U.S. counting on public shame to help mortgage modifications

WASHIGNTON -- The Obama administration wants to shame the mortgage industry into doing a better job of helping borrowers avoid losing their homes to foreclosure.

By publishing the names of companies that are lagging in the government's plan to ease the housing crisis, officials are counting on public outrage to get the industry on track. The Treasury Department on Tuesday plans to report on the progress of loan servicers — companies that collect mortgage payments — that are in line for up to $50 billion in subsidies.

"We want to go faster," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "There are a bunch of servicers that are lacking in performance. They have to lift their game."

When the plan was launched in March, the government said it hoped to help up to 4 million financially distressed homeowners modify their mortgages to lower their payments. As of last week, just 200,000 homeowners were on track to get a modification, and the government has extracted a verbal promise to reach 500,000 borrowers by Nov. 1.

Meanwhile, foreclosures are continuing to rise. RealtyTrac says 1.5 million American households received at least one foreclosure-related notice in the first six months of this year.

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"We're losing houses rather than making modifications," said Bruce Dorpalen, director of housing counseling at Acorn Housing, a non-profit housing group based in Philadelphia. "The foreclosure train has not stopped."

The 31 participating companies include such large players as Bank of America, Citibank, JPMorgan Chase and Wells Fargo. They have received billions in federal bailout money and are sensitive about their public image.

But there also are many independent companies involved. Most are secretive about their operations and may be less sensitive to bad publicity.

For much of the industry, "there's no market value to having a good brand," said Julia Gordon, senior policy counsel at the Center for Responsible Lending, a consumer group.