On Thursday, the Congressional Oversight Panel (COP) held a field hearing to examine foreclosure mitigation efforts under the Making Home Affordable (MHA) Program and its loan modification program, the Home Affordable Modification Program (HAMP).

In his opening remarks, COP member Richard Neiman emphasized the importance of hearing from government agencies, borrowers and servicers. “Only with these three groups of stakeholders working together can we develop affordable and sustainable solutions to the housing crisis, and a greater level of engagement and cooperation is long overdue.” COP member Damon Silvers emphasized the need to address the root causes of the crisis, stating that “the problem of mass foreclosure is on the other side of the coin of weak balance sheets. So long as we make our policy centered in pretending we have strong banks, we may not be able to admit that these loans have to be written down if we are to end up with viable housing markets and stop the downward spiral….”

The COP heard testimony from the following witnesses:

Panel One

Edward L. Golding, Senior Vice President, Economics and Policy, Freddie Mac  

Eric Schuppenhauer, Senior Vice President and CFO/Program Executive, Homeowner Affordability and Stability Plan, Fannie Mae  

Seth Wheeler, Senior Advisor, U.S. Department of Treasury

Panel Two

Eileen Fitzgerald, Chief Operating Officer, NeighborWorks America  

Deborah Goldberg, Director, Hurricane Relief Project, National Fair Housing Alliance  

Annette M. Rizzo, Judge, Court of Common Pleas, First Judicial District, Philadelphia County; Philadelphia Mortgage

Foreclosure Diversion Program  

Irwin Trauss, Supervising Attorney, Consumer Housing Unit, Philadelphia Legal Assistance

Panel Three

Allen Jones, Senior Vice President for Default Management, Bank of America Home Loans  

Larry Litton, President and CEO, Litton Loan Servicing  

Joe Ohayon, Vice President for Community and Client Relations, Wells Fargo Home Mortgage  

Paul Willen, Senior Economist and Policy Advisory, Research Department, Federal Reserve Bank of Boston

During the first panel, the COP heard from representatives from Treasury, Fannie Mae and Freddie Mac who are charged with the implementation and facilitation of modifying mortgage loans under the HAMP. The witnesses were probed as to whether, given the current rate of new foreclosures, the efforts being made were sufficient to meet the needs of struggling borrowers. Mr. Wheeler estimated that there were several hundred thousand foreclosures initiated on a monthly basis, with approximately 20,000-25,000 HAMP modifications initiated each week. The COP members expressed concern with Treasury’s goal of assisting only 1 million homeowners per year against an estimated 3-4 million new foreclosures each year. Mr. Wheeler responded by stating that Treasury has been “focused on getting the program up and running,” but admitted the need to evaluate whether the current goals are sufficient to meet borrower needs.

Mr. Schuppenhauer testified to the importance of transparency of the HAMP. He believed that the borrower hotline and the HAMP Administration Center for counselors will help to ensure that servicers that violate the HAMP are uncovered. When asked about enforceability of the HAMP, Mr. Golding stated that on-site visits are conducted to determine whether servicers are implementing HAMP as directed, including examining individual loan files. To the extent that violations are uncovered, Mr. Golding said that one of the penalties may be to withhold the servicer incentives payments. However, he stressed that the focus is not on assessing penalties, but on correcting procedures to help servicers maximize the number of borrowers assisted. The goal of the second panel was to hear testimony regarding borrower perspectives. Judge Rizzo stated that “[o]n the part of lenders and servicers, we are also seeing, in some cases, a lack of knowledge of the guidelines requiring exploration on alternative relief efforts for homeowners beyond HAMP, as well as less than full explanation on denials of loan modifications after trial forbearance periods.” She recommended more field training on the HAMP provisions and readily available technical support. Mr. Trauss testified that the most important measure to help borrowers would be for Congress to pass amendments to the bankruptcy code to give bankruptcy courts the authority to modify mortgage loans to make them affordable. Ms. Goldberg recommended stopping all foreclosure because too many borrowers are “losing along the path to foreclosure” and get are assessed fees that undermine the ability for a successful modification.

During the third panel the COP heard from an economist and several servicers currently participating in HAMP. Mr. Willen testified that a foreclosure prevention plan should address unemployment and that the most effective use of government funds would be to provide direct assistance to borrowers, rather than incentives to servicers. He stated that a plan that “targets the unemployed to help them cover their housing expenses until they get their feet back on the ground would prevent large numbers of foreclosures.”

The COP members asked the panelists to offer their recommendations that would help HAMP run more efficiently. Mr. Jones stressed the importance of the “value of uniformity” for all of the servicers. He stated the more uniformity surrounding HAMP and other programs geared toward second liens, short sales and deeds in-lieu, would benefit both the industry and the borrowers. Mr. Litton urged more clarity regarding imminent default. He stated that many HAMP servicers impose a “imminent default” standard that prevents servicers from assisting borrowers that are current on their mortgage loans. He stressed that clarifying this standard would make servicers more comfortable to enter into modifications.