Geithner: Servicers Failing in Foreclosure Fixes; Under Review

Posted: 29 Apr 2010 07:27 PM PDT eCreditDaily.com

U.S. Treasury Secretary Timothy Geithner – himself criticized by watchdogs overseeing the administration’s foreclosure mitigation program – lashed out against mortgage servicers today, saying they are not doing enough to help desperate borrowers.

Geithner said that Treasury is “conducting targeted, in-depth compliance reviews” of servicers who signed up for incentives under the $75 billion Home Affordable Modification Program. And will withhold incentives or “demand repayment” if it is determined they have failed to properly or sufficiently assist homeowners.

So far, HAMP has approved about 200,000 borrowers for reduced monthly mortgage payments. But Treasury’s initial goal was to help up to 4 million homeowners when it launched the program more than a year ago.  Moreover, the foreclosure crisis has not eased by most accountings, particularly in a few of the hardest hit states.

“We are concerned by the wide variation in performance we see across servicers and by the countless frustrated phone calls we receive from borrowers,” Geithner said in prepared remarks for testimony before the Subcommittee on Financial Services and General Government.

He said he is also troubled by reports that servicers have foreclosed on homeowners potentially eligible for HAMP assistance.

Reports also say that “they have steered these borrowers away from HAMP and into the bank’s own modification program,” Geithner said. “That they have lost documentation, or claimed to. That they are not responding to the needs of responsible and increasingly desperate homeowners. None of this is acceptable.”

Treasury is compelling servicers to re-review groups of mortgages – or their entire book – for eligibility.  Geithner said that in “circumstances where servicers are not compliant we will withhold incentives or demand their repayment.”

But Geithner himself has been the target of strong criticism, most notably from the official watchdog of the U.S. bailout program that funds most of HAMP.

Treasury is delaying the startup of new HAMP programs that include some principal forgiveness by not being fully prepared with rules, procedures and paperwork, the most recent watchdog report said. And that is  causing mortgage servicers and borrowers to hesitate in participating, according to  Neil M. Barofsky, special inspector general, Office of the Special Inspector General for the Troubled Asset Relief Program, SIGTARP.

Barofsky’s report, released this month, also said Treasury has failed to provide transparency, while some loan servicers have complained that they were not consulted about the new plans.

“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’s report said.