WASHINGTON — The Obama administration on Tuesday offered the first of what will be monthly reports on mortgage modifications, using a "name and shame" approach that found that from February through July, lenders started only 9 percent of eligible homeowners on trial mortgage modifications.
The first report under the Home Affordable Modification Program, involving more than 30 lenders that together collect payments on 85 percent of American mortgages, found an especially dismal performance by two major national banks — Bank of America and Wells Fargo — that received $45 billion and $25 billion, respectively, in taxpayers' bailout money.
The report is likely to produce more pressure on these two institutions, because the rescue money spent on them was expected to encourage greater lending and more loan modifications.
In a conference call with reporters, Assistant Treasury Secretary Michael Barr said that servicers who collect monthly mortgage payments on behalf of banks and investors that hold pools of mortgages had modified about 230,000 distressed mortgages since mid-February. The administration wants large mortgage servicers to modify 500,000 troubled home loans by Nov. 1.
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"I think we've been disappointed . . . about their performance in helping people in a timely fashion with the respect they deserve under difficult circumstances," Barr said.
The Center for Responsible Lending, a consumer advocacy organization in Durham, N.C., took an even tougher view of lenders.
"The report card issued by the Treasury Department today shows that financial companies deserve a failing grade in their voluntary efforts to modify home loans to help restore the U.S. economy," it said in a statement. "The results reveal that only 15 of every 100 families who are eligible for a modification of their mortgage have been offered one."
There are numerous indications that the list of eligible homeowners will grow.
"In June of this year alone, there were 254,000 foreclosure starts, which is more than the total number of modifications made to date under the current program," the center said, calling on Congress to allow bankruptcy judges to rework mortgages. "For over three years, lenders have insisted they can handle this crisis on their own, but today's report shows that the time for voluntary action is over."
Most of the homeowners who're falling behind on their mortgage payments are thought to have sub-prime or Alt-A mortgages, those given to weaker borrowers during the housing boom, which was fueled in part by loosened lending standards.
Publishing the first of its monthly reports on the performances of individual lenders and servicers, the Treasury Department found that Bank of America serviced 796,467 mortgages that were thought to be at least 60 days late on payments and potentially eligible for lower monthly rates.
The bank, however, extended modification offers to just 99,649 homeowners, or about 13 percent of those eligible, the Treasury report said, and it began trial loan modifications with only about 4 percent, or 27,985 borrowers.
Bank of America said it was doing plenty outside of the administration's Making Home Affordable effort.
"Importantly, this report is not intended to capture each servicer's progress outside of MHA in stemming the tide of foreclosures," Barbara Desoer, the president of Bank of America Home Loans, said in a statement. "In the first half of 2009, Bank of America completed 150,000 modifications through our own programs as we ramped up to make MHA operational. These 150,000 homeowners were at serious risk of foreclosure, but today remain in their homes with an affordable mortgage payment."
The banking industry, however, uses a broader definition of loan modification that includes merely allowing late payments or lowering payments for a fixed period only.
Wells Fargo led the banking sector's voluntary Hope Now loan-modification program, launched in tandem with the Bush administration. Tuesday's Treasury report, however, showed Wells Fargo in an unfavorable light, noting that while the bank serviced 329,085 mortgages that were 60 days late, it extended offers to only 38,673 homeowners, or about 12 percent of those eligible, and started trial modifications with another 20,219 loans, about 6 percent of those who were eligible.
Moreover, the Hope Now numbers are misleading, as they include everything from forgiving late payments to rescheduling payments. In fact, Hope Now members put only 96,000 modifications into force in June. That's about 3.5 percent of the 2.7 million borrowers nationwide who're thought to be at least 60 days late on mortgage payments.
In a statement, Wells Fargo said that it had modified more than 240,000 mortgages in the first seven months of this year.
"More than 90 of every 100 Wells Fargo customers have remained current on their mortgage payments," the company said. "And, according to March 31, 2009, Inside Mortgage Finance data, Wells Fargo continues to have the lowest delinquency rate of the top four lenders in the nation. The modifications, which include changes in loan terms, interest rates and principal, were completed with the goal of creating sustainable mortgage payments for consumers facing financial difficulties."
CitiMortgage, part of troubled Citibank, which received $45 billion in taxpayer life-support, did a bit better, according to the Treasury report. CitiMortgage extended offers of modifications to 21 percent of eligible homeowners and provided trial modifications for 15 percent, the report says. JP Morgan Chase, which has emerged as the nation's strongest bank, extended offers to nearly one in three eligible homeowners and started trial modifications for one in five.
In a statement, the Financial Services Roundtable, which represents most of the nation's biggest financial institutions, offered a different set of numbers. It said the 26 members of its housing council had reported 310,000 workouts to homeowners in June alone and 1.5 million workouts in the first half of this year.
As many as 2.5 million homes may go into foreclosure this year, the result of a three-year crisis in housing that's seen prices tumble nationwide, and especially in states where prices soared in the first half of the decade: Florida, California, Arizona and Nevada.
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