Gauging the success of the Home Affordable Modification Program (HAMP) by the number of trial modification offers is insufficient, according to the Office of the Special Inspector General for TARP (SIGTARP).
While debate has stirred recently about whether the Obama administration's long-stated goal of HAMP reaching up to 4 million borrowers was a reference to trial modification offers or permanent modifications, a new SIGTARP report cites an unnamed Treasury official's estimate that the program will result in between 1.5 million and 2 million permanent modifications.
‘Measuring trial modification offers, or even actual trial modifications, for that matter, is simply not particularly meaningful," SIGTARP says in its report. "The goal that should be developed and tracked is how many people are helped to avoid foreclosure and stay in their homes through permanent modifications.
The Treasury Department came under fire from congressional Republicans two weeks ago, when, in its release of February's HAMP numbers, the department stated it was more than a third of the way toward reaching its goal of offering trial modifications to between 3 million and 4 million borrowers by 2012. The Republicans accused the Treasury of distorting HAMP's success, saying the program's true goal, as originally stated by the Treasury, was 3 million to 4 million permanent modifications.
The Treasury's assistant secretary for financial stability, Herbert Allison, admitted in his response to SIGTARP that there has been confusion surrounding HAMP's expected reach, adding that the Treasury officials will be more precise about its projections.
The SIGTARP report additionally pins HAMP's disappointing results on three key causes. First, confusion surrounding the program's continuously changing guidelines has slowed servicers' progress. Second, HAMP's previous allowance for servicers to begin trial modifications based on borrowers' stated financial documentation was deemed "counterproductive." And third, the Treasury has made limited strides in increasing awareness of HAMP.
SIGTARP calls the absence of a television public service announcement one year since the program's launch "inexplicable." The Treasury is working with the Ad Council on a two-part awareness campaign, Allison says.
Moreover, the SIGTARP report says HAMP's design is particularly vulnerable to redefaults, given it does little to address negative equity or second liens.
Allison's reply notes that Bank of America, Wells Fargo and JPMorgan Chase have all recently signed on to HAMP's second-lien modification program, and he says that more large servicers are expected to join soon. Collectively, Bank of America, Wells Fargo and JPMorgan Chase account for more than $400 billion of second-lien loans.