Financially struggling homeowners are facing long delays after turning to the foreclosure prevention program from the Obama administration for assistance, according to a new report from the Special Inspector General for the Troubled Asset Relief Program overseeing the initiative.
“Without a timely review of their eligibility to even get a HAMP trial modification, struggling homeowners left in limbo hoping to get help from TARP’s HAMP program may not pursue other foreclosure alternatives and, with options narrowing over time, may be at risk for foreclosure,” the report said.
On Wednesday, the analysis found that the number of homeowners waiting for approval for the Home Affordable Modification Program (HAMP) has nearly doubled in the six months ending on May 31. The volume of unprocessed applications also climbed from 133,600 to 221,500. This trend is leaving homeowners in limbo and increasing the chance they will go into foreclosure. Many homeowners are waiting up to one year for a response after submitting an application.
The HAMP program lowers monthly mortgage payments for borrowers in default on their mortgage or close to default, typically through temporary interest rate reductions. Lenders are responsible for reviewing applications and determining which homeowners qualify for a modification.
Homeowners are first approved for a trial payment period to demonstrate they can handle the new lower payment. Once this stage is passed after about three months, homeowners must be approved for a “permanent” modification of five years. The unprocessed applications mentioned in this report refer to applications that have not been granted or denied a trial period.
The report also singled out Select Portfolio Servicing and JPMorgan Chase as the least effective at keeping up with the demand from homeowners. The report showed that the companies made a decision on less than 50% of the applications received in the six-month period, with JPMorgan processing about 35% of the applications each month and SPS processing about 42%.
CitiMortgage, meanwhile, took the longest to process applications, followed by JPMorgan and SPS. At its current pace, Citi would take one year to process the applications it already has, and up to two years if new requests are added. While it has improved its processing speed, Ocwen has the largest number of unprocessed applications at 61,000.
Earlier this month, the watchdog came to a $320 million settlement with SunTrust Mortgage to resolve allegations it misled HAMP applicants and failed to promptly process applications.
In the five years the program has been in existence, servicers have granted 1.4 million permanent mortgage modifications and rejected more than 5.5 million applications.