White House Prods Banks to Back Mortgage Program
Friday, July 10, 2009
The Obama administration yesterday scolded the heads of the country's largest banks, urging them to move faster and do more to help millions of distressed homeowners under a federal foreclosure prevention program.
In a two-page letter, Treasury Secretary Timothy F. Geithner and Shaun Donovan, secretary of the Department of Housing and Urban Development, acknowledge that the government program, known as Making Home Affordable, has yet to gain traction since being launched in March.
"We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," the letter said.
Under the program, lenders are paid with taxpayer dollars to help borrowers stay in their homes by modifying their mortgage, including lowering their interest rate or extending the term of the loans. So far, more than 270,000 homeowners have been offered modifications, but it is unclear how many mortgages have been adjusted. Lenders have been overwhelmed by requests for help as rising unemployment rates cause more borrowers to fall behind on their payments. The administration had aimed for the program to help up to 4 million struggling borrowers.
J.P. Morgan Chase defended its progress on the program, noting that it has already approved 87,100 modifications under the government program and was reviewing more than 150,000 applications. Since January, the company has added 950 loan counselors and opened 27 homeownership centers where troubled borrowers can go for help, the company has said.
"We have done a lot to implement it. We have made a lot of progress on it, and we continue to add resources to do more," said Chase spokesman Tom Kelly.
Bank of America said in a statement that it had "worked diligently to ensure our implementation of the program would lead to long-term success for our borrowers."
Wells Fargo issued a statement supporting the program. "We're committed to working with all struggling borrowers using this program and the other options we have available to help those at-risk," it read. "We will continue to work with the Treasury and the Administration to ensure [Making Home Affordable] is as effective as possible."
Geithner and Donovan asked the servicers to hire more staff, expand call centers and improve the training of employees handling calls from borrowers. The banks were also told to designate a senior liaison for the program and to prepare for a July 28 meeting with senior Treasury and HUD officials to discuss how to fully implement the effort.
"We are asking that all servicers expand servicing capacity and improve the execution quality of loan modifications in order to help the sizable number of homeowners at risk of foreclosure and eligible for the program," the letter said.
The administration will begin issuing monthly reports by Aug. 4 detailing lenders' performance, including how many modifications they have implemented. They will be judged by new criteria, such as how long it takes borrowers to get help over the phone and the accuracy of the information they are provided. Freddie Mac, the government-controlled mortgage financing company, is developing a "second look" program to audit the applications of borrowers who have been denied help under the program.