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Treasury Restores All HAMP Incentive Payments

The Home Affordable Modification Program, or HAMP, is now three years old. In that time, not one sanction has been placed on servicers for noncompliance with program guidelines, despite multitudes of documented evidence of abuse. I don’t think I have to go into all the different cases; just Google “Portrait of HAMP Failure. The Treasury Department, more than two years into the program, temporarily withheld some incentive payments to servicers who didn’t pass a compliance test they administered, but they hadn’t to date clawed back a payment. And eventually, Treasury freed up the incentive money to every servicer but one: JPMorgan Chase. That is, until today.

The three largest servicers Bank of America, Chase and Wells Fargo needed substantial improvement under HAMP, and the Treasury temporarily withheld incentive payments to each.

Wells was the first lender to earn back its payments, in the third quarter, followed by BofA. According to the fourth-quarter report released Friday, the Treasury said Chase finally made enough improvements. As a result, the withheld payments will be restored.

The Treasury will give back $89.1 million to Chase withheld since June 2011 and $81.7 million to BofA.

“Today the Treasury made it official that no bank will ever be penalized for the almost limitless misconduct committed under this program,” said former Special Inspector General for the Troubled Asset Relief Program Neil Barofsky in an interview with HousingWire. “They’ve sent a disgraceful message.”

The fact that the program itself is disgraceful matches with the disgraceful conduct of Treasury to allow lawlessness and rule-breaking without any meaningful sanction.

Incidentally, January’s HAMP stats are out. Servicers converted 18,000 modifications to permanent status, and made just 16,800 new trial modifications, which is lower than the average number over the past several months. That’s even after the new Treasury guidelines in January designed to encourage more modifications. This is a non-program. The fact that servicers can now get settlement credit under HAMP – that is, if the settlement has still happening (weren’t we promised that the terms would be filed in court by the “end of February”?) – might goose the program a little bit, but that would be completely artificial and the result of a bigger giveaway to the banks.

And these people have the gall to accuse HOMEOWNERS of moral hazard. What about banks who break contracts without being sanctioned for it.

UPDATE: Wow. Per Arthur Delaney:

The administration is letting the banks out of the doghouse not because of vastly improved servicing, but rather as a result of the $25 billion foreclosure fraud settlement struck last month. “As part of the mortgage servicing settlement, Treasury has agreed to release withheld incentives for past deficiencies,” Treasury said in a release.

Holy crap. So banks got released for their servicer conduct in HAMP as part of the settlement, too.

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David Dayen

David Dayen