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Treasury makes adjustments to give HAMP a chance

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The Treasury Department has begun implementing new enhancements to the Home Affordable Modification Program that will address borrower concerns and may give it a chance to succeed, the program's architect Laurie Maggiano said Thursday. Maggiano is the director of policy at the homeowner preservation office inside the Treasury. But in 1999, she was recruited by the Department of Housing and Urban Development to design and implement the current Federal Housing Administration's loss-mitigation program, which was considered a failure through its first two years. In its third and fourth year, modifications through the program passed foreclosures, and it was eventually called a success. Maggiano said that as HAMP enters its third year in March, servicers are being pushed to excel in the program just as before. Maggiano made her comments at the Mortgage Bankers Association's servicing conference in Grapevine, Texas. "You won't see any major new programs coming out," Maggiano said to applause. "We may tweak around the edges, but our primary objective in 2011 is excellence in the program we have. You have changed your systems at great agony. But we are ready to execute and execute really, really well. Borrowers have been jacked around the last few years. We need to improve that." There have been roughly 579,000 permanent modifications completed through HAMP since it launched in March 2009. But because of procedural backlogs and early promises of reaching between 3 million and 4 million homeowners, the program has been deemed a failure. On Feb. 1, the Treasury implemented a new escalation program to give borrowers denied a modification or trapped somewhere in the evaluation process to raise concerns directly with Treasury employees. Each participating servicer is required to implement escalation teams that report to the Treasury how many complaints they received and when they replied to them. Many borrowers complain of endless hours spent faxing documentation back and forth between the servicer and being denied modifications without an explanation. The Treasury set up two call centers, one in Dallas at the Fannie Mae HAMP Solution Center, where trained personnel can help borrowers find that explanation. The Dodd-Frank Act requires that servicers who deny a modification through HAMP because of a negative net-present value result must provide every input into that test. A negative NPV test means the investor in the mortgage would receive less cashflow with a modification than without it. If a borrower finds any mistakes in the inputs given to them after denial, they can call this center that opened in February. "If a borrower can prove income was wrong, a ZIP was wrong, they have ability to appeal for reevaluation," Maggiano said. "Call center employees can short circuit these appeals if they see it would be negative anyway." The Treasury is also putting together an NPV portal for servicers and borrowers to use on its website. It should be up in mid-May. However, reevaluation is not free. If a borrower raises concerns over the appraisal, he or she must pay the servicer $200 to get a new appraisal, Maggiano said. Together with more than $7 billion in unemployment assistance coming this year through the Hardest Hit Fund, Maggiano was confident that the program will turn around. Still, the program has come under fire from not only industry analysts but its watchdogs, the Congressional Oversight Panel and a recent report from the Special Inspector General for the Troubled Asset Relief Program. Neil Barofsky, who recently stepped down from his position at SIGTARP said the program's failures have been "devastating" and needed to be retooled. Republican lawmakers even went so far as to submit a bill that would defund HAMP. Maggiano and many from Treasury have pointed out that many private modifications, which outnumber HAMP mods nearly four to one, are seeing improvements in redefault rates on those loans because they were modeled after HAMP. In 2008, 60% of private modifications fell into 60-day delinquency six months later. But in 2010, that percentage dropped to 21%. "You think just maybe that big government standing behind servicers telling them to use this model led to more borrowers having more sustainable and more affordable mortgage agreements," Maggiano said. Still, both Maggiano and Larry Gilmore, the CEO of Hope LoanPort, the technology provider for housing counselors working directly with the Treasury, said HAMP has experienced difficulties and will not reach everyone. "This program was greatly challenged by documentation problems," Maggiano said. "And we're delighted that Hope LoanPort is as successful as it is." Gladys Moure, vice president of internal audits at the Florida-based servicer Bayview Loan Servicing, said the Treasury has good intentions with its changes, but that it has been a struggle implementing the program as it is. "By the time we brought everything up to speed, we've gone through our eligible portfolio," Moure said. "But these changes will be for the long haul. We have, and always will, do modifications." Write to Jon Prior. Follow him on Twitter: @JonAPrior

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