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."

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