by mostaccounts are causing more financial misery than financial relief, I see four options, of which thelast two, for reasons given below, are vastly preferable to the first two:

1. Do nothing, on the judgment that any action to stop lender mendacity will raise moreproblems (with lenders but also members of your administration) than it solves. Donothing and pay the political price, which I believe is high enough to swing elections.

2. Allow lenders to deny HAMP applications fornostatedreason. While repugnant toqualified applicants, and while furthermore a violation of your promise of hope to at-riskhomeowners, this option would at least stoplendermendacity dead in its tracks, givingapplicants closure on a bogus HAMP process and hard, cold clarity on their limitedhousing options going forward. For good or ill, it would also render superfluous existingHAMP guidelines.

3. Make mandatory, not voluntary, the decision by lenders to approve loan modificationsto qualifiedapplicants (current HAMP regulations make this decision voluntary.)Lenders will howl. Let them. On balance, given the toll that lender mendacity is taking ontheir credibility and on that of your administration and government itself, this option isprudent and sensible.

4. Buy some time. Take the issue of lender mendacity to the people. Call an immediate haltto all foreclosures until new, mandatory guidelines are established and [for] theseguidelines be overseen by a new Consumer Protection Agency. This language is fromthe Petition to the American Government from American Homeowners at thePetition2Congresswebsite. It too makes sense, for lender mendacity compellinglydemonstrates the need for a strong Consumer Protection Agency (Elizabeth Warren).

I write out of respect for what you have accomplished to date and wish you every success inleading our nation in these trying t imes.

Very truly yours,


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STEPHEN P. SEWALLGlenview, Illinois

P.S. Summary of Specifics of my HAMP application. In March 2009, GMAC referred me toa San Francisco-based senior finance counselor who reviewed my financial situation and assured

me that HAMP was designed to help homeowners like me. I would need a documented GrossMonthly Income (GMI) of around $3,400, she said, to qualify for a modification of my $276,000mortgage. This made sense. Over the next eight-months, however, a dozen Tier I CustomerService Agents (I never spoke with the same agent twice) cited HAMP guidelines requiring aGMI of from $5,400 to $7,600.

My GMAC-referred finance counselor, upon hearing this $7,600 figure from a GMAC Tier IISupervisor during a three-way conference call with GMAC in January 2010, commented that amandatory $7,600 GMI on a $276,000 mortgage made no rational sense. But GMAC stood itsground. On November 30, it denied my second HAMP application on the ground of insufficientincome.

In December 2009, Tier I agents had advised me to set up regular distributions from my (modest)retirement funds. I did so. In February 2010, however, Tier II Supervisors and Tier III AdvocacyResolution Specialists flatly rejected this advice, writing the Illinois Department of Financial andProfessional Regulation that IRAfunds[are] NOT allowedwithin[HAMP]programguidelines.

GMAC then reversed itself (again) just as I was about to confronted agents with HAMPSupplementalDirective 09-07 October8, 2009, which permits monthlyincomefrom . . .retirementfunds. On March 23, 2010, however, GMAC denied my third application, this timeon the ground of sufficientincome, which obviously contradicted GMACs previous denial onthe ground of insufficientincome.

Most recently, on April 30, GMAC denied my fourth HAMP application on the ground thathardshipisnotimminent. In justifying this decision, a Tier II Supervisor cited a HAMPguideline that she was unable to link to any specific HAMP guideline. Unable to explainGMACs denial of my fourth application, this Supervisor insisted that my only option is tosubmit a fifth.

To qualify for a HAMP modification, GMAC had all along insisted that my monthly mortgagepayments mustbe current. But this same Supervisor insisted that HAMP applicants have alwaysbeeneligibletoqualify for a modification when behind on their monthly payments.

Another GMAC agent I spoke with blamed GMACs changing guidelines on changingguidelines at Freddie Mac, the owner of my loan. Call Freddie Mac, he said. I did. Freddie Macflatly denied his assertion. It seems to have in place a shield of deniability like GMACs.

Not surprisingly, I could never speak with any of the Tier IV loan resolution officers who deniedmy four HAMP applications. Instead, GMAC sent me four crude form letters announcing itsdenials in a few words that made no reference to HAMP guidelines.


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FULL VERSION - July 4 1010 Open Letter to President Obama (revised and resent Aug 17)

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Transcript of FULL VERSION - July 4 1010 Open Letter to President Obama (revised and resent Aug 17)