Govt Aid only helping a few

U.S. Effort Aids Only 9% of Eligible Homeowners

By ANDREA FULLER
Published: August 4, 2009

WASHINGTON — The Treasury Department said on Tuesday that only a small number of homeowners — 235,247, or 9 percent of those eligible — had been helped by the latest government program created to modify home loans and prevent foreclosures.

A report released by Treasury officials identified lenders who had made slow progress in offering more affordable mortgages, naming Bank of America and Wells Fargo as among those failing to reach large numbers of eligible borrowers.

While 15 percent of eligible homeowners have been offered help through the mortgage modification program, the low rate of actual mortgage reductions has frustrated administration officials.

Michael S. Barr, the assistant secretary for financial institutions, said in a news conference that there were “significant variations” in performance and that some institutions had made “an infinitesimally small amount” of progress.

“I think it’s safe to say we’re disappointed in the performance of some of the servicers,” Mr. Barr said. “We expect them to do more.”

The release of data showing the progress of individual institutions is part of a Treasury effort to push banks to modify loans faster.

Under the $75 billion program, homeowners whose monthly mortgage payments are more than 31 percent of their gross income are eligible for modified loans, with interest rates as low as 2 percent.

Bank of America has modified only 4 percent of the eligible mortgages, and Wells Fargo has modified 6 percent.

Citimortgage, a unit of Citigroup, fared better at 15 percent, while JPMorgan Chase was among the most successful, modifying loans for 20 percent of eligible borrowers.

All four institutions received federal bailout money.

Since President Obama announced the mortgage modification program in February, mortgage holders have criticized the slow response by lenders. The Treasury Department hopes to reach as many as four million borrowers through the program in the next three years. Mr. Barr said he expected institutions to modify 500,000 loans through the program by November.

“We’re going to pay specific attention to making sure that the institutions that have been slow out of the block ramp up more quickly and more effectively,” he said.

Treasury Secretary Timothy F. Geithner met on July 28 with lenders who had signed agreements to participate and asked them to streamline the application process and improve customer service.

“For us the bottom line is, they need to reach the borrowers,” Mr. Barr said. “For some of them that means better training, for some of them that means ramping up capacity, for some of them that means treating people better in their call centers.”

The Treasury Department hopes the name-and-shame tactic will encourage banks to improve. In addition, Freddie Mac, the government-controlled mortgage buyer, will audit rejected applications.

Wells Fargo and Bank of America issued statements on Tuesday promising to comply with the program.

“Despite our aggressive efforts to find solutions for homeowners in default, we must improve our processes for reaching those in need,” said Barbara J. Desoer, president of Bank of America Home Loans. She said that Bank of America completed 150,000 modifications through its own programs in the first half of 2009.

Mike Heid, a president of Wells Fargo Home Mortgage, said the company would now send eligible customers a trial modification agreement within 48 hours of their initial contact.

“Our company has been accelerating our use of HAMP,” said Mr. Heid, referring to what is officially the Home Affordable Modification Program. “We’re confident we can achieve our portion of the government’s goal to reach 500,000 HAMP trial modification starts by Nov. 1.”

But John Taylor, president of the National Community Reinvestment Coalition, said the government should not depend on voluntarily compliance from banks.

“There are other modifications that Wells Fargo and Bank of America would argue that they’re making,” he said. “But maybe they’re making modifications that are not as deep or consistent with the guidelines.”

Michael Calhoun, president of the Center for Responsible Lending, was also skeptical that banks had enough incentive to comply with the program. The Treasury Department offers $1,000 payments to lenders for each modified loan and pays lenders part of the difference between borrowers’ old monthly payments and their new ones.

“For over three years, leaders have insisted they can handle this crisis on their own, but today’s report shows that the time for voluntary action is over,” Mr. Calhoun said in a statement.

Kathleen Day, a spokeswoman for the center, said: “There’s still a lot of market reasons why they wouldn’t do it. Some may not have the warm bodies to do it. They may feel overwhelmed.”

That would change, she said, if banks knew judges could modify mortgages in bankruptcy courts.