You know in the animated movie Madagascar, when Alex the lion starts to see walking steak every time he looks at his best friend Marty the zebra? Well, bill collectors are like a type of carnivore. The training and culture in a bill collection business is all about bringing in the benjamins.

Bill collectors are NOT social workers, debt counselors or consumer advocates. They are bill collectors, they will eat you. Oh, they may call themselves “mortgage servicers,” but what does that mean? It means they collect the money from the homeowners.

Yet, under both HARP and HAMP, these bill collectors are suddenly supposed to throw off everything they know, and help you pay LESS money on your mortgage. It’s like asking a lion to live on coconuts when there is yummy zebra walking around.

Which may explain why the [PDF] statistics for permanent mortgage modifications have been so dismal. Of the 3,137,548 requests for information sent to borrowers to determine eligibility for modification, only 1,032,837 have even gone into a trial period. Of the trial period mortgages, only 31,382 have been offered permanent modifications (Third quarter results for 2009). Yes, Firepups, you read that right, 1% of those who may be eligible have made it through the gauntlet and obtained a permanent modification.

There’s a handy dandy chart at Pro Publica where you can check on your own lender’s success rate. BTW, the overwhelmingly highest success rate comes from what are known as “portfolio” mortgages. A portfolio mortgage is one that is still held by the bank that originated the mortgage. These banks are more likely to outright forgive some of the principal, have a much higher rate of conversion from trial period to permanent modification, and a much lower re-default rate after conversion.

Yep, the traditional system, where a bank makes the mortgage, services the mortgage and keeps the mortgage on its own books is MUCH better adapted to meet this crisis than the fancy, fractionized, securitized mortgage with its layers and layers of both fees and conflicts of interests.

And despite the requirement that foreclosure is supposed to be stayed pending the outcome of the mortgage modification process, people are still losing their homes even though they have successfully completed their trial period. See, here.

There have been many reasons offered to explain this pathetic outcome.

– The servicers have failed to adequately train their bill collectors in the new HARP and HAMP procedures and how to apply them.

– The computer programs used by the servicers cannot accommodate a lesser payment amount and continue to generate delinquency alarms during the trial period.

– The servicers do not have enough warm bodies to handle all the new paperwork and phone calls.

– The loan modification department of the servicer does not share information with the foreclosure arm of the servicer.

– There is no agency or watchdog to ensure that servicers are doing HAMP or HARP in good faith, or even with minimal competence.

– Loan modification usually requires the servicer to take at least a small haircut, however, foreclosure results in additional fees to the servicer. Nice article here. [PDF] {

It’s that last one, all the financial incentives are stacked in favor of the servicer NOT doing the modification — or not doing it properly, that really jumps out at me. If makes all the other obstacles insurmountable.

Consequently, judges around the country—despite Congress’s failure to pass cramdown [PDF]—are starting to take consumer protection to heart. Up until the last few years, when a bank moved for foreclosure, the judges just assumed that the bank’s paperwork and legal case were in order. Consumers had to show a smoking gun to get a judge’s attention. Not anymore.

As I previously told you, a bankruptcy judge in the Southern District of New York outright cancelled a mortgage, because the bank failed to prove it owned the mortgage—its paperwork was not in order. Judge Robert Drain later pointed out, "As has become painfully obvious over the last two years, the servicers just don’t have their act together."

Other judges have stopped simply assuming that mortgage servicers and banks have their duck in a row. A State Supreme Court Justice in Brooklyn has taken to scrutinizing lender’s papers even when the, often pro se, consumer hasn’t pointed out any defects.

The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.

He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.

So too, did Justice Spinner of NYS Supreme Court, Suffolk County, cancelled a mortgage because a bank lacked paperwork proving ownership. And in Kansas. And in Florida. If you know of other similar cases from your state, let me know in the comments—with a link if possible and I’ll update the post.

[Earlier posts in this series and related links at Kouril's Foreclosure Fraud Resources]