Senators Propose Homeowner Advocacy Office for HAMP Grievances

Although the Treasury Department has vowed to hold mortgage servicers publicly accountable for their adherence to Home Affordable Modification Program (HAMP) guidelines, some senators want to go one step further.

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They have proposed establishing a new federal agency as a means of recourse for ""families who face foreclosure but believe their mortgage servicers are breaking the rules,"" as Sen. Al Franken (D-Minnesota) put it.

The Homeowner Advocate Act of 2011 (S.690) would create an Office of the Homeowner Advocate for the purpose of protecting homeowners seeking mortgage modifications through HAMP.

The bill was introduced by Franken, along with U.S. Sens. Olympia Snowe (R-Maine), Robert Menendez (D-New Jersey), and Jay Rockefeller (D-West Virginia), and has been referred to the Senate Banking Committee for consideration.

According to the bill, the Office of the Homeowner Advocate would have three primary functions: to assist homeowners, housing counselors, and housing lawyers in resolving problems with HAMP; to identify areas where homeowners are having problems in dealing with the program; and to identify possible administrative and legislative changes to HAMP.

Although the Dodd-Frank Reform Act established the Consumer Financial Protection Bureau to serve as a consumer advocacy agency -- with jurisdiction over mortgage lending regulation and, according to bureau officials, oversight of mortgage servicing rules as well -- the proposed Office of the Homeowner Advocate would deal directly and exclusively with the government's mortgage modification program. HAMP has come under heavy fire for unmet goals in terms of homeowners helped and inconsistent treatment of borrowers.

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The legislators say the new HAMP office would be modeled after the Office of the Taxpayer Advocate at the Internal Revenue Service (IRS). It would be funded from money that is available for the costs of administering the HAMP program, but is not otherwise committed.

As laid out in the language of the legislation, the office would be run by an independent director, appointed by Treasury and HUD. The bill explicitly states that this director cannot have worked for a servicer or for the Treasury Department within the past four years.

The office would be staffed with officials who have the authority, on a case-by-case basis, to implement servicer remedies, subject to the approval of the assistant Treasury secretary for financial stability, who currently oversees Treasury's mortgage relief programs. According to the senators, this assistant secretary backing will help to ensure that the staff of the Office of the Homeowner Advocate ""actually has the ability to make servicers follow the rules.""

""As recent news has shown, there have been serious problems with the current foreclosure modification program that have caused problems for too many homeowners,"" said Sen. Rockefeller. ""By creating an Office of the Homeowner Advocate, we would enable those homeowners who are receiving unfair treatment to have their issues resolved….[W]e should reward those who are working to modify and pay off their mortgages, not punish them.""

According to Rockefeller and his colleagues, if the legislation to establish an Office of the Homeowner Advocate passes, as many as 3 to 4 million homeowners would benefit from HAMP.

That target is the initial goal set for the program by President Obama â€" a goal that right now seems far out of reach. According to the latest figures from Treasury, as of the end of February, there were just over 557,000 active permanent HAMP mods in place. The federal program is set to expire at the end of next year.

Last month, ""Treasury announced"":http://dsnews.comarticles/treasury-will-publish-servicer-scorecard-based-on-hamp-performance-2011-03-30 that beginning in April, it will start publishing scorecards on individual servicer's HAMP performance. Officials say they will withhold financial incentives from servicers that receive unsatisfactory grades.

According to the senators behind the Homeowner Advocate Act, Treasury's ""acknowledgement that further action is needed to prevent abuse in the mortgage servicer industry highlights the need to establish an entity that would advocate on behalf of homeowners.""