HAMP Servicers Must Report Twice Daily on Their Progress

Washington-The White House says it is less-than-pleased with mortgage servicers and their record on loan modifications and aims to do something about it.

Beginning last month, each Home Affordable Modification Program servicer had to report to Treasury twice a day on their conversion of "trial" mods into permanent loans. This month, Treasury will begin publicly disclosing each HAMP servicer's conversion rate as a way to shame the laggards.

If Treasury doesn't like what it sees, it will impose monetary penalties and sanctions. However, the government isn't giving any hints about what type of sanctions mortgage bankers might face, though one senior Treasury official warned, "We will not hesitate to use the full range of authorities we have to ensure compliance with the program."

Despite the criticisms, HAMP has made substantial progress in placing more than 650,000 distressed homeowners into trial loan modifications but Treasury doesn't like the conversion rate which several months ago was about 1%. (No current figures were available at press time.)

Each family in the program has seen their monthly mortgage payments decline by an average of $576 per month.

To speed up conversions, Treasury is launching a communications and outreach campaign aimed at getting 375,000 borrowers into permanent modifications. Treasury officials insist most of these borrowers are current on their trial payments, and plans to increase pressure on servicers.

"Servicers who do not meet their obligations under the program are going to suffer the consequences," assistant Treasury secretary Michael Barr told reporters. (Last week, Treasury and Fannie Mae teams visited the eight largest servicers for three days to monitor their conversion efforts and troubleshoot problems.)

The major hang-up on conversions is tied to documentation. Candidates for a permanent modification must submit a package to the servicer that verifies their eligibility for the new affordable mortgage. Housing advocates claim servicers are not set up to process the documents and keep losing them, forcing borrowers to send the same document multiple times.

Mortgage industry groups are working with the Hope Now alliance to create a Web portal for housing counselors to help homeowners collect all the necessary documents. "This portal, when combined with the administration's Web-based resources, will help streamline the process to help convert trial modifications to permanent modifications," according to the Financial Services Roundtable. The roundtable also said servicers are "working hard" to keep distressed borrowers in their homes. Beside their HAMP efforts, lenders and servicers are helping borrowers through a variety of workout and loan modification plans.

The Center for Responsible Lending said the mortgage industry's voluntary efforts over the past three years have produced too few long-term modifications. "The Obama administration's latest adjustments to its foreclosure prevention do little but highlight the continued failure of lenders' voluntary efforts to stop the foreclosure crisis," said CRL president Michael Calhoun.

He noted voluntary efforts won't work unless borrowers have access to the bankruptcy courts to get a principal reduction, or Congress makes loss mitigation mandatory. Mr. Calhoun also called on the administration to create a low-cost, short-term loan program for unemployed homeowners who have no other option for keeping their homes.

The White House is working on a plan to assist unemployed homeowners but for now Treasury is focusing all its efforts on HAMP conversions. (It has created a Homeownership Preservation Office to push servicers and borrowers to take the necessary actions to complete the modifications.)

"Borrowers have to take responsibility," said Phyllis Caldwell, who joined Treasury in November to oversee the conversion campaign and head the Homeownership Preservation Office. Only one-third of 375,000 borrowers have submitted the necessary documents to qualify for a permanent modification, she said.

Meanwhile, 37% of the borrowers have submitted some documentation and more that 20% have not submitted anything. "Borrowers need to submit the necessary information or they could lose their eligibility for a permanent affordable modification," Ms. Caldwell said.

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