Second Whistleblower Alleges Fannie Turned Down Free Loan Portal for HAMP
Fannie Mae allegedly turned down an offer in July 2009 that would have allowed borrowers and counselors participating in the Home Affordable Modification Program (HAMP) to use a web-based portal for uploading and downloading financial documents for free, said Joseph Smith, CEO of Default Mitigation Management (DMM), the company that designed the portal and made the offer. Smith tells HousingWire that Fannie allegedly turned down the DMM offer that would have streamlined and solved early documentation and communication problems, a sign of its lack of commitment to HAMP, the same claim held by the first whistleblower. A source following the story told HousingWire that if pressed, Fannie Mae would likely deny that DMM ever submitted its pitch to use its portal for free, thereby showing that Smith's claim has no merit, the same position the government-sponsored enterprise (GSE) is taking with the first whistleblower. Fannie Mae has been under scrutiny this week after Caroline Herron filed a suit against the company, alleging the GSE fired her for pushing HAMP reform. According to the suit, Fannie, which was hired by the Treasury Department to administer HAMP for $113m, allegedly ran the program poorly, putting more of an emphasis on bettering its own balance sheet than helping homeowners. Fannie Mae conducted a private investigation that found no merit in the allegations, according a spokesperson at the company. Rep. Spencer Bachus (R-Ala.), the ranking Republican on the Financial Services Committee, sent a letter to committee chairman Barney Frank (D-Mass.) requesting their own investigation. According to a string of emails between Herron at Fannie, the Treasury, and HOPE NOW, DMM made its initial pitch to Fannie to use its web-based portal in June 2009 and another in November. Then, its software was fully capable to allow borrowers to upload financial documents and communicate with servicers electronically. Smith said HOPE LoanPort, the portal Fannie chose to use or support, at the time did not offer all of the features the DMM web-based platform did. DMM's portal had been in existence for over a year and was used with a number of servicers, several counseling agencies and more than 1,500 debtor attorneys at the time. Smith is not pursuing his claim in court. HOPE LoanPort is now its own nonprofit group. It began as a technology committee within the private mortgage industry membership of HOPE NOW and its technology partner Indisoft, but has since split off. "We were already up and running," Smith said, "and we said, 'Here it is free.'" Borrowers, counselors, attorneys and government administrators participating in HAMP would have been able to use it for free. Servicers would have paid for it just as they do now, Smith said. HAMP struggled early on. The Treasury reported in December, eight months into the program, that 31,382 trial modifications had been converted into permanent status. The blame landed on the documentation process. In order for a borrower to receive a permanent modification, they have to make all three monthly payments in the trial stage. At the start of the program, the borrower did not have to submit all of the necessary documents to the servicer before entering the trial. Some spent more than a year in the trial process, while the servicer gathered documents for the conversion or denial. Bank of America in December reported 98 permanent HAMP modifications, causing the bank to shift its focus from getting more borrowers into trials and start processing more documents. When the Treasury released that initial permanent modification report in December, more than 16,000 borrowers with an active HAMP trial under BofA had no documentation into the bank. In May 2010, HOPE NOW announced that its web-based tool was fully operational, and that it would streamline the submission process of completed loan modification applications by allowing the counselors to send them electronically to servicers. "We did previews with Fannie and Treasury in November," Smith said. "The people at the Treasury loved it. I just could not understand why Fannie turned their back on us." Emails in August 2009 from HOPE NOW to Smith show that there was an interest in the DMM portal, though the correspondence indicates Smith's program was not the only one under consideration:
"We are looking at actual modifications (hamp) and it seems your system would likely marry well into the concept. As you know, there are so many competing ideas and we are doing our best to stay abreast."According to a November email sent from Smith to the Treasury:
"Thank you very much for arranging our demo this morning with Caroline Herron and Tom MacDonald. I think it went very well and I hope that both Caroline and Tom see the benefit of adopting a portal. I’m obviously a little biased, but I think our Portal is an excellent solution to help solve many of the administrative issues confronting the HAMP program. Moreover, the Portal is already built, tested and can be implemented quickly.""Part of their consternation seemed to be that they didn't want to work with a for-profit company, but we weren't charging them anything," Smith said. The Treasury did not have a comment on the story, and Fannie Mae did not respond to requests for one. It should be noted that the emails were provided to HousingWire from Smith, and the Treasury and Fannie Mae have not acknowledged the exchange. Write to Jon Prior.