Treasury Reports Improvements in Residential Mortgage Servicing

The U.S. Department of Treasury (Treasury) recently issued a report that reviewed the implementation of Treasury guidelines for streamlining distressed homeowners’ communications with mortgage lenders. The Treasury promulgated its guidelines to mortgage servicers participating in the Making Home Affordable (MHA) program, a Treasury program that combines financial incentives and a common mortgage modification framework in order to increase the rate of mortgage modifications. The Treasury surveyed nine of the largest mortgage servicers participating in MHA for the report, which describes how each servicer’s “single point of contact” (SPOC) model is intended to work. The survey results show a significant increase in the resources committed to distressed homeowners since the beginning of the housing crisis.

Treasury’s Homeowner Communication Model According to the Treasury in the report, as the housing crisis deepened in early 2009, servicers were unequipped to work effectively with troubled homeowners. Servicers were normally operated to collect mortgage payments efficiently on behalf of investors who owned mortgage loans, and not to work collaboratively with distressed homeowners to modify their mortgages and provide paths to avoid foreclosures. Large and mid-sized servicers were organized into separate teams or departments, which rarely communicated with each other, and homeowners typically had to work with multiple servicer employees across multiple departments. This often resulted in homeowners receiving contradictory or inconsistent information, having trouble locating servicer representatives and being required to submit documents multiple times.

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