Lawsuit Reveals How a Middleman Is Blocking Mortgage Modifications for Homeowners - ProPublica: "No one appears to have tried to sort out this mess until 2009, when OneWest requested that HSBC, the trustee, allow modifications. The administration had just launched the Home Affordable Modification Program (HAMP), which pays servicers and investors subsidies to encourage affordable modifications. Under the program, modifications occur only when they will likely bring a better return to investors than foreclosure.
But HSBC refused to authorize any modifications, saying the contracts prohibit them. It's obligated to act in investors' interest, and it feared getting sued by those who didn't want to cut homeowners' payments. The dispute dragged on for months. Ultimately, HSBC offered to allow modifications only if OneWest accepted the risk of getting sued by investors, but OneWest wouldn't.
OneWest was in an increasingly difficult situation, it says in its suit. It faced potential suits from investors if it modified loans, and if it didn't, homeowners in the pool might sue.
In late June 2010, with HSBC still not budging, OneWest filed suit, asking a federal judge to decide whether modifications should or should not be allowed."