The House Committee on Oversight and Government Reform has launched an official investigation into the federal government’s foreclosure prevention program.
According to a statement from the head of the committee, the probe was triggered by complaints that servicers have been slow and inconsistent in modifying loans under the Making Home Affordable (MHA) program, and are not communicating clearly with eligible homeowners.
Chairman Ed Towns (D-New York) says he’s a strong proponent of efforts to ease the burden on struggling homeowners but has received “concerning information” that the administration is not fully living up to its pledge to help borrowers mitigate foreclosure.
“While I applaud Treasury’s efforts, numerous concerns have been brought to my attention regarding the effectiveness and efficiency of the MHA program and the extent to which it has assisted struggling homeowners,” he said.
In a letter to Treasury Secretary Timothy Geithner, Towns wrote, “… it is my understanding that Treasury has thus far refused to reveal in detail how it defines ‘net present value’, one of the key criteria for homeowner participation in the mortgage modification program.”
Towns added, “Moreover, if a homeowner is denied a permanent mortgage modification, the specific reasons for the denial are not revealed. Finally, Treasury has not established a process for homeowners to appeal the denial of a permanent mortgage modification.”
The latest figures from Treasury show that servicers have initiated just over 900,000 trial modifications, but according to the Congressional Oversight Panel, home foreclosures across the nation have increased faster than the rate of new HAMP trials, by more than 2 to 1.
Towns also noted that the servicer progress report issued last month demonstrates that certain institutions have made “dismal progress” in modifying loans, even though they service a large number of homeowners potentially eligible for HAMP.
Chairman Towns says he expects specific data requested for the investigation and a response to his inquiry from the Treasury Department by February 18.
Towns’ concerns echo similar accusations made by foreclosure counselors and distressed homeowners alike over the past several months that servicers still may not be equipped to handle the excess workload brought on by the government program and may be letting an unsettling number of borrowers slip through the cracks.