Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously implement a prudent design for remaining HAMP-funded programs.

Agency Affected: Department of the Treasury

Status: Open

Comments: Our March 2011 report identified areas where Treasury has made changes to the original design and requirements of the more newly announced HAMP-funded programs (i.e., Second-lien modification, Home Affordable Foreclosure Alternatives, and Principal Reduction Alternative programs) and made recommendations to continue improving the transparency and accountability of Making Home Affordable (MHA) related to these newer programs. Those recommendations remain open as of August 30, 2011.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously 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.

Agency Affected: Department of the Treasury

Status: Open

Comments: Starting with Making Home Affordable (MHA) program performance report though April 2011, Treasury has begun publicly reporting on the performance of the top 10 participating servicers in three categories?identifying and contacting homeowners, homeowner evaluation and assistance, and program management, reporting, and governance. Treasury has established benchmarks for each of these three categories consisting of both quantitative and qualitative (incorporating the results of its compliance reviews) criteria. Based upon the results of its servicer assessments, Treasury began withholding financial incentives owed to three servicers that it identified as requiring substantial improvement in meeting the requirements of the MHA program. However, the performance metrics are based on the HAMP first-line modification program and do not contain measures or benchmarks for the more recently announced TARP-funded homeowner assistance programs.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously 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.

Agency Affected: Department of the Treasury

Status: Open

Comments: Starting with its monthly Making Home Affordable (MHA) performance report for activity through May 2011, Treasury has begun reporting summary data on the principal reduction alternative (PRA) program. Specifically, Treasury provides information on PRA trial modification activity (started, cumulative, and permanent) as well as the median principal amount reduced for active permanent modifications. However, no data is report on the extent to which servicers determined that principal reduction was beneficial to the investor but was not offered.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously finalize and issue consequences for servicer noncompliance with HAMP requirements as soon as possible.

Agency Affected: Department of the Treasury

Status: Closed - Implemented

Comments: Starting with program activity through April 2011, Treasury has begun publishing quarterly assessments of the performance of the 10 largest participating servicers in meeting the requirements for implementing MHA programs. Treasury uses the results of compliance reviews conducted by Freddie Mac in its capacity as the compliance agent for MHA and quantitative data on performance on individual loan files maintained by Fannie Mae in its capacity as the MHA program administrator. Treasury reviews the compliance data and ratings, the program results metrics, and other relevant factors affecting servicer performance in determining whether a servicer needs substantial improvement, moderate improvement, or minor improvement to its performance under MHA guidelines. For servicers in need of substantial improvement, Treasury will, absent extenuating circumstances, withhold financial incentives owed to those servicers until they make certain identified improvements. In certain cases, particularly where there is a failure to correct identified problems within a reasonable time, Treasury may also permanently reduce the financial incentives. Servicers in need of moderate improvement will be subject to withholding in the future if they fail to make certain identified improvements. All withholdings apply only to incentives owed to servicers for their participation in MHA; these withholdings do not apply to incentives paid to servicers for the benefit of homeowners or investorsBased on performance through the first quarter of 2011, Treasury has imposed monetary sanctions?withholding of financial incentives?on 3 servicers that were determine to need substantially improvement in their performance with respect to meeting MHA program requirements.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously 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.

Agency Affected: Department of the Treasury

Status: Open

Comments: According to Treasury, it has promoted the HOPE Hotline through a number of channels to the public as a resource for borrowers with questions and problems about their HAMP application, trial period plan or permanent modification. For example, the hotline number is published on Treasury's Making Home Affordable (MHA) Web site, featured in media campaigns, and used in talking points for borrower/counselor events and media interviews. Treasury's MHA program guidelines require that servicers include in their notices to borrowers regarding the status of their request for a HAMP loan modification the telephone number for the HOPE Hotline with an explanation that the borrower can seek assistance at no charge from HUD-approved housing counselors and can request assistance in understanding the Borrower Notice by asking for MHA Help. In MHA program guidance issued on November 3, 2010, Treasury standardized the process required for handling certain borrower inquiries and disputes related to the MHA Program. The guidance also outlines the servicer's obligations for tracking borrower inquiries and disputes and conducting reviews in a timely fashion, whether received directly from a borrower or indirectly from the HOPE Hotline, through MHA Help, or the HAMP Solution Center. However, Treasury has not yet indicated how it will monitor the effectiveness of the HOPE hotline as a escalation process for handling borrower complaints about potentially incorrect HAMP denials.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously specify which complaints servicers should track to ensure consistency and to facilitate program oversight and compliance.

Agency Affected: Department of the Treasury

Status: Closed - Implemented

Comments: In November 2010, Treasury issued guidance to servicers on implementation requirements for the Making Home Affordable (MHA) program, which included HAMP. The guidance requires that servicers, among other things, establish a borrower support center and track certain types of complaints related to the program. Specifically, it required servicers to report the status of referred complaints escalated to servicers by the MHA Help and HAMP Solution Center, Escalated cases include, but are not limited to allegations that the servicer did not properly assess a borrower for a MHA program, inquiries regarding inappropriate program denials, and the initiation or continuance of foreclosure action in violation of program guidelines. Further, the guidance establishes a timeline for the resolution of the complaints (30 calendar days) and requires servicers to provide Treasury with data on these escalated complaints on a weekly basis.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously 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.

Agency Affected: Department of the Treasury

Status: Closed - Implemented

Comments: In February 2011, Treasury issued program guidelines that provided additional clarification regarding a servicer's responsibily to develop and execute an effective internal quality assurance program covering its MHA activities. These guidelines included specific requirements on the scope and methodology of the quality assurance reviews, including requiring either statistically valid sampling with a 95 percent confidence level, or a stratified sample of loans. In either case, the sampling methodology must be documented and must include both random and risk-based selection criteria, as appropriate. The guidance also requires that servicers include areas such as solicitation and outreach, determination of borrower eligibility, and documentation of investor-specific requirements.

Recommendation: As part of its efforts to continue improving the transparency and accountability of HAMP, the Secretary of the Treasury should expeditiously establish clear and specific criteria for determining whether a borrower is in imminent default to ensure greater consistency across servicers.

Agency Affected: Department of the Treasury

Status: Closed - Not Implemented

Comments: Treasury comments in its August 23, 2010 letter in responding to the recommendations in our report indicated that it did not plan to establish specific criteria for servicers to follow in determining whether a borrower is in imminent danger of default. Specifically, Treasury stated that servicers and investors were in the best position to judge when the imminent default classification was appropriate. In addition, in response to the report on the status of TARP in January 2011, it indicated that this recommendation should be closed as not implemented.