Sen. Al Franken wants somebody to be looking out for homeowners as they navigate the Obama administration's Home Affordable Modification Program. The Minnesota Democrat has introduced an amendment to create an Office of the Homeowner Advocate within the Treasury department.
"The government created this HAMP program that people have accessed, and sometimes they end up talking to the servicer of their loan and sometimes the servicers make mistakes and don't really have their back," said Franken in an interview with HuffPost on Tuesday. "It's resulted in people losing their homes when they didn't need to. This is an office that people can call and get government folks who do have their back and can stop someone from going into foreclosure if they shouldn't be."
The Obama administration, when it announced its $75 billion modification program in February 2009, said HAMP would help three to four million struggling homeowners modify their mortgages. But a year into the program, fewer than 230,000 homeowners have received "permanent" five-year modifications as complaints and even lawsuits against servicers mount.
Banks foreclosed on 2.8 million homes in 2009, and the first quarter has already seen 932,000 filings -- a 16 percent increase from the foreclosure pace at the beginning of last year.
Franken's amendment would give homeowners someone to call when they're having trouble with the bank servicing their mortgage. The homeowner advocate would be modeled on the well-regarded taxpayer's advocate office within the IRS.
"What happens is that one of the problems is that the servicers or representatives who talk to people on the phone don't seem to be expert as they might be. That's sort of the problem that this is addressing," he said. "Or they're told you're too late, or this form didn't come in, or that, or we didn't get this thing. Of course the person did send that thing. So there's just a lot of people reporting kind of frustrating interactions with the servicers' representatives."
Franken said he's heard too many stories of avoidable foreclosures. "That's a disaster. That's a tragedy. Someone's home is their home. Each one of these foreclosures is a tragedy."
The amendment has nine cosponsors -- including Maine Republican Sen. Olympia Snowe -- and the support of the Obama administration. "By getting servicers to work with borrowers to modify the repayment schedule, modifications help keep families in their homes," wrote White House communications director Dan Pfeiffer in a blog post showcasing the administration's 10 favorite amendments. "To improve the program's effectiveness, we support creating a homeowner advocate at the Treasury Department."
"I'm feeling very good about it partly because of the White House calling it one of the ten 'good guys' and partly because of Sen. Snowe and all the other cosponsors," Franken said.
Here's a summary of the bill from Franken's office:
When homeowners think that their mortgage servicer is breaking HAMP's rules, has lost their paperwork, or has otherwise done something wrong, it's very hard to figure out where to turn. They can call their servicer--but that often is a dead end. They can call the official hotline for homeowners at risk of foreclosure--but that only gets them to housing counselors who are working on a government contract and have no real authority to fix the problem or withhold servicer incentives. Homeowners who use their own lawyers or housing counselors to help them navigate HAMP often fare no better--lawyers report stories of contacting regulators about problems with the HAMP program, only to be told, "If the servicer says this is correct, it must be correct."
This amendment would address this problem, creating an Office of the Homeowner Advocate (OHA) modeled after the successful Office of the Taxpayer Advocate at IRS. OHA would be funded from money that is available for the costs of administering the HAMP program, but is not otherwise committed. OHA would:
* Have three primary functions:
o To assist homeowners, housing counselors, and housing lawyers in resolving problems with the HAMP program
o To identify areas (both individual and systemic) where homeowners, housing counselors, and housing lawyers are having problems in dealing with the HAMP program
o To identify possible administrative and legislative changes to HAMP
* Have an independent director, appointed by the Secretary of Treasury in consultation with the Secretary of Housing and Urban Development. This director would have a background as an advocate for homeowners and have experience dealing with mortgage servicers. The director cannot have worked for a servicer or for the Treasury Department within the past four years.
* The Director of OHA will be available to testify in front of the Senate Banking Committee and House Committee on Financial Services at least four times a year, or at any time at the request of the Chairs of either committee, and will issue a formal report to Congress once a year.
* Staff designated by the Director would have the authority, on a case-by-case basis, to withhold incentives from servicers or require repayment of previously paid incentives.
* While a person is appealing their case through OHA, homes may not go to foreclosure sale until the OHA process is finished or 60 days have passed, whichever is shorter.
I think this is an outstanding idea.