With a little more than a year left before the Home Affordable Modification Program (HAMP) is slated to expire, the U.S. Treasury still has time to implement changes that could make the program more effective, a federal watchdog agency says.
However, the Treasury shows little interest in adopting recommendations from the Special Inspector General of the Troubled Asset Relief Program (SIGTARP), including new calls for better benchmarking of acceptable servicer performance, according to a SIGTARP report published late last week.
Among its suggestions, SIGTARP recommended that the Treasury require that most of servicers' communications to borrowers be in writing, that the Treasury publicly assess major servicers' performance against those benchmarks and that the Treasury vigorously enforce the terms of servicers' participation agreements.
"Treasury has determined not to take any further action to implement SIGTARP's recommendations," the report says. "Treasury is giving up a chance at meaningful change, and sadly, it is struggling homeowners who have the most to lose."
The report indicates that as many as 600,000 HAMP-eligible borrowers will fail to enter HAMP before its expiration date of Dec. 31, 2012. To back up that statement, SIGTARP cites figures from the Treasury suggesting 992,968 borrowers are eligible for HAMP. If the current pace of trial-to-permanent modification conversions holds steady at its monthly average of 25,000-30,000, between 520,000 and 600,000 eligible borrowers will be shut out.
SIGTARP has long criticized the Treasury for being too gentle in dealing with servicers that participate in HAMP and the broader Making Home Affordable program. Although it is able to use financial remedies to force servicer compliance, the Treasury has largely avoided such measures. Despite widespread reports of servicer noncompliance, the Treasury has only temporarily withheld payments from three servicers to date.
"Rather than refuse to act on SIGTARP recommendations, Treasury should force servicers to change the status quo and help as many of the remaining eligible homeowners as possible stay in their homes," the report states.
According to SIGTARP, the Treasury must set benchmarks on acceptable performance for trial-to-permanent modification conversion rates, the length of trial modifications and the timeline for resolving escalated cases. HAMP guidelines require servicers to cancel or convert trial modifications after three or four monthly payments and resolve escalated cases within 30 days.
Recent performance data from the Treasury, however, shows that 22% of trial modifications last more than six months.
"If these are benchmarks for acceptable performance, many servicers have missed the mark," the report says. "Treasury should measure all servicers against those benchmarks, because without acceptable benchmarks, servicers will continue their bad practices, and ultimately, homeowners may suffer."