Bachus calls for hearing on incentive payments tied to HAMP

Rep. Spencer Bachus (R-Ala.) has called on House Financial Services Committee Chairman Barney Frank (D-Mass.) to convene a hearing in September on whether Fannie Mae executives improperly implemented the Home Affordable Modification Program (HAMP) in order to benefit from incentive payments offered by the Treasury Department.

Bachus is the committee's ranking member and in an Aug. 6 letter to Frank said he was concerned by reports that Fannie Mae executives allegedly pushed as many borrowers as possible into short-term trial modifications to receive incentive payments from the Treasury. 

"These allegations are of particular concern, not only because taxpayers have invested more than $85 billion in Fannie Mae to offset its losses, but also because it is being reported that the [Obama] administration might order the government-controlled mortgage finance company to forgive many Americans' mortgage debts later this month," the letter states.

Short-term modifications had to be completed by the end of 2009 for Fannie Mae executives to receive the payments. Shortly after this window closed, the number of permanent modifications increased 45 percent, according to a February report on HAMP.

The Bachus letter requests that Fannie Mae executives and its regulator be called before the committee. The congressman would also like to hear testimony from Caroline Herrin, a one-time Fannie Mae executive who has accused her former employer of "mismanagement and gross waste of public funds."

Herrin charged in a lawsuit that Fannie Mae executives pushed homeowners into short-term loan modifications to reap the incentive pay. 

"If true, it would help explain why HAMP has been such a failure," Bachus wrote. "It would mean that thanks to Fannie Mae's executives' misfeasance, particularly a preoccupation with short-term financial gain, HAMP was only able to permanently modify about 230,000 mortgages, instead of the 3 million modifications that the Obama administration promised."