June 9, 2011 by
Filed under Mortgage
WASHINGTON — The Obama administration was taking the first steps to punish mortgage companies for poor performance in its loan assistance program by withholding incentive payments for three of the nation’s largest banks, an official said Thursday
The administration official said that the Bank of America, Wells Fargo Co. and J.P. Morgan Chase Co. needed “substantial improvement” in how they process requests for mortgage modifications.
The three companies, which received $24 million in government incentive payments last month, would not get any more payments until their performance improves.
The US Treasury Department found deficiencies in each company’s process for assisting homeowners in danger of foreclosure as part of the government’s Home Affordable Modification Program (HAMP). The companies also had deficiencies in following the program rules — including how they evaluated homeowners for help and communicated with them.
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Wells Fargo responded sharply, saying it was “formally disputing” the findings with the Treasury, though it said it realized “continued improvements are needed.”
“It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury,” Wells Fargo said in a statement. “The report reviews activities that date back a year or more and in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners.”
J.P. Morgan and the Bank of America were not immediately available for comment.
A fourth company, Ocwen Financial, was also found to be in need of improvement, but Treasury officials decided not to penalize the company because its problems stemmed from an acquisition of loans serviced by another company, HomEq Servicing, which Ocwen purchased last year.
The action addressed a long-standing complaint from consumer advocates that the Treasury failed to effectively police the more than 100 participating companies in the HAMP. The Obama administration launched the HAMP initiative in early 2009 as an attempt to reverse the rising number of home foreclosures by reducing families’ mortgage payments, typically by lowering the interest rate and extending the term of a loan.
Mortgage servicing companies receive incentive payments to enroll borrowers, but the program has fallen far short of initial expectations. As of May, it has helped about 587,000 US homeowners avoid losing their homes through permanent loan modifications, with the goal being to help three million to four million borrowers.
The Treasury’s decision to withhold payments was reported Thursday in The Washington Post.
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