TreasurySecretary Assails HAMP Servicers in Speech to Senators

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Treasury Secretary Timothy Geithner told lawmakers Thursday that servicers are failing in their efforts to modify loans for Americans at risk of losing their homes.

“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,” Geithner said in testimony before the Senate’s subcommittee on financial services.

Geithner says he and his staff at the Treasury have received “countless frustrated phone calls” from borrowers, and are seeing distinct performance disparities across the various servicing shops operating under the Home Affordable Modification Program (HAMP) banner.

“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,” Geithner said. “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.”

In late March, the administration said it is adding new consumer protections to its mortgage modification

program, including requiring HAMP servicers to evaluate all homeowners who have missed at least two mortgage payment for the program and prohibiting a foreclosure to be initiated until it is determined the borrower is ineligible for HAMP or the borrower reneges on their commitment to make trial modification payments. But these policies aren’t being enforced until June 1.

An assessment by the Congressional Oversight Panel (COP) earlier this month said, “It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble.”

Members of the panel say the administration’s response to the housing crisis “continues to lag behind” the still growing number of delinquencies and for many is simply delaying, not preventing, foreclosure.

According to the Treasury’s latest HAMP progress report, as of the end of March, 230,801 homeowners had received permanent modifications under the program. The number of borrowers to re-default after being granted a permanent restructuring doubled from February to March.

Geithner told the Senate subcommittee, “We are committed to making sure that servicers hold up their end of the bargain. [W]e are going to continue to work to refine these programs to try and reach as many borrowers as possible.”

The Treasury secretary said his staff are already conducting compliance reviews targeted at certain servicers who are producing the expected results, and in the event of non-compliance, Treasury will withhold incentives from the servicer or demand their repayment.

“[W]e 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,” Geithner said.

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Paul Roesch
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