When it comes to the Home Affordable Modification Program (HAMP), the U.S. Treasury Department is in denial, the Congressional Oversight Panel (COP) reports. The federal watchdog agency, tasked with overseeing the expenditure of Troubled Asset Relief Program funds, says ‘an untold number’ of distressed borrowers may go without help ‘all because Treasury failed to acknowledge HAMP's shortcomings in time.’
In a report published Monday, the panel estimates that HAMP will prevent about 700,000 to 800,000 foreclosures. Through October, servicers had executed 519,648 permanent HAMP modifications, and nearly 156,500 modifications were still in the active trial stage. The Obama administration originally stated that the program would assist between 3 million and 4 million borrowers.
In April, the COP – then headed by Harvard law professor and Consumer Financial Protection Bureau creator Elizabeth Warren – blasted the Treasury for falling behind the pace of the foreclosure crisis, calling into question the timeliness, sustainability and accountability of the department's foreclosure-prevention programs. According to the panel's review, program changes made to HAMP have not resolved the COP's core concerns.
Calling HAMP's poor results in preventing foreclosures the program's ‘most dramatic shortcoming,’ the COP criticizes the Treasury's data collection and analysis efforts, as well as its refusal to commit to meaningful metrics, ‘while the program's sole initial goal – to prevent 3 million to 4 million foreclosures – has been repeatedly redefined and watered down.’
The COP says the Treasury has not held servicers accountable, further explaining that the department has pawned off oversight duties onto government-sponsored enterprises Fannie Mae and Freddie Mac – an action that has resulted in conflicts of interest.
‘Freddie Mac, in particular, has hesitated to enforce some of its contractual rights related to the foreclosure process,’ reads a statement from the COP, referring to a Securities & Exchange Commission filing in which Freddie Mac stated its attempts to enforce rights ‘may negatively impact our relationships with these seller/servicers, some of which are among our largest sources of mortgage loans.’
The Treasury should monitor HAMP modifications and intervene in cases where borrowers are falling behind, the COP adds.
‘It is too late for Treasury to revamp its foreclosure-prevention strategy, but Treasury can still take steps to wring every possible benefit from its programs,’ the COP says.
The COP has also again called for the Treasury to establish metrics for evaluating the program in the future, as well as ‘acknowledge that HAMP will not reach the expected number of homeowners.’
Basing its estimates on Congressional Budget Office data, the COP says HAMP will likely spend about $4 billion – far short of the $30 billion figure that Treasury officials use.
‘The fact that a program which should be an unmitigated success – paying people money for nothing – has had such limited success should be a clue that the situation is far more complicated than it appears,’ wrote COP members J. Mark McWatters, an attorney and accountant, and Kenneth Troske, an economics professor, in a separate statement.
‘From our perspective, the best foreclosure mitigation tool is a steady job at a fair wage and not a hodgepodge of government-subsidized programs that create and perpetuate moral hazard risks and all but establish the government as the implicit guarantor of distressed homeowners,’ McWatters and Troske added later in their commentary. ‘In the end, it appears that, for most participants, HAMP will only postpone the inevitable.’
SOURCE: Congressional Oversight Panel