Correction to This Article
An earlier version of this article about home foreclosure data misstated the newly initiated foreclosure rates included in a study by the Office of the Comptroller of the Currency. The correct rates are 0.60 percent for the fourth quarter of 2007 and 0.67 percent for the first quarter of 2008.

Data on Housing Relief Questioned

By David Cho and Renae Merle
Washington Post Staff Writers
Friday, June 13, 2008

Banks and mortgage firms are providing questionable information about the number of subprime mortgage borrowers they are helping and the rate at which homeowners are falling into foreclosure, according to the top regulator for the nation's largest banks.

Those details are crucial for regulators to gauge the severity of the housing crisis and evaluate the effectiveness of the steps lenders are taking to address the problems.

John C. Dugan, comptroller of the currency, which oversees national banks, said his agency found "significant limitations with the mortgage performance data reported by other organizations and trade associations."

"Virtually none of the data had been subjected to a rigorous process to check for consistency and completeness -- they were typically responses to surveys that produced aggregate, unverified results from individual firms," Dugan said in a speech in New York on Wednesday. "That lack of loan-level validation raised real questions about the precision of the data, at least for our supervisory purposes."

Dugan said in an interview that he was referring to information provided by groups such as the Mortgage Bankers Association, which reports a foreclosure rate widely cited by regulators and the media. A report by the Office of the Comptroller of the Currency calculated that the rate was higher based on raw data it collected from nine of the country's largest banks.

Dugan's comments also raised questions about the accuracy of the reporting from Hope Now, an alliance of mortgage firms and banks that was formed to help financially troubled holders of subprime mortgages. Leaders of the coalition, which was put together by the Bush administration, contend they have aided more than 1 million homeowners. Those figures were self-reported by lenders in response to the kind of surveys Dugan has faulted.

Faith Schwartz, executive director of Hope Now, acknowledged the need for uniform reporting standards. But, in a statement, she said her coalition's information was more complete than that collected by the OCC. She noted that the OCC data reflect mortgage loans from a limited number of banks, "while Hope Now statistics encompass more member data and provide a broader view of the range of solutions delivered by a larger number of mortgage servicers."

Jay Brinkmann, vice president of research for the MBA, also defended his organization's reporting. His group's information, he said, "gives the most comprehensive look at the performance of mortgage loans from a wide variety of different types of lending institutions in order to give a consistent year-in-and-year-out picture of the landscape."

In an interview yesterday, Dugan tempered the strong language he used in his speech. "It was not intended to be a criticism of what they are doing," he said of MBA and other industry associations. Their figures, he added, "get you in the ballpark . . . but we wanted to have a much more specific level of detail."

Banks and mortgage firms have widely varying definitions for what constitutes a loan modification for a struggling borrower and even define subprime mortgages differently. The lack of standards leave the data open for interpretation or manipulation.

The OCC collected its data from nine large national banks including Citigroup, Bank of America, Wells Fargo and J.P. Morgan Chase.

The agency then did its own evaluation of whether the measures taken by the firms qualified as loan modifications, OCC officials said. For instance, it excluded those agreed to over the phone. These efforts are often included by banks in their loan-modification figures.

The OCC found that the nine banks -- which represent 45 percent of the home loan market -- provided slightly less than 250,000 loan modifications from October to March.

Hope Now has said that its coalition, which represents nearly all lenders, completed nearly 1 million modifications during that same period.

The OCC also found that the rate of newly initiated foreclosures by the banks was 1.13 percent in the first quarter, compared with 1.01 percent in the fourth quarter. The MBA's national survey reported those rates as 0.99 percent and 0.83 percent, respectively.

Rep. Barney Frank (D-Mass.) said the OCC's findings demonstrated that the Hope Now initiative was not enough to solve the housing crisis.

"I welcome the objective report done by the OCC, and I appreciate the willingness of Comptroller Dugan to give us this independent analysis," Frank said. "I supported the Hope Now program when it came out, and I continue to think it is worth trying. But it is now clear that much more aggressive action is needed."

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