Banks Fall Short on Mortgage Help

Govt. report says 15 percent of eligible borrowers have gotten help.

ByABC News
August 4, 2009, 9:55 AM

August 4, 2009— -- The Treasury Department today released the first report on the performance of loan servicers in the Obama administration's home mortgage modification program -- and the numbers weren't pretty.

Only 15 percent of eligible homeowners have been offered assistance under the Home Affordable Modification Program thus far, according to the report, and some loan servicers have yet to modify a single loan.

"There are some institutions that have done an infinitesimally small amount," Assistant Treasury Secretary for Financial Institutions Michael Barr told reporters on a conference call this morning.

"We are going to be requiring ramped-up effort across the board," he noted. "We're going to pay more specific attention to ensuring that institutions that have been slow out of the blocks ramp up more quickly and more effectively."

Among the companies that have not modified any loans were American Home Mortgage Servicing and National City Bank. Bank of America had a 4 percent assistance rate for trial modifications, with Wells Fargo marginally better at 6 percent.

"We're disappointed in the performance of some of the servicers," Barr said. "We think they could have ramped up better, faster, more consistently and done a better job of serving borrowers and bringing stabilization to the broader mortgage markets and economy and we expect them to do more."

Wells Fargo defended its loan modification results in an interview with today.

"I think what's important to keep in mind is the HAMP program is a very good program but, relative to the first seven months of 2009, it's just a piece of the overall story," said Mike Heid, co-president of Wells Fargo Home Mortgage.

Heid said that, from January to July, the bank modified a total of 240,000 loans. More than 20,000 were modified through HAMP while the rest of the modifications took place through separate Wells Fargo programs.

Bank of America also touted its own loan modification programs, saying that it modified 150,000 home mortgages in the first half of the year.

American Home Mortgage said in a written statement that it had joined HAMP late last month and will begin loan modifications under the program soon. The company said it had completed 64,000 loan modifications through its own programs between July of 2008 and this June.

At least two loan servicers and their parent banks, meanwhile, are drawing fire for not participating in the government's program at all: Litton Loan Servicing, which is owned by Goldman Sachs, and Barclays' HomEq Servicing Corp.

"No program can work unless people actually sign on and do it," said Gloria Swieringa of ACORN, a non-profit low-income advocacy group. "It's like leading a horse to water and not letting him drink."

ACORN has labeled mortgage servicers that don't participate in the program as "homewreckers," but both Litton and HomEq could escape the designation soon.

A HomEq spokesman told that the company has signed an agremeent to participate in HAMP and expects "confirmation of our HAMP servicer status momentarily." Litton said in a statement today that it hopes to "formalize its participation in the Treasury program soon."

Litton said it has offered more than 35,000 trial modifications using terms "consistent with the Treasury program" since it was announced. Litton modified another 44,000 loans, the company said, in the 12 months before the start of the program.

Under the government's program, some servicers helped as many as one in five qualified borrowers with a trial loan, according to today's report. JPMorgan Chase had a 20 percent trial loan modification rate, as did GMAC Mortgage Inc. Saxon Mortgage Services came in at 25 percent and Aurora Loan Services 21 percent. CitiMortgage Inc. has begun modifications for 15 percent of its eligible borrowers.

"There are many servicers that are performing at quite high levels and our expectation is that other servicers will come up to that high level," Barr said.