The Treasury is expected to announce changes to its Home Affordable Modification Program (HAMP) today, several media outlets reported over the weekend.
According to reports from the New York Times and the Los Angeles Times, Treasury spokesperson Meg Reilly says the administration is taking additional steps to ‘enhance servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications.’
As of the end of October, HAMP servicers had started almost 651,000 trial modifications. Data on permanent modifications remains inexact at this point, although the Treasury has said it will begin publishing those statistics with its December progress report. A Congressional Oversight Panel (COP) report from October, which used Treasury data from September, indicated fewer than 2,000 permanent modifications had been executed.
Earlier this month, Ocwen Loan Servicing's Paul Koches told Servicing Management that the company had performed 3,039 permanent modifications.
Michael Barr, the Treasury's assistant secretary for financial institutions, told the New York Times that servicers' loan modification efforts are lacking.
"The banks are not doing a good enough job," Barr said. "Some of the firms ought to be embarrassed, and they will be," he added, alluding to the forthcoming progress report that will essentially grade HAMP servicers based upon a series of customer servicer metrics in addition to their number of trial and permanent modifications.
Bloomberg News reports that the steps to be announced by the Treasury will include "new private-public partnerships and resources for borrowers."
HAMP's administrators recently introduced denial codes that servicers are expected to use in explaining to borrowers why they have been denied entry into the program. A major complaint from homeowners and housing counselors is that servicers have been reluctant to share information on the financial input they use to calculate net present value tests, which dictate whether servicers offer trial modifications.
The Wall Street Journal, meanwhile, reports that the Treasury's announcement will focus on the department's plans to have officials oversee the largest servicers' loss mitigation activity. The department will additionally instruct servicers to outline their plans for increasing the number of permanent modifications, the Journal says.
HAMP's disappointing results could be due to the program's failure to address the foreclosure problem as it exists today. The October COP report concluded that HAMP was designed with last year's crisis in mind. Whereas exotic loan products caused the initial wave of foreclosures, traditional drivers of foreclosure – underemployment and unemployment – are at the heart of the crisis today.
"The president's program to restructure mortgages for homeowners facing payments too large for their incomes or who owe more money than houses are worth has only helped several thousand – not millions, as expected," says Peter Morici, a professor at the University of Maryland's Robert H. Smith School of Business. "The Treasury now proposes to shame some banks and invasively monitor, nag and cajole mortgage servicing companies – much like autocratic Beijing abuses Chinese financial institutions."