It is pretty well-known that HAMP has not been the government's most successful program. Although it was expected to assist millions of homeowners, the program has only recently broken the 1 million mark and has barely spent a fraction of the funds allocated for it.
So why has its performance been so lackluster? According to documents recently obtained by ProPublica, it may be that there was very little oversight over the program. According to the documents, the government did very little to oversee the HAMP program during 2009 and 2010 -- a period where the major servicers reviewed 2.7 million modification applications and denied two-thirds of them. Audits were few and far between. In the case of Bank of America and Wells Fargo, audits did not begin until the program had been running for a full year.
It would also appear that the servicers were the ones defining "compliance." Servicers would determine whether they were in compliance with the program's guidelines and then report back to Treasury with any admitted issues and the steps the bank planned to take to fix those issues.
It is difficult to tell what was done and how the banks responded because the Treasury department fought to keep the documents from being produced. When finally pressured to produce documents, Treasury released them with most of the information redacted. According to ProPublica, what is evident from the documents is that audits were too infrequent and had no real teeth; banks were allowed to certify their own compliance with the HAMP guidelines.
So what does this all mean? It means that while HAMP could have been a great program, trusting the banking industry to run that program without oversight most likely undermined its purpose and goals. It is a classic fox-watching-the-henhouse problem. However, if you ask Treasury or the servicers, then they will point to the reports issued by Treasury that indicate only "moderate problems" exist.
Go read the ProPublica article. It provides some useful insight into the issue. It's also worth looking at the documents that ProPublica obtained from Treasury. Although they are heavily redacted, it is possible to see a pattern -- lackluster audits followed by a brief response. To compare Treasury's oversight with the efforts of another federal agency, in the one year that it has been operational, the Consumer Financial Protection Bureau has already announced three major settlements with credit card companies that it investigated.
Clearly, something is amiss at Treasury.