This story appeared in Bank Digest.
The GAO has issued a report detailing the results of a survey on borrowers' experiences with the Home Affordable Modification Program. Roughly 76 percent of the 394 housing counselors surveyed characterized borrowers' overall experiences with HAMP--from the time they first inquired to the point at which they received a decision--as “negative” or “very negative.” By contrast, less than 9 percent of counselors described borrowers' overall experience with HAMP as “positive” or “very positive.” Roughly 40 percent of the counselors that provided written comments on their experiences with HAMP said that they had experienced difficulties working with servicers, while 39 percent said paperwork had been lost or needed to be resubmitted. According to the Treasury's HAMP guidelines, servicers are required to notify borrowers that they have been approved for or denied a trial modification within 30 days of receiving a complete HAMP application package. However, over 86 percent of counselors said that it typically took four months or more for borrowers to receive a decision about a HAMP trial modification from the time the borrower requested it. Nearly 46 percent said that the process typically took seven months or more. Roughly 60 percent of the counselors said the frequency for denial was “often” or “sometimes.” Of these, over half of the counselors said that a substantial number of these denials were related to servicers' miscalculations of borrowers' gross monthly income.
HAMP guidelines require that borrowers successfully complete a 90-day trial period, during which they make all the required payments on time before they can become eligible for conversion to a permanent modification. However, as of Sept. 30, 2010, 76,500 active trials (44 percent of all active trials) had been in place for six months or more. Nearly all of the counselors we surveyed said trial periods typically lasted longer than three months, and 50 percent said that trial periods typically lasted seven months or more.
The Treasury has reported that one of the most common reasons for canceling trial modifications is insufficient documentation. However, the Treasury indicated that it was unable to determine whether borrowers had not submitted the required documentation or servicers had lost or misplaced it. According to 96 percent of the counselors the GAO surveyed, “servicer continues to request borrower's updated financial documentation” was one of the three principal challenges borrowers faced in providing the required documentation. In addition, over 78 percent of the counselors ranked “servicer lost the borrower's documentation” as one of the three highest challenges.
According to the Treasury, roughly 21,000 complaints had been escalated to the HAMP Solution Center as of February 2011, with roughly a quarter of these submitted by housing counselors. According to Treasury officials, of these escalated complaints, roughly 17,000 had been resolved, with 32 percent of the resolved cases resulting in a permanent HAMP modification, consideration for a HAMP trial modification or the initiation of a trial modification. To improve the rate of successful modifications, counselors most often said that the Treasury should enforce sanctions on servicers that did not comply with HAMP guidelines. The Treasury told the GAO that it had asked servicers to rectify issues associated with noncompliance and in some cases had withheld financial incentives but had not yet finalized consequences for noncompliance. Counselors also cited the need for the Treasury to require servicers to make more timely decisions and to ensure that servicers worked with borrowers who were not yet 60 days delinquent. Borrowers used non-HAMP proprietary modifications for greater flexibility, fewer documentation requirements, fewer eligibility requirements and more flexibility, according to the report.