The Obama Administration’s expansion of its foreclosure mitigation program – including principal forgiveness and temporary relief for the unemployed – lacks key details and, in some cases, appears to be “only partially formed,” according to an update issued today by the program’s watchdog agency.
In its Quarterly Report to Congress, the overseer of the bailout money that funds the foreclosure prevention efforts at first praised the U.S. Treasury for adding principal writedowns to address the growing issue of negative equity.
But then it unleashed several critiques, including a lack of preparation by Treasury that is causing mortgage servicers and borrowers to hesitate in participating. The report also said Treasury has failed to provide transparency, while some loan servicers have complained that they were not consulted about the new plans.
Neil M. Barofsky, special inspector general, Office of the Special Inspector General for the Troubled Asset Relief Program, SIGTARP, had recommended adding writedowns to foreclosure mitigation in a critical audit of the Home Affordable Modification Program, HAMP, released last month.
“To date, Treasury has not articulated a clear, integrated vision of the number of borrowers it expects to assist in each program, the expected costs of many of the program adjustments, how some of the program components are to work together, or how their form and design optimally address the problems at hand,” SIGTARP concludes in today’s report.
These omissions or circumstances risk “creating problems that could affect HAMP’s long-term success.”
SIGTARP’s top concerns:
- Unclear expectations about the program’s eligibility, benefits, and effectiveness.
- Servicers’ and borrowers’ hesitation to participate until the “kinks are worked out.”
- Opportunities for fraud created by confusion and ambiguity.
The hesitation on the part of servicers and borrowers results in “their not taking advantage of a program whose success depends on widespread participation by eligible parties.”