June2016 - Chase[ing] the Dream

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44 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING THE LATEST Watchdog Calls for Additional Oversight With non-bank servicers increasing their market share, they have also taken a more active role in implementing HAMP, and SIGTARP says this brings increased risk to HAMP recipients and applicants. A few weeks after the Government Account- ability Office (GAO) published a report saying non-bank mortgage servicers need more oversight from the Federal Housing Fi - nance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB), another federal watchdog has joined the GAO. In its quarterly report to Congress, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) expressed the opinion that the federal regulators should more closely watch non-bank servicers because of the servicers' increased participation in TARP's signature foreclosure prevention program—the Home Affordable Modification Program (HAMP)— over the past six years. Non-bank servicers have more than quadrupled their market share in the nation's $9.9 tril - lion dollars worth of outstand- ing mortgage loans since 2012. According to the GAO, non-bank servicers' market share rose from 6.8 percent in 2012 up to 24.2 percent by June 2015. According to SIGTARP, there has been a corresponding increase in non- bank servicers' role in HAMP. Six of the 10 largest HAMP servicers were large banks in 2010, the first full year of HAMP. That calculated to be about 65 percent of HAMP loans serviced by large banks. Now, non-banks service 56 percent of loans modi - fied through HAMP, and the large bank share has declined to 39 percent. Treasury pays mortgage servicers for every homeowner who receives a permanent loan modification through HAMP, which has made HAMP and re - lated programs a lucrative venture for non-bank servicers. To date, according to SIGTARP, non-bank servicers have received $1.1 billion in federal TARP money from the Treasury through HAMP. SIGTARP believes non-bank servicers need more federal over- sight because without the same level of oversight, the loans are a considerable higher risk. "As non-bank servicers increase their role in HAMP, the risk to homeowners has also increased. Non-bank servicers have less federal regulation than banks that service mortgages," the SIGTARP report stated. "Some of the largest non-bank servicers have already been found to have violated laws in their treatment of homeown- ers, and have been the subject of enforcement actions by the federal or state government. Some of the largest non-bank servicers also have been found to have violated HAMP's rules in their treatment of homeowners. This increased risk to homeowners must be met with increased oversight to ensure that homeowners are treated fairly, and that HAMP and its related pro- grams are effective and efficient." According to SIGTARP, many homeowners were harmed when HAMP's rules were not followed during the transfer of the loan from one servicer to another. Some of the problems that de- crease or even deny the relief provided to HAMP-eligible home- owners include delays, omissions, and miscommunications between servicers. One problem that can be particularly harmful to bor- rowers waiting for HAMP relief is when the HAMP application is "lost." The borrower's financial hardships continue while the determination as to their eligibility for HAMP is delayed. "Strong oversight is critical to ensure that these non-bank ser- vicers follow HAMP's rules and the law, give homeowners a fair shot at HAMP, and administer HAMP effectively and efficiently," the report stated. "Violations of the law and HAMP rules raises risks to homeowners. With less regulation, non-bank servicers making decisions in HAMP need strong oversight to ensure home- owners and this TARP program are protected." HAMP, which began in February 2009 in response to the foreclosure crisis, is scheduled to expire at the end of 2016. The Office of the Special Inspector General for the Troubled Asset Relief Program expressed the opinion that the federal regulators should more closely watch non-bank servicers.

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