A new government report indicates that borrowers who are trying to modify their loans under the Home Affordable Modification Program are receiving different treatment from different servicers.
One of the U.S. Department of the Treasury’s goals in developing HAMP was to standardize the modification process among all servicers, according to the report released today from the U.S. Government Accountability Office.
However, treatment of HAMP prospects has been inconsistent among similarly situated borrowers, GAO found.
One reason for the disparity is that the Treasury didn’t release HAMP guidelines until a year after the program was announced. That caused borrower notification to occur between 31 and 60 days after a delinquency.
“Treasury has emphasized the importance of reaching borrowers before they are delinquent but has not issued guidelines for determining when borrowers are in imminent danger of default,” the report said. “As a result, the 10 servicers that GAO contacted reported seven different sets of criteria for determining imminent default.”
Servicers were also slow to respond to HAMP applications and often provided inadequate information about the program.
Another issue outlined was the lack of review by servicers of trial modifications and HAMP denials. GAO attributed this shortcoming to the Treasury’s lack of specification about how loan files should be sampled for review or what the reviews should include even though servicers were told to establish internal quality assurance procedures to ensure compliance with HAMP requirements.
Servicers were also not advised about which HAMP complaints to track — leaving some tracking only certain types of complaints.
The agency additionally noted that the Treasury hasn’t informed borrowers that they can complain about their HAMP handling or challenge HAMP decisions using the HOPE Hotline.
“Finally, Treasury does not have clear consequences for servicers that do not comply with program requirements, potentially leading to inconsistencies in how instances of noncompliance are handled,” the report stated.
