Some help for HAMP
by Maria Boos
There's a lot of finger pointing going on in attempts to explain—and deflect blame for—the mediocre performance of the Home Affordable Modification Program (HAMP), the Treasury Department's $75 billion initiative to modify mortgages to keep people out of foreclosure and in their homes. HAMP is woefully behind in progress toward the goal of 3 to 4 million successful modifications.
The Congressional Oversight Panel is chastising the Treasury, the Treasury is coming down hard on mortgage servicers, and some of the largest servicers are pointing out that they've succeeded in modifying more mortgages under their proprietary programs than through HAMP. Just take a look at these articles:
- Congressional Oversight Panel Evaluates Progress of TARP Foreclosure Mitigation Programs
- Treasury Secretary Timothy F. Geithner Statement before the Senate Committee on Appropriations Subcommittee on Financial Services and General Government As Prepared for Delivery
- Testimony of Barbara Desoer President Bank Of America Home Loans Before the House Financial Services Committee
Regardless of which parties deserve the most credit for success or blame for failure, it's good news that the Administration has stepped up efforts to improve both the program itself and servicer performance. It's even better news that one of the metrics for performance will be "homeowner experience," measured in servicers' handling of phone calls, timeliness of resolving homeowner problems, and reduction in complaints to the Homeowner's HOPE Hotline.
But, in a notable omission, there's no mention of improving the communications sent to homeowners throughout the HAMP process. A look at these documents suggests that their complexity might be contributing to borrowers' reluctance to respond to modification offers, and the high rates of incompletions and inaccuracies when they do respond.
So, Secretary Geithner, here are three tips on how to simplify the HAMP documents:
1. Streamline the program architecture.
The program, at its core, is simple. Eligible borrowers get an offer to make their mortgage affordable. If they meet the terms of the offer for three months, it becomes permanent. Stop talking about a "Home Affordable Modification Trial Period Plan" and a "Home Affordable Modification Agreement" as if they were two separate things.
While you're at it, there's no need to confuse the borrower with a cast of thousands. There's one letter that includes references to HUD (Department of Housing and Development), Making Home Affordable, the Federal Government, SIGTARP (Office of the Special Inspector General for the Troubled Asset Relief Program), the Home Affordable Modification Program, Fannie Mae/Freddie Mac, a lender, and a servicer. And you wonder why the borrower isn't rushing to pick up the phone?
2. Make it crystal clear what borrowers are taking on.
The documents require borrowers to make "representations," "acknowledgements" and "agreements," but there's no true distinction among the terms that are sprinkled across those categories. Some of them are downright silly, such as requiring the borrower to acknowledge that "time is of the essence," particularly given the delays and mishaps in implementing the program.
3. Apply the principles of plain language writing and good information design.
The documents get bogged down with convoluted legalese, meaningless headings, unenforceable provisions, essential payment amounts buried in running text… and so on. Documents developed by committees are almost never clear from the consumer's perspective. Once the lawyers, actuaries and administrators have hammered out the details of the revamped program, make the last stop for the documents the editor's desk.
Maria Boos is a strategy director for the Siegel+Gale New York office.