By Teke WigginBefore the housing bubble burst, Anthony Ugaro lived across from a country club in Bloomfield, N.J. "I was playing golf every day. I thought I was a duke," he said. But the good life began to unravel for Ugaro, 65, when the military veteran lost his job at an electronics company in 2009. Soon after, he was diagnosed with heart disease, which hampered his ability to work and to keep up with mortgage payments. Suddenly facing foreclosure, Ugaro twice ignored his doctor's advice and took on part-time jobs to make ends meet. His wife, Judy, currently works three jobs, he said, and they have exhausted $55,000 in savings, all to stay afloat. The Ugaros are the kind of homeowners that government was trying to help with its flagship housing aid program. But three years later, after repeated efforts to work with their lender through the Home Affordable Modification Program, they've joined millions of others who've had their HAMP applications denied, for reasons many of them find hard to understand. And the Ugaros have just about given up hope.
Overseen by the Treasury Department and funded by the Troubled Asset Relief Fund, HAMP was launched in 2009 to prove relief to a wide swath of homeowners facing foreclosure in the wake of the housing bust. The program is designed to lower monthly mortgage payments for distressed borrowers by either reducing interest rates, delaying payments, slashing loan balances or using some combination of the three. The results of a ProPublica questionnaire in the summer of 2010 suggested that many distressed borrowers have had experiences similar to the Ugaros' in attempting to qualify for HAMP. Two-thirds of respondents to the questionnaire who indicated that they were denied HAMP modifications said that they were given "different or conflicting reasons" for why they didn't qualify.
The Treasury Department's most recent Making Home Affordable Program Performance report, released monthly, showed that servicers have, indeed, made progress in using HAMP, particularly in the area of income calculation. For example, the Treasury found that more than 1 in 4 calculations of a borrower's income performed by Wells Fargo when evaluating HAMP applications was at least 5% off the mark in the first quarter of 2011. Now, just 1 in 50 are off by that much. Wrongly Denied? Could the Ugaros have been mistakenly denied a HAMP modification? That's unclear. But the couple does appear to meet all the main eligibility requirements of HAMP. Their home is their primary residence, their mortgage was originated before 2009 and they owe less than $729,750 on their mortgage. (They owe about $230,000.) Anthony's layoff and heart disease diagnosis also qualifies as a hardship.
If the test determines that a modification will save an investor money, then it must perform the modification. Otherwise, a servicer may choose not to. A failure by lenders to either correctly enter or calculate the test numbers has resulted in a substantial number of improper HAMP denials, according to the Office of the Special Inspector General for the Troubled Asset Relief Program and the Government Accountability Office. Little Recourse for Rejected Borrowers People denied HAMP modifications can call 1-888-996-HOPE and ask to speak to "MHA Help," and "depending on the circumstances," this may require a servicer "to re-solicit or re-evaluate impacted borrowers," the Treasury Department told AOL Real Estate. But Cohen said that only a small minority of aggrieved HAMP applicants know about the option and pursue it. She also said that even if the Treasury Department determines that a borrower was wrongly denied a modification, it has trouble holding a servicer's feet to the fire. It cannot impose fines on lenders for breaching HAMP guidelines. What the Treasury can do is nudge lenders in the right direction by withholding or reducing financial incentives. It withheld nearly $200 million from Bank of America and JPMorgan Chase, before releasing those funds as part of the "robo-signing" settlement. But that approach hasn't cut it, Cohen said. "To date, enforcement by the Treasury of HAMP guidelines has been abysmal," she said. The Consumer Finance Protection Bureau could potentially create rules and penalties that would impose more discipline on servicers, she said. In fact, the agency, which was created in 2011 as part of the Dodd-Frank Act, is in the process of crafting such rules right now. A CFPB spokesperson told AOL Real Estate that the agency intends to enact a "means for a consumer to appeal denials for loan modifications programs." But Cohen wonders if such a rule will offer enough protection. "The bottom line is, if those rules are not directly usable by the homeowner when they're in foreclosure, they will have limited value." More From AOL Real Estate Michigan Man Buys County's Entire Foreclosure Stock 90% of Bank-Owned Homes Held Off Market, Estimates Suggest 'This Is Crazy': Company Snatches Condos from Owners