The Treasury Department is threatening to deny or even claw back incentive payments to mortgage servicers that are not modifying loans, according to the administration's guidelines.

The department would not say how many servicers have broken the rules, let alone which ones. But consumer advocates say noncompliance is rampant in the Home Affordable Modification Program (HAMP). They have documented cases in which servicers wrongly denied modifications or foreclosed before reviewing a borrower for HAMP.

The program is voluntary, so withholding or taking back the incentive payments is the biggest club the Treasury holds over servicers. It pays $1,000 for each completed permanent modification for a delinquent borrower and $500 for each mod given to a current borrower. So far, servicer payments have totaled $68.4 million. (A total of 109 servicers are participating in the program.)

At a meeting two weeks ago with consumer advocates and Freddie Mac, the department's compliance agent for HAMP, a Treasury official said the government had privately rebuked "four to six" servicers for "systemic noncompliance" with HAMP guidelines, according to three people who were in the room.

"Everyone asked, 'How come we haven't heard about this?' " said Andrew Jakabovics, an associate director for housing and economics at the Center for American Progress. The Treasury has "been doing compliance checks, and they've found systemic problems," he said, "but we don't know what actions have been taken to fix the problems or even if they are working on it."

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