“We also report that 70% of homeowners who applied for HAMP got turned down, with JP Morgan Chase, Bank of America, and Citi, each turning down 80% or more and Ocwen denying more than 70% of the homeowners.”
SIGTARP for the Troubled Asset Relief Program Advancing Economic Stability Through Transparency, Coordinated Oversight, and Robust Enforcement
Quarterly Report to Congress
July 29, 2015
At the start of TARP, our nation was in a foreclosure crisis. More than two million
homeowners had foreclosures commenced against them in 2008.1 TARP is not
supposed to be just a bailout of the largest financial firms, but was always supposed
to include a bailout of homeowners at risk of foreclosure. Congress rejected
Treasury’s initial proposal that TARP just be a bailout of some of the largest
financial firms. Instead, in recognition of the foreclosure crisis, Congress made
foreclosure mitigation an express part of the law authorizing TARP. Among other
things, preserving homeownership is an explicit purpose of that law, and “the need
to help families keep their homes” is one of the considerations that the Secretary of
Treasury is required by law to consider in exercising his authorities under TARP.2
As SIGTARP reported in its March 25, 2010, audit report,i a working group of
officials from Treasury, the Department of Housing and Urban Development, and
the White House developed the outlines of a mortgage modification program that
was intended to “have a scale that can have a real impact on turning the housing
problems around in this country.”
In February 2009, the Administration announced its signature TARP housing
program known as the Home Affordable Modification Program (“HAMP”) to
“enable as many as 3 to 4 million at-risk homeowners to modify the terms of their
mortgage to avoid foreclosure.”3
Treasury designed HAMP to encourage mortgage servicers, on a voluntary
basis, to modify eligible mortgages so that the monthly payments of homeowners
who are in default or at imminent risk of default will be reduced to affordable,
sustainable levels. To encourage participation, Treasury pays incentives using
TARP funds. HAMP was initially a $75 billion program: $50 billion to be funded
by TARP funds for Treasury’s part of HAMP (to modify mortgages not owned by
the Government–sponsored enterprises Fannie Mae and Freddie Mac), plus $25
billion for GSE-owned mortgages.4 Although this allocation was reduced to $29.8,
approximately $18.5 billion in TARP funds remains unspent and available for
HAMP as of June 30, 2015.5
Although participation in HAMP is voluntary, servicers who agree to participate
are required to offer HAMP modifications to all eligible homeowners. The actual
execution of HAMP lies in large part with participating mortgage servicers, whose
employees are responsible for reviewing homeowner HAMP applications and
deciding whether a homeowner gets into HAMP or not. A servicer must follow the
HAMP rules in making its decision, and Treasury has an oversight responsibility to
ensure that servicers follow Treasury’s HAMP rules.ii
[…]
