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Incentive Compensation under HAMP – Did investors receive it?

At Webbs Hill, we don’t make accusations. Instead we question trustees, securities administrators and servicers when the data suggests that bond holders may not have received the funds that they were due. We have many questions as to whether investors have received their HAMP incentive compensation, and if so, if it was applied correctly. The data suggests there may be a big problem here. It is definitely worth investigating.

Borrowers, servicers and investors are eligible for incentive compensation under HAMP. Through February 2018, the US Treasury has paid out $9.6 billion in incentive payments to Lenders/Investors (see page 2). The servicers receive these incentive payments and must promptly remit the money to the investors via the securities administrators. We discovered 5 types of incentive payments available to investors from the US Treasury.

We are troubled that investors have little to no means of determining how much they received, whether the payments were calculated correctly and whether the funds were properly applied to the bonds. Only US Bank provides a line item on the remittance for “HAMP investor incentive, cost share and depreciation funds” and provides loan level data for each type of incentive program. The data is helpful but worrisome. Some is applied at the loan level and some is not. Some incentive payments appear missing. Remittance reports and loan level data from DB, BNY Mellon, Wells Fargo and others are silent on these incentive payments and the only place left for finding clues is mining through the loan level data.

We see some subsequent recoveries that suggest that incentive payments are being remitted. Unfortunately, it is inconsistent across securities administrators and servicers. In the many examples that follow, you will see how it varies across combinations of securities administrators and servicers. All the varieties of loan level behavior is frustrating. That alone should worry you. For some deals, the lack of any evidence in the loan level suggests that some of these payments are made at the bond level. We know for certain that whatever is going on, there is no consistency across the industry.

Our questions are 1) have all the various incentive payments been remitted? 2) are the payments correct? 3) have the payments been properly applied? Only with loan level data will investors have any answers to these questions. It is a simple data request: for each loan, list the payment amount, type of incentive and date when it was remitted to the Trust.

In the meantime, bondholders must trust that the securities administrators and servicers are remitting all these incentive payments in a timely fashion and applying these payments correctly to the bonds. That’s funny. Unless you are trying to reduce our national debt, $9.6 billion, or even half of that, is a lot of money. It is time for investors to demand a reconciliation of all these incentive payments. Get the data. We will crunch through it.

Examples start on page 7. All the examples are Tier 1 HAMP Modification with PRA waterfall – incented forgiveness. It is worth spending some time reviewing.

Contact us at 203-276-0672 to become a client and access all reports and attachments.

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