October 31, 2014
The Special Inspector General of the Troubled Asset Relief Program (SIGTARP) issued a report, Homeowners Can Get Lost in the Shuffle And Suffer Harm When Their Servicer Transfers Their Mortgage But Not the HAMP Application or Modification, that highlights some of the structural problems in the servicing industry. The report notes, for instance, that, “Homeowner calls to SIGTARP’s Hotline about difficulties experienced in HAMP as a result of mortgages being transferred from one servicer to another have persisted throughout the life of the program and have escalated in the last year.” (1) This is just the most recent reminder that servicing transfers continue to be a major source of trouble for homeowners.
Given the scale of the reported problems related to transfers to new servicers, and the potentially serious harm to struggling homeowners who need relief from HAMP, Treasury must be aggressive and swift in sending the message to servicers that Treasury will not tolerate harm to homeowners in HAMP from servicing transfers. HAMP is five years old, and servicers have had ample time to understand the rules and to follow them. Treasury should no longer tolerate a failure to follow HAMP rules. Treasury should report on violations publicly, and permanently withhold incentive payments from servicers that do not comply with HAMP rules on transfers. (12)
The problems in the servicer industry are structural, but it is far from clear that there are sufficient structural changes in the works to deal with them. This sad state of affairs will last far into the future unless thoughtful solutions are designed and implemented in the present. So, while it is important that SIGTARP draws attention to this problem, it is more important for other regulators like the Consumer Financial Protection Bureau and the Federal Housing Finance Agency to take up the cause and start implementing far-reaching solutions.