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GAO Recommends Enhanced Oversight of HAMP Servicers' Fair Lending Compliance
On February 6, the GAO released a report of its review of Making Home Affordable (MHA)/Home Affordable Modification Program (HAMP) servicers’ compliance with fair lending laws. The GAO states that while the Treasury Department requires MHA servicers to develop internal control programs that monitor compliance with fair lending laws, Treasury has not assessed the extent to which servicers are meeting this requirement. Treasury noted that it shares HAMP loan-level data with the federal agencies responsible for fair lending enforcement. GAO states that its analysis of HAMP loan-level data from four large MHA servicers identified some statistically significant differences in the rate of denials and cancellations of trial modifications as well as in the potential for redefault between populations protected by fair lending laws and other populations. GAO acknowledges that its analysis alone cannot account for all factors that could explain these differences. It states that reviewing the fair lending internal controls of MHA servicers could give Treasury additional assurance that servicers are complying with fair lending laws. The report recommends that Treasury should (i) assess the extent to which servicers have established internal control programs to monitor compliance with fair lending laws, (ii) issue guidance to servicers on working effectively with limited English proficiency borrowers, and (iii) monitor servicers’ compliance with that guidance. Treasury noted that it was considering GAO’s recommendations and agreed that it should continue to strengthen its program.
GAO Issues Report On SCRA Mortgage Protections
On January 28, the GAO issued a report on SCRA mortgage protections required by the 2012 legislation that extended those protections. Using data from three large mortgage servicers and a large credit union, the GAO examined changes in the financial well-being of servicemembers who received foreclosure-prevention and mortgage-related interest rate protections under SCRA, including the extent to which they became delinquent and the impact of protection periods. The report states that the number of servicemembers with mortgages eligible for SCRA mortgage protections is unknown because servicers have not collected this information in a comprehensive manner. For those identified as SCRA-eligible at the two servicers, delinquency rates ranged from 16 to 20 percent and from four to eight percent for other military borrowers. Delinquencies at the credit union were under one percent. GAO concluded that some servicemembers appeared to have benefitted from the SCRA interest rate cap of six percent, but that many eligible borrowers had not taken advantage of the protection. GAO also determined that the data were insufficient to assess the impact of SCRA protections after servicemembers left active duty, although it believes one institution’s limited data indicated that military borrowers had a higher risk of delinquency in the first year after leaving active duty. GAO also reviewed documentation on DOD’s partnerships and relevant education efforts related to SCRA mortgage protections and found relevant information to be limited because DOD has not undertaken any formal evaluations of the partnerships' effectiveness. Given its finding that many servicemembers did not appear to be taking advantage of the SCRA interest rate cap, GAO concluded that DOD’s SCRA education efforts could be improved and that an assessment of the effectiveness of these efforts is still warranted.