Thursday, February 6, 2014
MORTGAGE MODIFICATION, ACA, BOONDOGGLES FOR THE RICH
By Barbara Garson, TomDispatch
This piece first appeared at TomDispatch. Read Andy Kroll’s introduction here.
Health care isn’t the first boon that President Obama tried to give us through a public-private partnership. When he took office, more than 25% of U.S. home mortgages were underwater—meaning that people owed more on their houses than they could get if they tried to sell them. The president offered those homeowners debt relief through banks. Now he’s offering health care through insurance companies.
In both cases, the administration shied away from direct government aid. Instead, it subsidized private companies to serve the people. To get your government-subsidized mortgage modification, you applied at your bank; to get your government-mandated health coverage, you buy private insurance.
Let a Hundred Middlemen Bloom
In other countries with national health plans, a variety of independent health care providers—hospitals, doctors, and clinics, among others—deliver medical care, while the government doles out the compensation. They let a hundred healthcare providers bloom, but there’s only a single payer. If the U.S. moved to single-payer healthcare, however, what would happen to the private health insurance business?
On the face of it, such a plan would seem expensive, since it means supporting two bureaucracies, one of which would be obliged to take profits for investors. Meanwhile, doctors would still have the expense of trying to collect from multiple insurers with reasons to stall. But theHeritage plan had one great advantage. Since Harry Truman, American presidents have tried unsuccessfully to get us national health care. The exchange system, however awkward it might be, pacified the insurance companies which had previously spent millions of dollars to defeat other plans for “socialized medicine.” With the support of those companies for a program that not only kept them in the picture, but also promised to deliver millions of new, subsidized customers to them, Obama gave us a national healthcare law.
The danger is that it essentially makes insurance companies our medical receptionists, a profit-making face that greets sick people whenever they try to use their government healthcare. That gives private companies a lot of power to make the government look bad.
That’s why it’s important to understand how banks used Obama’s mortgage subsidy program to sabotage debt relief and discredit government. If we grasp how they pulled that off, we may be able to protect the present health plan and someday even get genuine single-payer healthcare out of it. So here’s the story.
The Home Affordable Modification Program (HAMP) offered banks government incentives—cash bonuses—to lower the principle or interest on underwater mortgages. Of course, health insurance companies don’t actually provide healthcare, but banks did provide the underwater mortgages so, however ill-advised or fraudulent they were, those institutions obviously had a role in negotiating their modification. The HAMP partnership was structured so that the government’s role was to provide cash incentives to banks, while participating banks would be required to accept and process the applications of those who were eager to modify their onerous mortgages. Whether they granted a modification was, however, strictly up to them.
In 2009, when I visited Balthazar (“Balty”) Alatas in Vallejo, California, he had been out of work for a year and had been negotiating a HAMP mortgage modification with Bank of America for nine months. He was beginning to suspect that the bank’s elaborate application procedure was deliberately designed to give people just enough hope to keep paying their old mortgages for as long as humanly possible. He had already emptied his Individual Retirement Account and borrowed all he could, in good conscience, from his in-laws. “But I may be too cynical,” he said. “See what you make out of it.” And he set down a pile of printed correspondence about a foot and a half thick in front of me.
The initial piece of paper I drew randomly from the stack was a request for documents verifying income and expenses. It wasn’t the first time he had gotten such a letter, as he would show me. Like HAMP applicants at other banks, Balty complained of receiving letters asking for the same documents over and over. He’d learned that it was quicker to send things again than to try to locate the person at the bank who’d already received and even discussed the documents with him.
“No matter how many times they ask, I’ve always complied in full,” he told me.
“I bet you didn’t submit this in full,” I said, indicating a request for utility bills and death certificates.
“Well, there hadn’t been any death in the family,” he responded. He had indeed, however, resubmitted the utility bills.
One letter I pulled from the pile indicated that his case was being transferred to the “Hope Team.” That sounded hopeful to me, but in Balty’s experience each transfer within the bank—he’d recently been “escalated” to the Escalation Q Unit—only meant that he had to start all over again with someone new.
At one point, he complained to a California banking agency about the delays. Bank of America’s response to the state’s inquiry read in part:
“At times the process can be repetitive and lengthy. Our work-out negotiators work diligently to minimize delays, however, at times unforeseen occurrences beyond anyone’s control may further delay the process. We appreciate your continued patience as we work toward completing the modification of your loan.”
“Repetitive,” “lengthy,” full of “unforeseen occurrences beyond anyone’s control”: the bank’s own description sounded remarkably like the morass so many HAMP applicants described to me. Now, I was starting to wonder: Could it possibly be that way on purpose?
No Modification Granted
If anyone could cope with paperwork it was Balty Alatas. He’d done a lot of it in his former job and, in some perverse way, he found filling out the forms almost soothing. That was definitely not the case on the next stop in my underwater-mortgage tour of America—the mostly poor, mostly black city of Richmond, California, where house values had gone down by 66% since 2007.
Alice Epps, a home care attendant, was already behind on her mortgage payments when she heard about what her neighbors called the “Obama modifications.”