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The Special Inspector General for the Troubled Asset Relief Program is renewing calls for further investigation of servicers it claims may be denying too many Home Affordable Modification Program applications.
"Treasury has a small window of opportunity to figure out why so many people have been denied HAMP and to establish a zero tolerance standard for servicers who do not follow HAMP's rules," Special Inspector General Christy Romero said in a statement accompanying SIGTARP's latest quarterly report, issued Wednesday.
According to SIGTARP, 70% of homeowners who applied to lower their mortgage payment through HAMP have been denied assistance by their servicer. At some of the largest servicers, that percentage is even higher, the watchdog adds.
"There is a massive lost opportunity for an emergency program designed to help homeowners through the crisis if only 20-30% of families seeking help from HAMP actually get into HAMP," she said.
SIGTARP years ago pushed Treasury to require servicers to report why homeowners were rejected for HAMP, and found that servicers largely blamed it on "incomplete" applications.
It is now suggesting that the problem may lie in servicer rather than borrower inadequacies.
"Even if some people did not meet Treasury's eligibility standards, SIGTARP has repeatedly pointed out, and Treasury has found in their reviews, known problems by the largest HAMP servicers that have plagued homeowners," she said.
Examples of these include income calculation errors, lost paperwork, and improper denials, according to Romero.
HAMP mods were expected to experience some stress from upward adjustments in rate set to occur this year. Re-defaults have been high, and the program also has been the target of scam artists who have fraudulently promised borrowers assistance through the program in exchange for a fee.