A top Treasury department official said Thursday that the government has still not imposed any fines on banks that do not comply with the Obama administration's mortgage modification program.
In testimony before a House Financial Services subcommittee, Phyllis Caldwell, chief of Treasury's Homeownership Preservation Office, said her department has pursued "non-monetary remedies" but has not actually imposed any fines on banks for not complying with the administration's flagship $50 billion foreclosure prevention program.
Even in the midst of a growing controversy over allegedly fraudulent foreclosure paperwork, Treasury has not imposed any penalties on banks.
By many estimates, the Home Affordable Modification Program, which was launched last year, has been a failure. Although about 1.5 million borrowers were encouraged to sign up during its first year, 40 percent of those were kicked out of the program after initiating "trial" modifications, HuffPost's Shahien Nasiripour and Arthur Delaney reported. The program was intended to help up to 4 million homeowners avoid foreclosure.
In his latest report to Congress, the special inspector general for TARP Neil Barofsky said the mortgage-modification program can actually cause borrowers to go into foreclosure, due to extra fees that can accumulate on modified loans. The Government Accountability Office reported in March and in June not only that Treasury has not levied any fines on mortgage companies, but also that it hasn't even finalized guidelines for doing so.
After bank officials admitted that they had employed people who approved foreclosure documents without reading them, big banks including JPMorgan Chase and Bank of America last month temporarily halted their foreclosures. A Federal task force is investigating whether there has been criminal activity in the mortgage industry, and Bank of America faces a Federal racketeering lawsuit over its allegedly shoddy paperwork.
Still, Treasury has not yet punished these banks in any significant way. "To date we have not gone back to take back incentives that have already been paid, but we have pursued many of the non-monetary remedies, including further actions and evaluations, and re-evaluations," Caldwell told Rep. Maxine Waters (D-Calif.), chair of the subcommittee on Housing and Community Opportunity, after Waters repeatedly asked her if she had "levied any penalties or sanctions."
Caldwell emphasized that her department has required mortgage servicers, the companies that collect mortgage payments, to alter the way they carry out the HAMP process. But Waters was not impressed.
"You've required them to do some things. You've asked them to change some of their procedures, et cetera," Waters said. "There have been no monetary penalties, from what I'm hearing from you."
Lawmakers criticized the mortgage-modification program throughout the hearing, with none of them coming to Treasury's defense.