Superintendent's Statement: Treasury's Directive to Extend TARP’s Trial Mortgage Modification Period Must Go Further
December 23, 2009
New York N.Y.: Richard H. Neiman, Superintendent of Banks for New York State and TARP Oversight Panel Member, issued a statement today about the Department of Treasury’s directive to mortgage servicers.
Treasury's Directive to Extend TARP’s Trial Mortgage Modification Period Must Go Further.
“By a supplemental directive posted on their Web site today, the Department of Treasury told mortgage servicers to extend by 31 days the deadline to make permanent the temporary mortgage modifications for families who have been avoiding foreclosure under the Treasury’s Home Affordable Modification Program (HAMP).”
This step is a critical development that several of us have been calling for, but just as critical are the steps that Treasury has yet to take.
“During this holiday season, 375,000 families in the program have faced the stress of not knowing if they would be able to securely remain in their homes beyond December 31st. These homeowners have proven a willingness and ability to meet their obligation under newly renegotiated mortgage terms; they have made all of their required modified monthly payments for at least three consecutive months and some for as many as five. But servicers have yet to respond to their submission of required documentation or have been unable to obtain all documents from borrowers.”
Treasury and servicers must now clearly, publicly announce the extensions of the trial modification period to these families, so they may remain in their homes during the holidays worry-free.
“Without extension, as of the New Year, these families would have lost their trial modifications and faced foreclosure. And they would have lost a reduction in their monthly mortgage payments averaging $740 per month (an average interest rate reduction from 7.6% to 2.9%).”
This extension must not serve as an excuse for continued heel-dragging, but the opportunity must be taken to resolve critical implementation problems:
“Mortgage servicers must use the additional 31 days to expeditiously inform the roughly 40% of these borrowers who have submitted their required documents if the servicer is going to make their modifications permanent or not. Servicers must also improve outreach to those remaining borrowers who have submitted incomplete documents.”
“Servicer capacity has been a significant part of this problem, as the Congressional Oversight Panel’s October report noted. But the report also indicated, and I highlighted in the report’s Additional Views section, the servicers have no more excuses for not being able to handle the increased caseload.”
“Treasury must use the additional 31 days to streamline the documentation requirement itself, while continuing to safeguard against abuse. Redundant document requirements should be eliminated and servicers should be given flexibility to accept alternative documents where appropriate. For example, the requirement that some homeowners provide individual profit and loss statements is ripe for reconsideration.”
“Further, Treasury must accelerate the March 31st date for making the upcoming web portal operational so that homeowners can track their documents online. This reform will quickly make borrowers aware of missing or incomplete documents to help obviate the need for yet another extension.”
“Finally, Treasury must require servicers during this extended period to fully explain the rationale to homeowners of any failures to convert and must afford families an opportunity to appeal the decision.”
“A modification program of this scale is a massive undertaking, but we cannot lose our resolve at this final and most critical stage of the process. At the Congressional Oversight Panel’s foreclosure hearing in October, the testifying servicers rated their modification performance with a generous letter grade of B. Any servicers who do not take full advantage of this extension to complete the hard work of the past year will be deserving of an F.”
The Treasury directive can be found at:
The New York State Banking Department is the regulator for all state-chartered banking institutions, virtually all of the United States offices of international banking institutions, all of the State’s mortgage brokers, mortgage bankers, check cashers, money transmitters and budget planners. The aggregate assets of the depository institutions supervised by the Banking Department are more than $2.4 trillion.In addition to regulating banking institutions, the Banking Department is active in informing and educating all New Yorkers on banking matters. To contact the Banking Department, please call 1-877-BANK-NYS or visit our Web site at www.dfs.ny.gov.