Troubled Asset Relief Program: Actions Needed by Treasury to Address Challenges in Implementing Making Home Affordable Programs

This testimony discusses our work on the Making Home Affordable (MHA) program, including the Home Affordable Modification Program (HAMP). Since the Department of the Treasury (Treasury) first announced the framework for its MHA program over 2 years ago, the number of homeowners facing potential foreclosure has remained at historically high levels. HAMP, the key component of MHA, provides financial incentives to servicers and mortgage holders/investors to offer modifications on first-lien mortgages. The modifications are intended to reduce borrowers' monthly mortgage payments to affordable levels to help these homeowners avoid foreclosure and keep their homes. Since HAMP's inception, concerns have been raised that the program is not reaching the expected number of homeowners. In two prior reports, we looked at the implementation of the HAMP first-lien modification program, noted that Treasury faced challenges in implementing it, and made several recommendations intended to address these challenges. In addition, our ongoing work examines the extent to which additional MHA programs have been successful at reaching struggling homeowners, the characteristics of homeowners who have been assisted by the HAMP first-lien modification program, and the outcomes for borrowers who do not complete HAMP trial or permanent modifications. These programs include the Second-Lien Modification Program (2MP) for those whose first liens have been modified under HAMP, the Home Affordable Foreclosure Alternatives (HAFA) program for those who are not successful in HAMP modifications, and the Principal Reduction Alternatives (PRA) program for borrowers who owe more on their mortgages than the value of their homes. This testimony is based on the report on HAMP that we issued in June 2010, as well as on preliminary observations from our ongoing work. Specifically, this statement focuses on (1) the extent to which HAMP servicers have treated borrowers consistently and the actions that Treasury and its financial agents have taken to ensure consistent treatment; (2) the status of Treasury's second-lien modification, foreclosure alternatives, and principal reduction programs; (3) the characteristics of borrowers who received HAMP modifications; and (4) outcomes for borrowers who are denied or fall out of HAMP trial or permanent first-lien modifications.