According to a quarterly report to Congress from a special inspector general for Troubled Asset Relief Programs (TARP) Home Affordable Modification Program (HAMP), mortgage servicers reject 72% of struggling home owners reaching out for help to create more affordable monthly mortgage payments to keep their homes.
Christy Romero, special inspector general for TARP said, “There is a massive lost opportunity for an emergency program designed to help homeowners through the crisis if only 20% to 30% of families seeking help from HAMP actually get into HAMP.”
“All cannot be right,” Romero said.
Statistics in the report for bank rejections for HAMP: Citigroup Inc. (C - NYSE) rejected 87% of applications, JPMorgan Chase & Co. (JPM - NYSE) has rejected 84% of applications, Bank of America Corporation (BAC - NYSE) has rejected 80% and Ocwen Financial Corp. (OCN - NYSE) has rejected 70%.
Citi failed to meet benchmarks in most reviews and “has had one of the worst records of non-compliance” with Treasury’s guidance for reviewing applications, per the report.
“Citi is the only large active servicer that has ever been rated as needing ‘substantial improvement’ with respect to denial determinations,” the report said.
The report noted that officials found that servicers have “wrongfully denied” borrowers from entering HAMP. The U.S. Treasury Department’s requirements for servicers to explain why borrowers were rejected “do not give a clear picture of why homeowners were denied,” per the special inspectors report.
“Persistent problems and errors in the application and income calculation process (servicers calculate a homeowner’s income) have historically plagued homeowners seeking HAMP assistance, and continue to do so,” the report said.
“It is Treasury’s responsibility to ensure that mortgage servicers participating in HAMP treat homeowners fairly and do not wrongfully deny homeowners who should have gotten into the program,” the report said. “Top HAMP servicers are still mistreating homeowners by not following HAMP rules designed to protect homeowners.”
Treasury’s chief for homeownership preservation, Mark McArdle said the department has “robust compliance procedures” to see whether servicers are following program requirements.
McArdle said, “We have seen significant improvement in servicers’ compliance with program guidelines, including proper evaluation and denial decisions.”
Treasury should do more to reduce high denial rates for HAMP, the report said.
The report said, “Despite these extensive and continuing problems - documented in many cases by Treasury’s own servicer assessments — Treasury has never permanently withheld TARP incentive payments from any servicer.”
Contributed by Millennium Traders
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