1). Roughly $36.9  billion in TARP funds have been allocated to these servicers for  modification of non-GSE loans. Of the trial modifications begun, about 0.8 million were in  active trial modifications, fewer than 0.2 million were in active permanent  modifications, and the remaining had been canceled. To date, Treasury has reported limited information on the number of  borrowers who have been denied trial modifications under HAMP. Further Actions Needed by Treasury to Improve HAMP’s Transparency and Accountability

In our July 2009 report on HAMP, we noted that Treasury’s projection that  3 to 4 million borrowers could be offered loan modifications was based on  several uncertain assumptions and might be overly optimistic. We also reported that while HAMP is the cornerstone effort under TARP to  meet the act’s goals of preserving homeownership and protecting home  values, a number of HAMP programs remained largely undefined. According to  Treasury, as of March 1—over a year after the first announcement of  HAMP—details of the second-lien program had not yet been finalized, and  only two servicers had signed an agreement to participate in the program. Finally, we reported in July that Treasury had not finalized a  comprehensive system of internal control for HAMP. In addition, Treasury has not yet finalized  remedies, or penalites, for servicers who are not in compliance with  HAMP guidelines. According to Treasury, these remedies will be complete  in April 2010 and a HAMP compliance committee has been established to  review issues related to servicers’ compliance with program guidelines  and to enforce appropriate remedies. Servicers Reported Facing Challenges in Implementing HAMP, and Program Implementation Was Sometimes Inconsistent

The servicers we interviewed told us that a major challenge they faced in  implementing the HAMP first-lien modification program was the number  of changes to the program. Each major program change often required  servicers to adjust their business practices, update their systems, and  retrain their servicing staff. In addition, although one of HAMP’s goals is to create clear, consistent,  and uniform guidance for loan modifications across the industry, we found  inconsistencies and wide variations among the HAMP servicers that we  contacted with respect to communication with borrowers about HAMP,  the criteria used to evaluate borrowers for imminent default, and the  tracking of HAMP complaints. Treasury has not  developed standards to evaluate servicers’ performance in communicating  with borrowers or penalties for servicers that do not meet Treasury’s  requirements. Among the 10 servicers we contacted, there were 7 different sets of  criteria for determining imminent default. Tracking of HAMP complaints – While Treasury has directed HAMP  servicers to have procedures and systems in place to respond to HAMP  inquiries and complaints and to ensure fair and timely resolutions, some  servicers are not systematically tracking HAMP complaints or their  resolutions. Similarly, several of the  servicers we interviewed indicated that they tracked resolutions only to  certain types of complaints. We have shared our preliminary observations about inconsistencies in  servicers’ implementation of HAMP with Treasury so that these  inconsistencies can be addressed in a timely manner. HAMP Faces Additional Challenges Going Forward

While HAMP has offered some relief to over a million borrowers struggling  to make their mortgage payments, the program may face several additional  challenges going forward. Conversions – Treasury has taken some steps to address the challenge of  converting trial modifications to permanent modifications, but  conversions may continue to be an issue. As a result, it remains difficult to  determine whether this program feature is likely to meet its purpose of  reducing redefaults among high debt-burdened borrowers. Appendix I: Examples of Other Foreclosure Prevention Programs

Borrowers with loans owned or guaranteed by Fannie Mae or  Freddie Mac can refinance into a fixed rate loan at the current  market rate  Eligible borrowers are current on their loans, the owner occupant of  a one- to four-unit property, and have a loan-to-value ratio (LTV) of  less than 125 percent  Between February 2009 and February 2010, over 190,000  borrowers were refinanced through HARP  Borrowers can refinance into an affordable loan insured by FHA  Eligible borrowers are those who, among other factors, have a  monthly mortgage debt-to-income ratio above 31 percent  Servicers provided incentive payments; lenders required to write  down the existing mortgage amount depending on the borrower’s  monthly mortgage debt-to-income ratio and total household debt. According to Treasury, it will work with Fannie Mae and Freddie Mac  to build and refine the internal controls within these financial agents’  operations as new program components are implemented. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

Mortgage loan defaults and foreclosures are key factors behind the current economic downturn. In response, Congress passed and the President signed the Emergency Economic Stabilization Act of 2008, which authorized the Department of the Treasury to establish the Troubled Asset Relief Program (TARP). Under TARP, Treasury created the Home Affordable Modification Program (HAMP) as its cornerstone effort to meet the act's goal of protecting home values and preserving homeownership. This statement focuses on (1) HAMP's program activities to date, (2) status of GAO's July 2009 recommendations to strengthen HAMP's transparency and accountability, (3) preliminary findings from GAO's current work evaluating servicers' implementation of HAMP, and (4) additional challenges HAMP faces going forward. GAO obtained information from 10 HAMP servicers of various sizes that accounted for 71 percent of the TARP funds allocated to participating servicers. GAO reviewed their policies and procedures, interviewed management and quality assurance staff, and observed a sample of phone calls between borrowers and servicers. GAO is also reviewing samples of loan files for borrowers offered and denied HAMP trial modifications. Finally, GAO spoke with officials at Treasury and its financial agents--Fannie Mae and Freddie Mac--and is analyzing program information and data from these sources.

What GAO Found

When Treasury announced the program in March 2009, it estimated that HAMP could help 3 to 4 million borrowers. Through February 2010, including both the portion funded by TARP and the portion funded by Fannie Mae and Freddie Mac: (1) about 1.1 million borrowers had begun trial modifications; of which (2) about 800,000 were in active trial modifications, and (3) fewer than 200,000 permanent modifications had been made. As of early March 2010, the TARP-funded portion of the program had 113 participating servicers, and about $36.9 billion of the $50 billion in TARP funds for HAMP had been allocated to these servicers. A typical TARP-funded modification could result in a monthly mortgage payment reduction of about $520. Treasury has taken some steps, but has not fully addressed concerns that GAO raised in its July 2009 report on HAMP's transparency and accountability. For example, Treasury has yet to finalize some key components of its internal controls over the first-lien program, including establishing metrics and benchmarks for servicers' performance. In addition, Treasury has not finalized remedial actions, or penalties, for servicers not in compliance with HAMP guidelines. According to Treasury, these remedies will be completed in April 2010. Lastly, GAO reported that Treasury's projection that 3 to 4 million borrowers could be helped by HAMP was based on several uncertain assumptions and might be overly optimistic, and GAO recommended that Treasury update this estimate, but the Department has not yet done so. Preliminary results of GAO's ongoing work show inconsistencies in some aspects of program implementation. Although one of HAMP's goals was to ensure that mortgage modifications were standardized, Treasury has not issued specific guidelines for all program areas, allowing inconsistencies in how servicers treat borrowers. For example, the 10 servicers GAO contacted had 7 different sets of criteria for determining whether borrowers who were not yet 60 days delinquent qualified for HAMP. Also, some servicers were not systematically tracking all HAMP complaints and, in some cases, tracked only resolutions to certain types of complaints, such as written complaints addressed to the company president. GAO also found that servicers faced challenges implementing HAMP because of the number of changes to the program, some of which have required servicers to readjust their business practices, update their systems, and retrain staff. HAMP is likely to face additional challenges going forward, including successfully converting trial modifications, addressing the needs of borrowers who have substantial negative equity, limiting redefaults for those who receive modifications, and achieving program stability. While GAO's study is not yet completed, GAO shared preliminary findings with Treasury to allow it to address these issues in a timely manner.