Hamp and Future Servicing Challenges

WASHINGTON-Residential servicers participating in the government's Hamp effort soon will be evaluated on their treatment of minorities during the loan modification and foreclosure process.

The Treasury Department is providing the Department of Justice with Hamp data that will be "disaggregated by race and ethnicity," according to assistant attorney general Thomas Perez.

The Department of Justice will work with the Federal Reserve Board and Department of Housing and Urban Development, analyzing loan restructurings for possible fair lending violations.

Perez told a Congressional judiciary subcommittee recently that minorities targeted by subprime lenders and their communities have been particularly hard hit by foreclosures.

"We want to make sure homeowners are not again subjected to abusive practices as they attempt to get out of unsustainable loans," he said.

More than 100 Hamp servicers have helped 1.1 million borrowers lower their mortgage payments through trial and permanent modifications.

Besides participating in the Hamp program, many of these servicers have developed proprietary loan modification and workout programs in response to the foreclosure crisis.

Meanwhile, the National Community Reinvestment Coalition, which represents 600 community organizations that promote access to financial services for working Americans, also is looking at the treatment of minorities by servicers.

NCRC surveyed homeowners seeking loan modification assistance under the Home Affordable Modification Program and found that white borrowers are almost 50% more likely to receive a modification than minority borrowers.

NCRC also says that servicers foreclose on delinquent African-American homeowners more quickly than on white and Hispanic borrowers.

The group released its findings this spring, hinting of "possible racial disparities" and the need for fair lending investigations. The nonprofit unveiled a study showing that minority borrowers are facing foreclosure more often than their white counterparts.

Its findings are based on a statistical sampling of loans in the Washington metropolitan area, which boasts a large concentration of blacks and Hispanics.

"Minority borrowers are facing foreclosures more often than white borrowers even after controlling for borrower, loan and neighborhood characteristics," the NCRC study says.

NCRC used credit scores to compare the borrowers. It said that "income has almost no statistical significance" in explaining the disparity.

"I'm sure some of it is explainable," said NCRC president and chief executive John Taylor, "but a lot of it isn't-and if it isn't, something has to be done about it."

NCRC is sending its study to DOJ. "Obviously, we can go only so far. Somebody needs to dig deeper," Taylor told Mortgage Servicing News.

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