The Home Affordable Modification Program (HAMP) is a part of the U.S. Treasury’s Home Affordability and Stability Plan. HAMP was supposed to help 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. U.S. Dept. of the Treasury Statement of March 2009 here. HAMP is failing miserably and has not resulted in a fraction of the modifications promised. The government reports as of March 12, 2010 that a mere 170,000 homeowners have been approved for permanent modifications (borrowers have not necessarily accepted them). See Treasury Release here. There are a variety of reasons that the program is not working more than likely. One reason is probably that the servicers are doing a poor job at implementation. Borrowers consistently complain across the country that paperwork is lost, they cannot get through, they get misleading or conflicting information, and a host of other serious problems. This is no accident and the government so far has done little to improve the program or take action against the servicers for their behavior.
In order to participate in the program (that they help design), servicers enter into an agreement with the federal government (using Fannie Mae as its agent). What do these agreements promise? You would not believe it:
Servicer covenants that it will: (i) perform the Services required under the Program Documentation and the Agreement in accordance with the practices, high professional standards of care, and degree of attention used in a well-managed operation, and no less than that which the Servicer exercises for itself under similar circumstances; and (ii) use qualified individuals with suitable training, education, experience and skills to perform the Services. Servicer acknowledges that Program participation may require changes to, or the augmentation of, its systems, staffing and procedures, and covenants and agrees to take all actions necessary to ensure it has the capacity to implement the Program in accordance with the Agreement.
Paragraph 5(d) of the Financial Instrument attached to the Servicer Participation Agreement. Look at the agreements yourself. Bank of America’s agreement is here. JP Morgan Chase’s agreement is here. CitiMortgage’s agreement is here. Wells Fargo’s is here. Others are here.
Does anyone think these servicers are doing this? The servicers do a great job at foreclosing on people — they manage to get this done quite well, but modifying loans under HAMP is a different story. See examples here. So, what might happen if a servicer certifies the above is being done but that turns out to be false or misleading? Let’s check the agreement:
Servicer acknowledges that the provision of false or misleading information to Fannie Mae or Freddie Mac in connection with the Program or pursuant to the Agreement may constitute a violation of: (a) Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or (b) the civil False Claims Act (31 U.S.C. §§ 3729-3733). Servicer covenants to disclose to Fannie Mae and Freddie Mac any credible evidence, in connection with the Services, that a management official, employee, or contractor of Servicer has committed, or may have committed, a violation of the referenced statutes.
Paragraph 5(f) of the Financial Instrument attached to the Servicer Participation Agreement.
So, I wonder if there is anything that could be done? Hmmm, I wonder.