2 Big Banks Lag in Mortgage Aid Program
August 4, 2009 - 1:15 PMBoth Bank of America and Wells Fargo got low marks in the first monthly report card on the Obama administration's plan to stem the foreclosure crisis.
In March, the government launched a $50 billion program to help up to 4 million financially troubled borrowers by modifying their loans to lower the payments. As of last week, only 9 percent of eligible homeowners who have missed two months of payments have been given a three-month trial modification under the program.
Both Bank of America Corp. and Wells Fargo & Co. - which have received billions in federal bailout money - were below average. BofA, which did not immediately comment, modified 4 percent of eligible loans, and Wells Fargo 6 percent.
"We know we've fallen short of our customer service goals in some cases," Mike Heid, co-president of Wells Fargo's mortgage unit, said in a statement. The company is aiming to sign up most borrowers for the Obama plan with one phone call and plans to send customers a trial offer within two days.
Other big banks did better. JPMorgan Chase & Co. modified 20 percent of eligible loans, and Citigroup Inc. modified 15 percent.
Meanwhile, several smaller companies - including American Home Mortgage Servicing and PNC Financial Services Group Inc. - have yet to modify a single loan.
American Home Mortgage Servicing just started the program on July 22, a spokesman said. PNC, which owns National City, was up and running in early July.
"National City is working with qualified customers to make mortgage modifications available. There are loan modifications in the process," said PNC spokesman Fred Soloman.
The government on Tuesday detailed big disparities among the 38 companies that have signed up for the program. Overall, only 15 percent of the 2.7 million eligible homeowners have been offered assistance, the report said.
"We think they could have ramped up better, faster, more consistently and done a better job serving borrowers and bringing stabilization to the broader mortgage markets and economy," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "We expect them to do more."
So far, more than 400,000 offers have been extended to 2.7 million borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.
Saxon Mortgage Services Inc. had the best results among the large loan servicers. One in four of its eligible borrowers has a trial loan modification with a lower monthly payment to help the homeowner avoid foreclosure. Aurora Loan Services LLC, GMAC Mortgage Inc. and JPMorgan Chase all had one in five qualified borrowers in a trial loan.
For each homeowner who makes regular payments for three months, the loan servicer collects $1,000 from the government. If the borrower stays current for three years, the servicer gets a maximum of $4,500.
The administration says it is still on track to meet its goals by 2012, and last week extracted a verbal promise from the mortgage industry to reach 500,000 borrowers by Nov. 1.
But despite these efforts, foreclosures continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.
Housing advocates say the plan has been a big disappointment so far. They cite numerous cases in which companies haven't followed the program's rules. And when borrowers are denied, they often aren't told why. In response to such complaints, the Treasury Department says Freddie Mac will be doing random audits to see if borrowers are being improperly rejected.
The lending industry is asking for patience, saying the industry needed time to implement the program. The administration rolled out the guidelines gradually this year. Much of the program was not finished until mid-May, and the guidelines were updated again in early July.
AP Real Estate Writer J.W. Elphinstone contributed to this report from New York.
(Copyright 2009 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)