Banks and the U.S. Treasury Point Fingers Over HAMP

by 28 Aug 2012

(TheNicheReport) -- According to the United States Treasury Department, mortgage lenders and servicing entities have been dragging their feet with regard to loan modifications. This has in turn caused many Americans to fall into foreclosure, despite the availability of relief provided by the Home Affordable Modification Program (HAMP). The admonishment by the Treasury has prompted some banks to point their fingers right back at the government over the ill-conceived HAMP.

The Failure of HAMP

The battle against foreclosures in the U.S. began with the Emergency Economic Stabilization Act of 2008, which was signed by former President George W. Bush in haste shortly after the collapse of the credit markets on Wall Street. The Obama administration has been a strong supporter of HAMP and other programs designed to curb the avalanche of foreclosures.

HAMP was designed to help up to four million homeowners in the U.S. by providing banks with funds, guarantees and guidelines to reach out to struggling borrowers. Since HAMP was enacted, only about a million mortgages have been modified, and in that time many families have lost their homes. 

The Treasury believes that the banks have been slow to implement HAMP and quick to process foreclosures. The proof in these claims can be traced to the events that resulted in the National Foreclosure Settlement Agreement of 2012, and now many banks are judicially mandated to offer relief to their mortgage borrowers. 

The Banks Strike Back 

HAMP can be seen as a monumental task for the mortgage lenders and servicing companies to carry out, but the Treasury maintains that they have the potential to augment their operations and meet the challenge presented by HAMP. For their part, bank executives have sharply criticized HAMP as being too complex, capricious and ineffective. 

The banks also point to the harsh economic conditions as being too problematic for HAMP and other loan modification programs to implement, namely factors such as unemployment, debt ratios, lack of reserves, consumer credit delinquencies, etc. 

What Borrowers Can Do

The finger-pointing between the Treasury and the banks does not benefit homeowners at all, but the fact remains that loan modifications are still the best option for families to avoid foreclosures and stay in their homes. Under the provisions of HAMP, the banks are supposed to reach out to their borrowers. If banks are overwhelmed and fail to contact borrowers before it is too late, homeowners should seek assistance. 

HAMP is not the only option available to borrowers. The U.S. Department of Housing and Urban Development (HUD) offers borrowers counseling with regard to HAMP and other options that can help them stay in their homes.


  • by William Matz | 9/2/2012 1:31:22 AM

    The recent revelation by former TARP Inspector General Neil Barofsky that Treas. Secy Geithner privately admitted that HAMP was about delaying foreclosures to protect the banks, not about helping homeowners probably explains a lot of the lack of recent success. In 2008, Sheila Bair estimated that FDIC could successfully modify 75% of the delinquent mortgages in FDIC bank takeovers. Yet HAMP has done less than 20%, which tends to confirm Geithner's comments.

    The bank excuses are transparently weak. 2 complicated? If banks hired other than partly trained monkeys, they could do the job. There were lots of unemployed mortgage folks who would have needed little training. After all, running the NPV calculation takes all of five minutes, and gathering the necessary input data should take no longer than 1-2 weeks. Yet all too often borrowers languish in mod limbo for 6, 12, 18 months or more, often learning then that the calculations are still not right.

    We might have had more sympathy for the banks if it was just a problem with the HAMP workload. But the robosigning scandal revealed that the banks had little regard for foreclosure law compliance. Recall that the San Francisco Recorder's 2012 study found serious errors in 84% of foreclosures. So it seems that the rush to foreclosure is at least partly motivated by the banks' desire to cover up as much old "dirt" as possible.


Should CFPB have more supervision over credit agencies?