When the new Home Affordable Modification Program (HAMP) was gaining some momentum in the fall of 2009, it became evident that servicers were being deluged with applications from struggling homeowners.
Over 700,000 borrowers were participating in trial modifications and just 31,500 had been approved for permanent reductions in their monthly payments.
Processing had become a problem, which was compounded by lost documents. Struggling homeowners had to send the same documentation regarding their job status, income and other information two or three times.
Borrowers were frustrated and the servicers were overwhelmed by these processing problems and delays.
Officials at the Treasury Department overseeing the HAMP program also realized that lost documentation was a becoming a problem.
In November 2009, they asked Fannie Mae to develop a Web site that would assist borrowers in completing and submitting HAMP-related documents to their loan servicers.
But the Federal Housing Finance Agency (FHFA), Fannie's regulator, pushed back, according to a new FHFA Office of Inspector General report.
"FHFA and Treasury engaged in a significant dispute over Treasury's request," the OIG report said.
"Officials in the FHFA's Office of Conservatorship Operations opined that Fannie Mae lacked the in-house expertise to complete the project, and also raised operational and cost-based objections. Ultimately, Treasury agreed to remove Fannie Mae from the website development project," the report said.
(An FHFA spokeswoman indicated the agency has no disagreement with the IG's reporting on this issue and declined to comment for this story.)
Fortunately, several banks and nonprofit groups began testing a website portal to handle modification documents in late 2009 that became known as the Hope LoanPort.
It was based on an existing system provided by a technology vendor. "It was fairly low cost because we enhanced it," said Faith Schwartz, executive director of the Hope Now servicer alliance.
"There are other portals but the Hope LoanPort was developed by servicers and counselors so they could get the information needed to make a decision—whether it is a HAMP mod, Fannie, Freddie or proprietary modification," Schwartz said last week.
After testing Hope LoanPortal in six markets, most participating HAMP servicers began using the portal in June 2010. But by then the lost document problems and other issues plaguing HAMP had largely discredited the Obama administration's signature loan modification program.
Even Democratic congressmen had become critical of the HAMP program and the slow responses by servicers.
Senate appropriators complained about the HAMP servicers in a committee report released in August 2010.
"We are dismayed that many of the banks participating in the program continue to drag their feet or are unfairly denying loan modifications to troubled borrowers after receiving billions in taxpayer dollars," the committee report said.
Today, HAMP processing is much smoother. Mortgage servicers completed 31,600 HAMP modifications in June including 2,000 mods that involved principal reductions, according to a Treasury Department report.
"There is no excuse for lost documents today," Schwartz said, with the availability of Hope LoanPort and other methods of communication that are low cost, safe and secure.
"For counselors and servicers, lost documents are no longer an excuse," she added.
Separately, GMAC Mortgage and the state of Maryland are adopting Hope LoanPort to exchange foreclosure mediation documents electronically.
GMAC is funding the development of the Web portal that will be used by housing counselors, servicers, investors and others.
"Preparing for the mediation process can sometimes be overwhelming and Hope LoanPort offers borrowers a convenient option to assist with the process," said Steve Abreu, president of GMAC Mortgage.
The foreclosure portal is scheduled to go live in October. "We’re proud to be the first mortgage servicer to use this Web-based tool,” Abreu said.
Maryland homeowners who receive a foreclosure notice have 25 days to opt-in to foreclosure mediation.