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Of all the possible reasons why the government's loan modification program has been a dud, at least one has received scant attention: When borrowers are denied a loan mod and call a hotline to have their case reviewed, they are handed off to a nonprofit group created by a large mortgage servicer and largely funded by the industry.
The nonprofit Homeownership Preservation Foundation got its start as an in-house arm of the mortgage lender Residential Capital LLC, a unit of Ally Financial Inc., the former GMAC Inc. The foundation's board is dominated by GMAC and other finance officials; its chairman is the former CEO of GMAC's ResCap unit.
No one involved even bothers to dispute the conflict of interest, one of many that have plagued the Treasury Department's Home Affordable Modification Program.
"Because we're supported by the...