Washington, DC – Michael Bennet, U.S. Senator for Colorado, today sent a letter encouraging the U.S. Treasury Department to make common-sense improvements to its mortgage loan modification program that would help Coloradans from losing their homes to foreclosure. The Home Affordable Modification Program (HAMP) provides assistance to allow families facing foreclosures to stay in their homes, and the changes Bennet is pushing for would further improve the program’s ability to help struggling homeowners.
Bennet’s letter to Herbert Allison, Assistant Secretary for Financial Stability, requests that the Treasury Department provide more transparency for families attempting a HAMP modification and create an independent appeals process for homeowners who have been turned down for a modification.
“Homeowners throughout Colorado facing foreclosure in this economy have repeatedly expressed their frustration with the federal loan modification process, which is necessary to complete in order for them to stay in their homes. It seems to me that families that are faced with foreclosure have been through enough already – the least Washington can do is make it a little easier for them to get the help they need,” Bennet said.
Under Bennet’s proposed changes, when a request for modification is denied, the loan servicer would provide homeowners with a justification for the denial in writing with meaningful information about the basis for the denial so that the homeowner can determine whether the decision was appropriate. Under the current rules, the burden of collecting the necessary information to determine whether a denial is fair or appropriate is on the homeowner facing foreclosure.
Bennet also requested that the Treasury Department create an independent, expeditious appeals process for families that have been turned down for a modification and denied an opportunity to convert their temporary modification into a permanent one. Currently, families do not have an adequate avenue to appeal and keep their homes.
In February, Bennet sent a letter to Assistant Secretary Allison requesting the Treasury Department to forbid mortgage providers from initiating or continuing the foreclosure process until they determine whether a homeowner is eligible for mortgage loan assistance through HAMP. Bennet was successful in getting the Treasury Department to incorporate that change into its guidelines.
The full text of letter sent today is included below.
The Honorable Herbert Allison, Jr.
Assistant Secretary for Financial Stability
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Assistant Secretary Allison:
I write to request that the Treasury Department create an independent appeals process for homeowners who have been turned down for a mortgage modification under the Home Affordable Modification Program (HAMP). Treasury should also work to increase the transparency of the program by requiring servicers to provide homeowners with detailed information underlying HAMP denials and by making the Net Present Value (NPV) model available to the public.
Under the current rules, loan servicers must undertake an NPV analysis to ascertain whether a homeowner is eligible for a mortgage modification. If a loan servicer rejects a homeowner’s application, it must identify the reason for the rejection. Where the denial is based on the NPV test, it must “include a list of certain input fields that are considered in the NPV decision.” Home Affordable Modification Program, Supplemental Directive 09-08, p. 3 (Nov. 3, 2009). If a homeowner wants to examine more thorough data used in denying the application, she must request the specific information from the servicer within thirty days.
Ultimately, a loan servicer will re-assess a homeowner’s eligibility if she provides corrected information for the NPV analysis and the new information “is material and likely to change the NPV outcome.” Id. Homeowners, however, lack any meaningful opportunity to appeal a servicer’s decision to deny an application. While Freddie Mac is conducting a general compliance and oversight program for HAMP, homeowners cannot initiate any action or appeal an individual decision under this program. Rather, homeowners are instructed to contact the HOPE hotline, which can serve as a conduit but has no oversight role.
Families throughout Colorado have repeatedly expressed their frustration about the modification process and the lack of information and cooperation from loan servicers. Servicers routinely misplace documents and homeowners must repeatedly provide the same documents. In some instances, homeowners have been asked to submit the same documents five or six times. Homeowners also express frustration about the inability to speak to the same loan review officer and as a result, are given different and conflicting information. For example, one representative will indicate that the loan has been “preapproved” and there is no foreclosure in process while another will indicate that it has not been “preapproved” and that the loan is in foreclosure. The pressure and stress of a potential foreclosure further exacerbates the difficulties that a family encounters throughout this process.
Given these challenges, servicers which deny a homeowner’s modification on the basis of an NPV test should automatically provide the underlying data, documents, and information used in the analysis. Under the current rules, however, the burden is on the homeowner facing foreclosure to obtain the necessary data. In all instances in which a modification is denied, the servicer should, at a minimum, provide the reasons for the denial in writing with meaningful information about the basis for the denial so that a homeowner can assess whether the decision was appropriate. In addition, by making the factors used in an NPV analysis publicly available and accessible in a form that homeowners can use to verify their own eligibility, we can create a more transparent and workable system.
At the same time, the Treasury Department should work to create an independent appeals process for families that have been turned down for a modification and denied an opportunity to convert their temporary modification into a permanent one. The appeal should occur expeditiously to provide certainty and clarity for struggling families facing the prospect of losing their home. The current process lacks an ample avenue for recourse. Finally, the importance of transparency and accountability is even greater as Treasury announces new efforts to expand the HAMP program. For example, homeowners soon may be processed through two NPV analyses, in an effort to promote principal reductions.
Ultimately, these simple changes-providing greater transparency to the program’s NPV analysis and turndown process, and offering an independent appeals process-will provide more safeguards for families and ensure that homeowners who are otherwise eligible for a modification don’t have to face foreclosure due to red tape or a miscommunication with a loan servicer.
It is my hope that the Treasury Department can implement these simple changes in the near future.
If you have any additional questions regarding the foregoing, please do not hesitate to contact me.
Thank you for your attention to this matter.