Treasury has entered into agreements with Fannie Mae and  Freddie Mac to act as its financial agents for HAMP. Treasury has not  established how many borrowers are likely to be helped with this feature. Servicers’ Solicitation and Evaluation of Borrowers for HAMP Have Been Inconsistent, and More Treasury Action Is Immediately Needed To Ensure Equitable Treatment of Borrowers with Similar Circumstances

Although one of Treasury’s stated goals for HAMP is to standardize the  loan modification process across the servicing industry, we identified  several areas of inconsistencies in how servicers treat borrowers under  HAMP. These areas of inconsistency could lead to inequitable treatment of  similarly situated borrowers, and borrowers in similar circumstances  could have different outcomes. First, we found that servicers differed in  when and how they solicited borrowers for HAMP, and numerous  borrowers had complained that they did not receive timely responses to  their HAMP applications or had difficulty getting information from their  servicers about the program. In March 2010, more than a year after the program was first announced,  Treasury issued additional guidelines governing solicitation efforts. According to HAMP guidelines, borrowers who are current or less than 60  days delinquent on their mortgage payments but in imminent danger of  defaulting may be eligible for HAMP modifications, and Treasury has  emphasized the importance of reaching borrowers before they are  delinquent. As a result of the lack of specific guidance, we found seven different sets  of criteria for determining imminent default among the 10 servicers we  contacted. While the HOPE Hotline escalation process is the primary means for  borrowers to raise concerns about their servicer’s handling of their HAMP  applications and potentially incorrect denials, Treasury has not explicitly  informed borrowers that the hotline can be used for these purposes. The  Emergency Economic Stabilization Act called for Treasury to, among  other things, preserve homeownership and protect home values, and  HAMP continues to be Treasury’s cornerstone effort for doing this. However, because Treasury has not specified  requirements on the types of complaints that servicers should track, some  servicers are tracking only certain types of complaints such as those  addressed to a company executive. Recommendations for Executive Action

As part of its efforts to continue improving the transparency and  accountability of HAMP, we recommend that the Secretary of the Treasury  take actions to expeditiously:    establish clear and specific criteria for determining whether a borrower is  in imminent default to ensure greater consistency across servicers;   develop additional guidance for servicers on their quality assurance  programs for HAMP, including greater specificity on how to categorize  loans for sampling and what servicers should be evaluating in their  reviews;   specify which complaints servicers should track to ensure consistency and  to facilitate program oversight and compliance;   more clearly inform borrowers that the HOPE Hotline may also be used if  they are having difficulty with their HAMP application or servicer or feel  that they have been incorrectly denied HAMP, monitor the effectiveness of  the HOPE Hotline as an escalation process for handling borrower  concerns about potentially incorrect HAMP denials, and develop an  improved escalation mechanism if the HOPE Hotline is not sufficiently  effective; finalize and issue consequences for servicer noncompliance with HAMP  requirements as soon as possible; report activity under the principal reduction program, including the extent  to which servicers determined that principal reduction was beneficial to  investors but did not offer it, to ensure transparency in the implementation  of this program feature across servicers; finalize and implement benchmarks for performance measures under the  first-lien modification program, as well as develop measures and  benchmarks for the recently announced HAMP-funded homeowner  assistance programs; and implement a prudent design for remaining HAMP-funded programs. Appendix I: Scope and Methodology

To examine servicers’ treatment of borrowers under the Home Affordable  Modification Program (HAMP), between November 2009 and March 2010,  we spoke with and obtained information from 10 HAMP servicers of  various sizes that collectively represented 71 percent of the Troubled  Asset Relief Program (TARP) funds allocated to participating servicers,  visiting 6 of them.
Why GAO Did This Study

Congress created the Troubled Asset Relief Program (TARP) to, among other things, preserve homeownership and protect home values. In March 2009, the U.S. Department of the Treasury (Treasury) announced the Home Affordable Modification Program (HAMP) as its cornerstone effort to achieve these goals. This report examines (1) the extent to which HAMP servicers have treated borrowers consistently and (2) the actions that Treasury has taken to address the challenges of trial modification conversions, negative equity, redefaults, and program stability. GAO obtained information from 10 servicers that account for 71 percent of HAMP funds and spoke with Treasury, Fannie Mae, and Freddie Mac officials.

What GAO Found

While one of Treasury's stated goals for HAMP was to standardize the loan modification process across the servicing industry, GAO found inconsistencies in how servicers were treating borrowers under HAMP that could lead to inequitable treatment of similarly situated borrowers. First, because Treasury did not issue guidelines for soliciting borrowers for HAMP until a year after announcing the program, servicers notified borrowers about HAMP anywhere from 31 days to more than 60 days after a delinquency. Many borrowers also complained that they did not receive timely responses to their HAMP applications and had difficulty obtaining information about the program. Treasury has recently issued guidelines on borrower communications, and plans to monitor compliance with the guidelines. Second, 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. As a result, the 10 servicers that GAO contacted reported 7 different sets of criteria for determining imminent default. Third, while Treasury required servicers to have internal quality assurance procedures to ensure compliance with HAMP requirements, Treasury did not specify how loan files should be sampled for review or what the reviews should contain. As a result, some servicers did not review trial modifications or HAMP denials as part of their quality assurance procedures. Fourth, Treasury has not specified which HAMP complaints should be tracked, and several servicers track only certain types of complaints. Fifth, Treasury has not clearly informed borrowers that the HOPE Hotline can be used to raise concerns about servicers' handling of HAMP loan modifications and to challenge potentially incorrect denials, likely limiting the number of borrowers who have used the hotline for these purposes. 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.