According to the
Special Inspector General for the Troubled Asset Relief Program (SIGTARP), 70 percent of homeowners who applied for the program were turned down for a permanent modification. Despite
initially promising a $75 billion commitment to HAMP, through September of this year, the government has spent only $10.2 billion, with an additional $2 billion on related programs. Most of the spending came after the initial years when the foreclosure crisis was at its most acute.
In the most damning revelations of servicer misconduct, employees at Bank of America’s mortgage servicing unit
testified in a class-action lawsuit that they were told to lie to homeowners, deliberately misplace their documents, and deny loan modifications without explaining why. For their efforts, managers rewarded them with bonuses — in the form of Target gift cards — for pushing borrowers into foreclosure.
Despite this, the Treasury Department
never permanently sanctioned a single mortgage servicer for HAMP violations by clawing back incentive payments. They never used their leverage to force better outcomes. Instead, former Treasury Secretary Timothy Geithner told government officials, HAMP’s purpose was to “
foam the runway” for the banks. In other words, it allowed banks to spread out eventual foreclosures and absorb them more slowly, protecting bank balance sheets.