Treasury: ‘Robo-Signing’ No Affect on Mortgage Modifications

President Obama and the foreclosure crisisA top Treasury official overseeing the Obama Administration’s foreclosure relief program said today that the shoddy foreclosure paperwork practice known as robo-signing has not affected mortgage modifications.
Phyllis Caldwell, the U.S. Treasury’s Chief Homeownership Preservation Officer, also defended the administration’s much-criticized Home Affordable Modification Program (HAMP).
Through September, the program has reduced the mortgage payments for 466,708 borrowers by an average of $500 — that’s only 34 percent of those who started the program.
Criticism has focused on a high degree of cancellations out of HAMP, a lack of a clearly-stated goals by the administration and its inability to stem the tide in the deepening foreclosure crisis.
Reports of lender representatives rushing through affidavits in foreclosure cases, often neglecting to review the facts, has fueled new concerns of a further backlog in sale of foreclosed homes in the worst-hit areas and a prolonged crisis. More than a quarter of U.S. home sales involve foreclosures.
Because HAMP is intended to keep homeowners out of foreclosure “it is not directly affected by “robo-signers” or false affidavits,” Caldwell said. “(HAMP) has strong compliance mechanisms in place to ensure that servicers follow our program’s guidelines.”
Caldwell described HAMP as a success in written testimony before the Congressional Oversight Panel, the watchdog over the primary U.S. bailout funding mechanism, TARP (Troubled Asset Relief Program). HAMP is primarily funded through TARP.
The majority of borrowers who started a modification trial have bailed out of the program — 51 percent of borrowers, nearly 700,000 homeowners, according to the just-released September HAMP update.
“Based on survey data from the eight largest servicers, it is estimated that a majority of borrowers who are turned down for a trial modification are offered a foreclosure alternative – usually a modification proprietary to the servicer, or a short sale – rather than proceeding directly to foreclosure,” Caldwell said.
It is unclear ow many of those that cancel out of modifications are provided alternatives.
Caldwell said those in permanent modifications are showing a lower delinquency rate that the overall housing finance market.
“Early data indicate that HAMP permanent modifications are performing well over time, with lower delinquency rates than those reported by the industry at large,” Caldwell said. “At nine months, almost 90 percent of homeowners remain in their permanent HAMP modification and less than 16 percent of permanent modifications are 60+ days delinquent. “
Read Phyllis Caldwell’s full testimony.

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