Senate Banking Committee Focuses On HAMP

ed to include testimonies from Wells Fargo and Bank of America) As a precursor to the July 28 meeting scheduled between Treasury officials and servicers participating in the government's Home Affordable Modification Program (HAMP), the Senate Banking Committee held a hearing Thursday morning in an effort to help lawmakers gauge HAMP's progress – or lack thereof – since its introduction in February. The hearing – which included testimonies from the Treasury, as well as Wells Fargo and Bank of America servicing execs – highlighted the program's administrative obstacles and shortcomings. In recent weeks, lawmakers have increasingly expressed concern that HAMP, originally projected to save up to 4 million homes, is both underperforming and being implemented too slowly. "We've got to get this out sooner, quicker, faster, more expeditiously," said Sen. Mark Warner, D-Va. So far, 27 servicers, including the five largest, have signed HAMP contracts. Between loans serviced by the contracted servicers and loans owned or guaranteed by the GSEs, more than 80% of the country's mortgages are covered by the program, said Herb Allison, the Treasury's assistant secretary for financial stability. "At this early date, [Making Home Affordable] has already been more successful than any previous similar program in modifying mortgages for at-risk borrowers to sustainably affordable levels and helping to avoid preventable foreclosures," Allison, a former Fannie Mae CEO, testified. "Tens of thousands" of trial modifications are under way, he said, and 325,000 borrowers have been sent trial modification offers. While Allison emphasized HAMP's growth, he conceded that there is much more work to be done. "[W]e know that more is required to help American families during this crisis and will aggressively continue to build on this progress," he said, alluding to the expected near-term rollout of several subsequently announced HAMP components, such as its second-lien and foreclosure alternative programs. Although the committee aggressively attacked the speed at which HAMP is being implemented, the servicers at the hearing – Mary Coffin, Wells Fargo's executive vice president of servicing, and Allen Jones, Bank of America's default management policy executive – noted the Treasury's piecemeal delivery of guidelines. Both servicers suggested that the administration's strategy of publicly announcing major initiatives and then slowly formalizing details could be improved. "The current method of publicly announcing new guidelines or changes concurrently with their effective dates creates immediate demand with insufficient lead time for operational readiness," Jones said. "This can lead to negative customer experience and, ultimately, public backlash against the programs." Wells Fargo's Coffin observed that various program details were provided to servicers over a 90-day period. "We understand this time has been frustrating for our at-risk customers and that they are anxious and in need of answers," Coffin said. Committee members, however, focused heavily on the inconsistent application of HAMP's guidelines. Several senators noted instances of borrowers being denied entry into HAMP despite meeting eligibility requirements – a point echoed in other testimonies. Diane E. Thompson, counsel for the National Consumer Law Center, called HAMP's implementatoin "excruciatingly slow." According to her testimony, borrowers have routinely been asked by HAMP servicers to waive their legal rights as a prerequisite to being placed in a trial mod. Others have been steered into modifications that do not entirely meet the program's guidelines, she said. Connecticut Housing Development Fund President and CEO Joan Carty, also testifying, said servicers have done a poor job of updating their systems, causing unnecessary delays that result in added costs taken on by borrowers. "It's a process that often feels futile," Carty said. Several committee members also grilled Allison as to whether HAMP needed punitive measures for those servicers that are not abiding by the program's rules. "We've used the carrots," Warren said, referencing HAMP incentives. "Do we need some sticks?" Allison responded by noting the Treasury's recently announced plan to release performance data, available on a servicer-by-servicer basis, in early August. Since the department announced its intentions to do so, HAMP administrators have seen increased activities from certain servicers, Allison


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