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Treasury Department Announces Penalties Against Nonperforming Banks in HAMP

June 21, 2011

Our Perris foreclosure defense attorneys have watched the Home Affordable Modification Program from its beginning, and we've had concerns about lenders' compliance for almost as long. So we were extremely pleased to see a June 9 article from the New York Times announcing that it would withhold payments from three major banks for their failure to perform under HAMP. Wells Fargo, Bank of America and Chase will pay the penalties for a variety of failures. Ocwen Financial had a similarly poor record, but the Treasury Department declined to penalize it for reasons the newspaper did not fully explain. The penalties come 19 months after Treasury announced it would use such penalties; it did not answer questions about the lengthy delay.

The four banks earned their poor performance records through evaluations of seven specific actions, including searching for and identifying eligible participants; assessing eligibility correctly; and effective program management and reporting. Bank of America got one star out of three in four of the areas; Wells Fargo in three areas and Chase in one. Two of the banks issued press releases disagreeing with their evaluations, with Wells Fargo saying it would "formally dispute" the penalties. But critics said it didn't go far enough. Neil Barofsky, who resigned in March as the special inspector general for TARP, called the move a lost opportunity for accountability and Treasury's monitoring of the lenders' behavior "toothless." The payments being withheld totaled $24 million for the three banks in March. Treasury has spent $1.34 billion of the $50 billion earmarked for HAMP.

As Escondido foreclosure defense lawyers, we agree with Barofsky that Treasury could do more. In particular, we're surprised that this move didn't come sooner, since the threat of penalties was raised more than a year and a half ago. As law professor Katherine Porter told the newspaper's Bucks blog the next day, the move also doesn't address the underlying problems that have made HAMP less than successful. Homeowners can and do successfully sue their loan servicers for giving them the runaround under HAMP, and we've succeeded with su Congress Critical of HAMP During Testimony By Treasury and Mortgage Lenders ch claims. But HAMP does not explicitly give borrowers the right to sue or any right to fair dealing, which means those claims aren't as strong as we might like. And the fines, while they are a signal that the government is finally ready to penalize banks, don't do anything to directly help borrowers.

Howard Law PC directly helps borrowers all the time -- it's our job and one of our busiest areas of practice as Orange County foreclosure defense attorneys. We have successfully filed numerous lawsuits on behalf of homeowners who were mistreated under HAMP. Under the program's own rules, lenders must grant loan modifications if borrowers meet the qualifications -- period -- and must make temporary modifications permanent as long as borrowers have made their payments on time. Numerous loan servicers are ignoring those rules, as Treasury found -- and when they do, we help the borrowers sue. By getting the case in front of a judge, you can not only get an impartial second opinion, but often stop a foreclosure sale right away.

If you're tired of being misinformed, ignored and jerked around by your loan servicer, you should call Howard Law PC to see how we can help. For a free, confidential case evaluation, send us an email or call 1-800-872-5925 today.

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