(Recasts, adds criticism of regulators)
By Corbett B. Daly
WASHINGTON, Dec 2 (Reuters) - A widely criticized Obama administration program designed to help struggling borrowers stay in their homes should be ended, a Republican lawmaker who is expected to head a key Congressional oversight panel said on Thursday
Representative Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, said the Home Affordable Modification Program has only managed to provide payments to financial institutions which would have modified those loans without the government’s money.
“This program seems to have outlived its usefulness,” Issa, said at a hearing of the House Judiciary Committee. Issa is expected to head the Oversight and Government Reform Committee when Republicans take control of the House in January,
The modification program, known as HAMP, has helped just under 500,000 homeowners get permanent loan modifications.
Treasury launched HAMP in order to reduce mortgage payments for struggling homeowners who were at imminent risk of foreclosure.
But HAMP is widely regarded as flawed. Lawmakers say it is failing to ease the strain on households hurt by slow economic growth, high unemployment and red tape imposed by banks that makes it hard to meet the hurdles for a temporary or permanent reduction in monthly payments.
Phyllis Caldwell, who heads the Treasury Department’s Homeownership Preservation Office, defended the program, saying the mere existence of HAMP has changed the way mortgage servicers, firms which collect loan payments, modify loans.
Treasury’s HAMP was not alone in the line of fire on Thursday.
Panel members slammed regulators, including the Office of the Comptroller of the Currency, for not paying close enough attention to mortgage documentation problems that led to the “robo-signing” controversy — allegations that bank employees signed hundreds of foreclosure documents a day without proper legal review.
“Can you explain how the OCC, which regulates the large banks that are at the center of this controversy, failed to detect that there were foreclosure documentation issues well before this turned into a crisis that we find has gummed up the entire works here and caused problems for families, problems for people who want to buy homes, has really altered the entire real estate market in the country?” Representative Robert Goodlatte asked a top lawyer at the OCC, which supervises the largest U.S. banks.
Julie Williams, chief counsel at the OCC, said her agency was focused on supervisory efforts of the loan modification process.
“There were no warning signs from internal audit, quality control, or even complaints relating to the foreclosure documentation aspect of mortgage servicing that were triggering red lights for us,” Williams said, adding that she learned of the controversy from press accounts.
“In hindsight, if we think about the volume of transactions that were going through the process, we could have been more suspicious” there might be problems, Williams said.
Federal bank regulators and all 50 state attorneys general are probing Bank of America (BAC.N), JPMorgan (JPM.N) and other major mortgage servicers, many of whom temporarily halted foreclosures to examine their practices, only to then resume them. (Reporting by Corbett B. Daly, Editing by Leslie Adler)