From the U.S. Government Accountability Office, www.gao.gov Transcript for: Watchdog Report: Implementation of Treasury’s Home Affordable Modification Program Audio interview by GAO staff with Mathew Scire, Director, Financial Markets and Community Investment Associated Publication Number: GAO-10-556T Released on: June 24, 2010 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the Government Accountability Office. It's June 24, 2010. In 2009 the United States Treasury created the Home Affordable Modification Program, or HAMP, to help struggling homeowners reduce their monthly mortgage payments. A group led by Matt Scire, a Director in GAO's Financial Markets and Community Investment Team, recently examined the status of HAMP's major initiatives. GAO's Scott Golden sat down with Matt to learn more. [ Scott Golden: ] What exactly is the Home Affordable Modification Program, or HAMP, and what are its main goals? [ Matt Scire: ] The HAMP program is a $75 billion federal effort to make mortgages affordable for families that are either in default or face the prospect of defaulting on their mortgages. It's part of the larger TARP program, and TARP provides $50 billion of those $75 billion. [ Scott Golden: ] What did GAO find were some of the major challenges facing the HAMP effort to mitigate foreclosures? [ Matt Scire: ] There are a number of challenges. In our most recent report, we focus on the treatment of borrowers and there we report on how the lack of specific guidance can result in inconsistent treatment of borrowers. We also have reported since last July issues concerning capacity on the part of Treasury as well as the servicers that actually carry out the loan modification. [ Scott Golden: ] I know that the relationship between the various loan servicers and the borrowers enrolled in HAMP is a key issue related to the program's success. Could you talk a little bit more about GAO's findings in this area? [ Matt Scire: ] Yeah, and this goes back to that challenge regarding consistent treatment of borrowers. What we found and we met with 10 servicers that represent over 70 percent of all eligible borrowers. What we saw was that some servicers use different standards for when they would first contact a borrower to inform them about the HAMP program. Sometimes they would call a borrower after they missed a payment for 30 days; some would wait until 60 days. We also found that there was inconsistency in the judgments that were made as to whether a borrower who was current on their mortgage but was very likely to default in determining whether or not they would be eligible for the program. We also saw inconsistency in how they handled complaints. With some servicers, they tracked all complaints, some servicers tracked only a subset, and so there was lack of clear guidance from Treasury to the servicers as to when to track complaints, how to judge whether or not a borrower should be considered in imminent danger of default, and also when to reach out to borrowers. [ Scott Golden: ] What mechanisms are being used to gauge how HAMP is being carried out? [ Matt Scire: ] The principal mechanism right now is a monthly report that Treasury puts up on its Web site. There are also three different organizations that have been established by the act to provide oversight. There's GAO of course, and we've been preparing reports every 60 days on the TARP program, and HAMP is part of the TARP program. You also have the Congressional Oversight Panel, which reports periodically on activities of TARP, and of course you have the Special Inspector General for the TARP program, who's also involved in looking at the HAMP program. [ Scott Golden: ] Can you discuss the recommendations GAO is making then to improve the implementation of HAMP? [ Matt Scire: ] There are a number of recommendations that we make in this report. First, there are areas within the guidance which are just not specific, and so we make recommendations that Treasury provide greater specificity on defining, for example, when you should consider that a borrower is in imminent danger of default. We also make recommendations for greater specificity in the guidance. We also think that there's more that Treasury can do in holding servicers accountable. And there we have in mind that Treasury could do more to specify what sort of benchmarks or goals that they expect servicers to meet. Also, right now Treasury has not yet specified the consequences for a servicer who is not complying with program requirements. There, we recommend that Treasury do so. [ Music ] [ Narrator: ] To learn more, visit GAO's Web site at gao.gov, and be sure to tune in to the next edition of GAO's Watchdog Report for more from the congressional watchdog, the Government Accountability Office.