Banks Are Not Modifying Mortgages Under HAMP

[dropcap]W[/dropcap]hen the banks were bailed out by the federal government under the Troubled Asset Relief Program (TARP), the banks were required to offer loan modifications under Homeowner Assistance Modification Program (HAMP). The Special Inspector General for TARP (SIGTARP) recently renewed its criticism of the high denial rate in HAMP. Paperwork backlogs are one root cause of the problem, according to the watchdog, along with from insufficient Treasury Department oversight and servicer calculation errors.

Data from SIGTARP and Treasury show denials on average fell sharply to 69% in 2013 after peaking in 2012 at 82%. The average as of April was 63%. Other statistics show cumulative HAMP denials have climbed significantly over time, increasing by 1 million since 2012. The top reasons applications get denied are incomplete applications and insufficient income, according to SIGTARP.

According to SIGTARP, the top servicers it singles out for criticism had higher-than-average denial rates of 70% to 80% — notably Citi, Bank of America, JPMorgan Chase and nonbank Ocwen.

The HAMP application pipeline is generally paper-intensive and can be challenging for consumers and servicers alike, but has improved over time, according to Karl Falk, chief executive of consumer-facing mortgage default servicing technology provider ShortSave. When asked why HAMP denial rates are so high, what the cause of this might be and who might be responsible, he said, “If you want my opinion, it’s the process, but it’s hard to point any fingers in that.”

But top servicers said that that they felt their success in providing foreclosure alternatives should not be measured by HAMP approvals alone. Although about two-thirds of reviewed applications cannot qualify for a modification under the explicit guidelines of the government programs, servicers are able to help many consumers avoid foreclosure through other avenues, according to Bank of America.

The bottom line is that the banks were bailed out by the taxpayer and in return the banks were supposed to help distressed homeowners through HAMP. In fact, under HAMP, the government gives incentives to approve modifications by paying the banks for each approval. The banks have not fulfilled their obligation and used excuses such as paperwork or put the blame on the borrowers. That is why it is necessary to have an attorney that is on the borrower’s side. Even if HAMP is not available, a knowledgeable lawyer will look at other modification programs that are available.


Copyright © Mortgage Help Info Center