Treasury has taken several steps to increase participation,  such as extending the program deadline, expanding program eligibility  criteria through HAMP Tier 2, and providing funding to counseling  agencies to assist homeowners with completion and submission of  application packages (intake project). However, as shown in figure 1, participation in HAMP, as measured by  trial and permanent modifications started each month, peaked in early  2010, generally declined in 2011, and has remained relatively steady  through November 2013. Originally the project was scheduled to end in December of 2013, but  Treasury extended the project through September of 2014. Initially, Treasury allocated $18.3 million in TARP funds for the MHA  Outreach and Borrower Intake Project. Treasury Has Not Assessed Servicers’ Internal Controls or Borrower Data Related to Fair Lending

Treasury requires MHA servicers to develop an internal control program  to monitor compliance with fair lending laws. Our analysis of HAMP loan-level data, which focused on four large MHA  servicers, identified some statistically significant differences within these  servicers’ portfolios for certain protected groups in denials and  cancellations of trial modifications and in the potential for redefault of  permanent modifications, which might indicate a need for further review. Treasury Requires Servicers to Develop and Maintain Systems to Monitor Compliance with Fair Lending Laws

The MHA Servicer Participation Agreement and MHA Handbook require  that servicers have an internal control program to monitor compliance  with relevant consumer protection laws, including ECOA and the Fair  Housing Act, and that the servicers review the effectiveness of their  internal control program quarterly. By evaluating the extent to which servicers have  developed and maintained internal controls to monitor compliance with  fair lending laws, Treasury could gain additional assurance that servicers  are implementing the MHA program in compliance with fair lending laws. However, the MHA program provides direct outlays of taxpayer dollars to  servicers and is intended to provide benefits to eligible borrowers. As  such, it is important that Treasury take appropriate steps to help ensure  that all eligible borrowers, including those whose primary language is not  English, have access to the MHA program benefits. Finally, despite an executive order issued in 2000 to improve access to  federal programs for people with limited English proficiency and a 2011  memorandum by the Attorney General renewing the federal government’s  commitment to that executive order, Treasury officials have only recently  developed a written plan that covers the Making Home Affordable  programs as of November 2013. Housing  counselors and housing advocacy groups that work with LEP borrowers  have questioned the ability of servicers to assist LEP borrowers. Recommendations for Executive Action

As part of Treasury’s efforts to continue improving the transparency and  accountability of MHA, we recommend that the Secretary of the Treasury  take actions to  require that its compliance agent take steps to assess the extent to  which servicers have established internal control programs that  effectively monitor compliance with fair lending laws that apply to  MHA programs;  issue clarifying guidance to servicers on providing effective  relationship management to limited English proficiency borrowers; and ensure that the compliance agent assess servicers’ compliance with  LEP relationship management guidance, once established. In its comment letter, Treasury noted that it was still considering our  findings and recommendations, and agreed that it should continue to  strengthen its program in order to help as many homeowners as possible  avoid foreclosure. We  clarified the text to acknowledge the actions taken to raise awareness and  outreach to LEP borrowers, but that Treasury has not provided guidance  to servicers on its requirement to have a relationship management policy  for their LEP borrowers or assessed the effectiveness of its own or its  servicers’ LEP practices. Appendix I: Objectives, Scope, and Methodology

The objectives in this report were to examine (1) the status of Making  Home Affordable (MHA) and steps Treasury is taking to increase  participation in the program, (2) Treasury’s oversight of the MHA-related  fair lending internal controls of participating servicers, and (3) Treasury’s  and MHA servicers’ policies and practices for ensuring that borrowers  with limited English proficiency (LEP) have equal access to the program. These checks were consistent with the reported key findings of  differences between the fair lending and other selected populations and  their comparison populations. Troubled Asset Relief Program: Home Affordable Modification  Program Continues to Face Implementation Challenges.
Why GAO Did This Study

Treasury introduced MHA in February 2009 and indicated that up to $50 billion would be used to help 3 to 4 million struggling homeowners avoid potential foreclosure. Since then, questions have been raised about participation rates and the overall success of the program. The Emergency Economic Stabilization Act of 2008 requires GAO to report every 60 days on the Troubled Asset Relief Program (TARP) activities.
This 60-day report examines (1) the status of MHA and steps Treasury has taken to increase program participation, (2) Treasury's oversight of the MHA-related fair lending internal controls of servicers, and (3) Treasury's and MHA servicers' policies and practices for ensuring that LEP borrowers have equal access to the program. For this work, GAO reviewed program documentation, analyzed HAMP loan-level data, and interviewed officials from Treasury, fair lending supervisory institutions, and the five largest MHA servicers.

What GAO Found

Participation rates in the Home Affordable Modification Program (HAMP), a key component of the Making Home Affordable program (MHA), peaked in early 2010, generally declined during 2011, and remained relatively steady from 2012 through November 2013. As of November 2013, about 1.3 million borrowers had entered into a HAMP permanent modification. Treasury has made several efforts to increase participation, such as extending the program deadline through December 2015, expanding program eligibility requirements, and initiating the MHA Outreach and Borrower Intake Project. This project provides funding to counseling agencies to help borrowers complete and submit MHA application packages. The project was scheduled to end in December 2013 but was recently extended through September 2014.
Treasury requires MHA servicers to develop internal control programs that monitor compliance with fair lending laws (the Fair Housing Act and Equal Credit Opportunity Act) but has not assessed the extent to which servicers are meeting this requirement. Treasury noted that it shares HAMP loan-level data with the federal agencies responsible for fair lending enforcement. GAO's analysis of HAMP loan-level data for four large MHA servicers identified some statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for redefault between populations protected by fair lending laws and other populations. Such analysis by itself cannot account for all factors that could explain these differences. Reviewing the fair lending internal controls of MHA servicers could give Treasury additional assurance that servicers are complying with fair lending laws.
Despite an Executive Order issued in 2000 and a 2011 Attorney General's memorandum regarding improving access to federal programs for limited English proficiency (LEP) persons, Treasury only recently developed LEP-related written guidelines and procedures for the MHA programs. Treasury has taken measures to reach out to these borrowers and requires servicers to have a policy for “effective relationship management” with LEP borrowers. However, Treasury has not provided any clarifying guidance to servicers on what such a policy should contain or assessed servicer compliance with this requirement. Housing counselors have noted that LEP borrowers continue to encounter language-related barriers in obtaining access to MHA program benefits. Without a comprehensive strategy that includes guidance for servicers on engaging with LEP borrowers and monitoring of servicers, Treasury cannot ensure that all potential MHA participants have equal access to program benefits. Because the MHA program provides direct outlays of taxpayer dollars, it is important that Treasury take appropriate steps to ensure that all eligible borrowers, including those whose primary language is not English, have access to MHA program benefits.

What GAO Recommends

Treasury should (1) assess the extent to which servicers have established internal control programs to monitor compliance with fair lending laws, (2) issue guidance to servicers on working effectively with LEP borrowers and (3) monitor servicers' compliance with the guidance. Treasury noted that it was considering GAO's recommendations and agreed that it should continue to strengthen its program. Treasury also provided technical comments that were incorporated into the report as appropriate.