It is pretty well-known that HAMP has not been the government's most
successful program. Although it was expected to assist millions of homeowners,
the program has only recently broken the 1 million mark and has barely
spent a fraction of the funds allocated for it.
So why has its performance been so lackluster? According to
documents recently obtained by ProPublica, it may be that there was very little oversight over the program. According
to the documents, the government did very little to oversee the HAMP program
during 2009 and 2010 -- a period where the major servicers reviewed 2.7
million modification applications and denied two-thirds of them. Audits
were few and far between. In the case of Bank of America and Wells Fargo,
audits did not begin until the program had been running for a full year.
It would also appear that the servicers were the ones defining "compliance."
Servicers would determine whether they were in compliance with the program's
guidelines and then report back to Treasury with any admitted issues and
the steps the bank planned to take to fix those issues.
It is difficult to tell what was done and how the banks responded because
the Treasury department fought to keep the documents from being produced.
When finally pressured to produce documents, Treasury released them with
most of the information redacted. According to ProPublica, what is evident
from the documents is that audits were too infrequent and had no real
teeth; banks were allowed to certify their own compliance with the HAMP
So what does this all mean? It means that while HAMP could have been a
great program, trusting the banking industry to run that program without
oversight most likely undermined its purpose and goals. It is a classic
fox-watching-the-henhouse problem. However, if you ask Treasury or the
servicers, then they will point to the reports issued by Treasury that
indicate only "moderate problems" exist.
Go read the ProPublica article. It provides some useful insight into the
issue. It's also worth looking at the
documents that ProPublica obtained from Treasury. Although they are heavily redacted, it is possible to see a pattern --
lackluster audits followed by a brief response. To compare Treasury's
oversight with the efforts of another federal agency, in the one year
that it has been operational, the Consumer Financial Protection Bureau
has already announced three major settlements with credit card companies
that it investigated.
Clearly, something is amiss at Treasury.