Schwartz to Congressional Oversight Panel: HAMP gets a bad rap
The government's much-criticized Home Affordable Modification Program helped set the stage for a successful private loan modification effort that likely wouldn't have gotten off the ground without it, said Faith Schwartz, former executive director of Hope Now. Schwartz testified Wednesday before the Congressional Oversight Panel on the Troubled Asset Relief Program, in a hearing about TARP foreclosure mitigation programs. "The HAMP roadmap set the stage for servicers to better apply solutions for distressed borrowers who failed to meet the HAMP requirements," Schwartz said in written testimony submitted to the panel. "The Home Affordable Modification Program (HAMP) has received criticism, in part, because it did not immediately produce certain projected numbers of permanent loan modifications," she wrote. "This criticism is not entirely accurate," according to Schwartz. "HAMP has played an important role by helping to organize the participants and process in the loan modification effort and instituted a loan modification protocol that would have been difficult to mandate in any other way. Hope Now and government agencies attempted this in 2008 through the streamlined modification program, but it did not reflect all investors and primarily focused on GSE-owned loans. That was a start, but the HAMP program expanded and formalized those initial standards for loan modifications." The Hope Now Alliance was formed in 2007 to expand and better coordinate the private sector and nonprofit counseling community to reach borrowers at risk. "Early on, the goal of the Alliance was simple: reach at-risk borrowers that had no contact with their servicer," Schwartz said. "Research showed that over 50% of all foreclosures involved homeowners who were not in contact with their servicer." The alliance established a hotline, organized community outreach events, sent letters to delinquent borrowers and launched a website. It also established HOPE LoanPort, a Web-based system that enables for uniform intake of an application for a modification, allows stakeholders to see the same information in a secure manner, and delivers a completed loan package to the servicer that is actionable. The pilot program includes 14 large mortgage servicers, representing a majority share of the market. "HAMP modifications offer a well-defined safety net for borrowers as a first line of defense," Schwartz said. "As evidenced by Hope Now data, servicers are implementing significant modifications after reviewing for HAMP eligibility by offering alternative modifications in lieu of foreclosure. Servicers report proprietary non-HAMP solutions run almost three times greater than HAMP modifications due to eligibility challenges." "These are modifications that do not require taxpayer dollars and they are meant to benefit the homeowner and investor in lieu of foreclosure," she said. Write to Kerry Curry.