The SIGTARP’s latest report to Congress issued July 29, 2015 chastises Treasury for its failure to question and punish loan servicers for their dismal HAMP numbers. Servicers who participate in HAMP are paid incentives, and are “required to offer HAMP modifications to all eligible homeowners.” Servicers “must follow the HAMP rules” and “Treasury has an oversight responsibility to ensure that servicers follow Treasury’s HAMP Rules.” But they do not.
A staggering 7 out of 10 homeowners have been rejected for HAMP modifications. Mortgage servicers have denied four million homeowner applications for HAMP assistance. “JP Morgan Chase and Bank of America, historically the two largest HAMP servicers, and Citi each turned down 80% or more of homeowners who applied for HAMP; Ocwen, the current largest HAMP servicer, turned down more than 70% of homeowners who applied for HAMP.” See SIGTARP Report, Section 3. And this is only after Treasury began requiring servicers to report some of their metrics post-2009.
“In Treasury’s first [second look] June 2011 servicer assessment, 5 of the top 10 servicers (Bank of America, Cit, JPMorgan Chase, Ocwen and OneWest Bank) ranked poorly in Treasury’s second look.” Id.
Treasury continues to find servicers wrongfully denying homeowners. “In two quarters in 2014 Treasury found second look problems at Ocwen, Wells Fargo, and Citi.” In addition, Treasury “found problems recently in the fourth quarter of 2014 at Select Portfolio Servicing, and at Nationstar Mortgage, LLC in the first quarter of 2015.” Treasury’s findings “make clear that even after more than five years of HAMP, top HAMP servicers are still mistreating homeowners by not following HAMP Rules designed to protect homeowners.” Id. (emphasis added)
Predictably, the self-reporting loan servicers lay the blame on homeowners but SIGTARP easily dispels the pretext.
The main three reasons self-reported to Treasury by the loan servicers are (1) failure to send documentation; (2) failure to accept trial payment plans or loan modifications; or (3) eligibility failure based on income. But all three of these reasons can also be caused by servicer misconduct, as has been widely reported.
As noted by SIGTARP, the Consumer Financial Protection Bureau, and Treasury’s own limited investigations, as well as homeowner-filed complaints, “Persistent problems and errors in the application and income calculation process have hisorically plagued homeowners seeking HAMP assistance, and continue to do so. As a result, eligible homeowners may have been, and may continue to be, denied a chance to get into HAMP through no fault of their own.”
As for the “failure of documentation,” SIGTARP reports that the “incomplete documentation” is often attritubutable to loan servicers losing paperwork and requiring resubmission, servicer delays, and servicers ignoring requests for clarification or assistance. SIGTARP cites the “egregious examples” of the SunTrust Mortgage prosecution by the Department of Justice in July 2014 and of the CFPB findings that “Ocwen, the largest HAMP servicer, provided false and misleading information to homeowners about the status of their loss modification review, failed to respond to homeowner requests for loan modification information and assistance, and failed to honor modifications in process of loans obtained from other servicers.”
SIGTARP also questions the servicer claims of homeowner failures to accept modified loans, pointing out the role of significant servicer backlogs such as Citibank’s 14-month backlog, and Bank of America and Select Portfolio Services, LLC’s signficant application backlogs of 5 months each.
SIGTARP urges Treasury to see the HAMP denials through the “known history of servicer misconduct,” to look beyond the servicer reporting, and “hold servicers accountable for extensive delays, lost paperwork, and errors in calculating key eligibility factors such as income, rather than let those and other servicer problems seep into the servicers’ decisions on homeowners’ HAMP applications.”