Foreclosure Buzz

Update of August 8, 2008: There is more on the ways of HPF. See HPF’s Hope Hotline created to save lenders money here.

—-original post—-

The Homeownership Preservation Foundation [HPF] operates the Hope Hotline. (See HPF website here.)  [Don't confuse HPF's hotline with the Hope Now Alliance, more on them here.] The Hope Hotline has been pushed throughout the nation by lenders, media, governments and even by President Bush himself (radio address here) for troubled borrowers to call to get counseling.  Interestingly HPF seems to help promote how well the industry is doing, and certainly does not criticize it.  (e.g., Mortgage Servicers Set Monthly, Quarterly Records For Helping Homeowners Avoid Foreclosure, MarketWatch, July 30, 2008 here.)  They claim their mission is:

To develop innovative solutions for preserving and expanding homeownership by partnering with consumers, policy makers and the mortgage lending industry.

Noble mission and consisely stated.  Of course it was really easy for the Homeownership Preservation Foundation to partner with the mortgage lending industry — because they are the industry.

Their board is composed of current employees of Residential Capital LLC, Countrywide [now Bank of America presumably], HUD, Chase, entire list here.)  In fact, several are with Residential Capital.  Coincidence three are from one lender?  Hardly.

Residential set it up in 2004 with a $20 million donation. (PRNewswire article here;   HPF’s 2004 IRS Form 990 shows the donation came from Residential here, and GMAC RFC is either the parent or the subsidiary of Residential, sources here, and here.  Regardless, let’s call them Residential/GMAC.)  As if $20 million was not enough, Residential/GMAC also lets HPF operate in its offices: 8400 Normandale Lake Blvd., Suite 250, Minneapolis, MN, 55437.  See 2004 990 here.  Even HPF’semployees are actually employees of Residential/GMAC.  In the 2004 IRS filing HPF candidly states:

The Executive Director, Treasurer and Secretary/Corporate Counsel are employees of GMAC RFC.  The services of these three individuals are donated to the organization and no amount is paid by the foundation for these services.

See HPF IRS Form 990-PF, 2004, Footnotes - Statement 5 here.

So who is GMAC RFC besides the parent or whatever of Residential?  Just one of the top ten mortgage industry players in the country using different trade names (e.g., Ditech source) that proudly states:

We were one of the first mortgage conduits in the U.S. to focus on buying and securitizing single-family mortgages, with loan balances above the purchasing authority of the government-sponsored enterprises (jumbo mortgages).

 We purchased loans in the secondary market from a variety of originators (for example, mortgage bankers) and sold them as mortgage-backed securities (MBS) to fixed-income institutional investors.

GMAC RFC website here.  More here.

So the entities that made billions using unregulated securitization resulting in a nationwide foreclosure crisis, and worldwide credit crunch, thought it would make amends by creating this little nonprofit?  (It has two paid employees.)  Come on.

With only a handful of paid staff, HPF claims to actually perform the counseling in press releases:

The nonprofit Homeownership Preservation Foundation operates a national hot line offering free counseling to help people avoid foreclosure.

Here.

Pretty impressive if they really did it.  Of course, they do not counsel anyone themselves, but they spun it.  Their hotline merely transfers callers to another counseling agency:

Our credit counseling partners are neutral third party resources providing education and counseling that helps homeowners overcome financial difficulties and stay in their homes.

HPF website here.

HPF owns a computer that forwards the calls.  Wow.  But wait, HPF is supposedly a foundation, not a spin machine.  Who do they fund?  Originally only one nonprofit entity in London — London England.  In 2004 HPF reported distributing $94,000 to National Association of Citizens Advice Bureaux, 115-123 Pentonville Road, London. See HPF’s 2004 990 here. Its mission:

The Citizens Advice service helps people resolve their money, legal and other problems by providing free advice and by influencing policymakers. Every Citizens Advice Bureau is a registered charity reliant on trained volunteers and funds to continue providing this vital service to local communities.

CAB website here.

Remember, this was the single donation (a mere $90k) made by HPF in 2004, which was repeated 2005 (see another HPF 990 here)– to an organization that only helps folks in the UK.  (Note that the Citizens Advice Bureaux received over $100 million in 2007 here, and has the tag line: the charity for your community.)  In 2006 HPF gave money to other “poor” organizations: NeighborWorks (source), National Urban League, and USA Cares totaling about $1 million.  See HPF’s 2006 990 here.  Impressed? 

Given that HPF immediately invested the money it received from the industry in 2004 and that the dividends alone amount to $1 million a year, they give little away and have few staff, where is the rest of the money going?  Nowhere.  Their latest financial statement is not available, but HPF has been maintaining their $20 million in assets, and more donations from the industry are coming in to help out this wonderful foundation (e.g., Chase $200k here, $3.25 million Fannie Mae, Ocwen $200k, Countrywide $150k source.)  How?  By investing in the mortgage industry of course.  Here is a partial list:

• Capitol One Bank
• Citigroup Inc.
• Houshold Finance Corp.
• Washington Mutual
• Wachovia
• Chase
• Countrywide
• Bank of America
• Residential Capital (nice gesture since they donated the money originally)
• Bear Stearns
• Fannie Mae
• Freddie Mac
• Morgan Stanley
• Lehman Brothers
• Goldman Sachs

See HPF’s 2004 990 here, and 2006 990 here.  Could this be a conflict of interest?  Nah.  The money came from the industry, why shouldn’t it be invested back into the industry?  (Although they may have taken a beating with these investments of late [no report available yet], the point is that the Homeownership Preservation Foundation is financially aligned with the mortgage industry.) 

Remember, HPF’s own statement about their counseling above: “Our credit counseling partners are neutral third party resources.”  It appears they admit they are a lender front, or they are bragging that the agencies they refer callers to have been compromised (i.e., the counselor is not on the borrower’s side).  Thus, the push for the national number — “call us, and we will send you to a group that we approve of.”

In addition to the support of the industry that has a bit of power in Washington and beyond, was it mentioned that Homeownership Preservation Foundation hires outside lobbyists?  They have spent more than $60k doing that so far this year with the law firm of Dykema Gossett.  Source.

It is safe to say the Homeownership Preservation Foundation was started by the mortgage industry, run by the mortgage industry, invested in the mortgage industry, and protects the mortgage industry.  They bought influence with some alleged consumer groups to go along (e.g., NeighborWorks).  The mortgage industry already had the local, state and national governments in their pocket who repeat the mantra of their choosing.  The mortgage industry created this shell hotline that does little and then sends the callers to agencies they approve of, while collecting the stats and spinning them as they wish with more help from their sister group the “Hope Now Alliance”, but more on them tomorrow (see Hope Now Alliance’s Numbers Flawed here).