Is HAMP On Last Leg? Administration Pressures Loan Servicers for More

Treasury Secretary Geithner today appeared before the Senate Financial Services and General Govt. Subcommittee.

On the agenda was….

Holding Banks Accountable: Are Treasury and Banks Doing Enough To Help Families Save Their Homes?

Below are a few comments from Geithner's prepared text that lead you into the story.

From the release….

“The damage from housing crisis has affected millions of Americans. “

“It's affecting those who were taken advantage of by predatory lenders, seeing their interest rates suddenly and unexpectedly skyrocket.  It's affecting those who took out traditional mortgages only to see their home's value plummet, leaving them owing more to the bank than their house is worth.  And it's affecting those who, as a result of the broader crisis, have lost their jobs and are facing foreclosure.”

“As you have recognized, Mr. Chairman, solving these problems is crucial to our economic recovery.  For most Americans, their house is their most important financial asset, and as the financial crisis wreaked havoc on household wealth, the Administration moved to protect this critical component of stability.”

“Together, Treasury and the Fed have purchased more than $1.4 trillion in agency mortgage backed securities.  We also acted to stabilize the GSEs.  These actions returned mortgage rates to historic lows.”

“We recently made important enhancements to HAMP to help responsible borrowers, enhancements that will give us increased flexibility to reach our goal of reaching up to 3 to 4 million homeowners at risk of foreclosure over three years”

NOTHING NEW YET…BUT THIS IS WHERE THINGS GET TENSE:

“I want to be clear that we do not believe servicers are doing enough to help homeowners – not doing enough to help them navigate the difficult and often frightening process of avoiding foreclosure.”

“We are concerned by the wide variation in performance we see across servicers and by the countless frustrated phone calls we receive from borrowers.  We are troubled by reports that servicers have foreclosed on potentially eligible homeowners, or that they have steered these borrowers away from HAMP and into the bank's own modification program.  That they have lost documentation, or claimed to.  That they are not responding to the needs of responsible and increasingly desperate homeowners.”

“None of this is acceptable.  We are committed to making sure that servicers hold up their end of the bargain.  We are conducting targeted, in-depth compliance reviews.  We are compelling servicers to re-review groups of mortgages – or their entire book – for eligibility.  And in circumstances where servicers are not compliant we will withhold incentives or demand their repayment”

“And we will soon publish much more detailed data on the performance of servicers to hold them accountable to the public – so that both members of Congress and the homeowners in your communities can assess for themselves the performance of these servicers.”

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Don't forget one very important thing:

59.1 percent of permanent HAMP borrowers report that their financial hardship was caused by aloss of income. Combine that with the fact that 44.1 percent of the 6.5 millionunemployed Americans have been out of work for longer than six monthsand its not hard to see why HAMP is having a hard time.

The true test of HAMP's success will be whether or not borrowers who received permanentloan modifications are able to avoid re-default.

Thoughts? Are servicers totally to blame or is the Administration starting to give in to banks which want to pick up the pace of home inventory liquidation? Some homeowners just can't be saved by HAMP. It looks like the Administration is trying to squeeze every last drop of rescue funding from the program though. Can't blame them for trying…

IF YOU ARE A DISTRESSED HOMEOWNER. YOU NEED TO REACH OUT FOR HELP.

START HERE

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