Correction to This Article
In this article about Bank of America's difficulties meeting the demand for mortgage modifications under the federal Making Home Affordable program, a zero was omitted from the approximate number of home loans modified by J.P. Morgan Chase under the program. It has modified about 117,000.

Bank of America Scrambles to Provide Mortgage Relief Before Deadline

By Renae Merle
Washington Post Staff Writer
Monday, October 12, 2009

PLANO, Tex. -- Bank of America employees are reminded every day of how far they still have to go. Just outside the elevators of their vast third-floor command center, attached to the wall, is a cardboard thermometer that shows them inching toward their goal of signing up 125,000 struggling borrowers for a federal program to modify their mortgages.

The company faces many of the same challenges as other major lenders addressing the foreclosure crisis. But with weeks remaining to meet the November deadline set by the Obama administration, Bank of America is trailing well behind the other large banks, according to Treasury Department data.

The company's effort has been hamstrung by a staff shortage and by adapting its computer systems and even fax machines to the scale of the program, which began in March. The company was also slow out of the box because it initially took a more conservative approach than some other banks, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, Bank of America softened the requirement and began authorizing some modifications without getting all the documents first.

Adding to borrowers' difficulties was a letter sent this summer by Bank of America that mistakenly informed some of them that they did not qualify for the administration's foreclosure-prevention program because their loans were not backed by Fannie Mae or Freddie Mac, the government-controlled mortgage giants. "Bank of America is not actively participating in this program," the bank wrote to some borrowers, according to a copy of the letter obtained by The Washington Post.

After a reporter asked the company about the letter, Bank of America stopped sending it out. A company spokeswoman said the bank reviewed the cases of borrowers who received it, adding that she did not know how many there were.

Even as the administration urges lenders to do more to help homeowners, some Bank of America employees continue to express skepticism about whether all of those seeking assistance really need it. "There's a difference between hardship and entitlement," said Jerry Durham, Bank of America's vice president of home retention.

Stacking Up the Banks

Under the Making Home Affordable program, lenders are paid with taxpayer funds to reduce borrowers' mortgage payments by lowering their interest rates, for example, or by extending the terms of their loans

A progress report released last week by the Treasury Department showed that only 11 percent (about 95,000) of Bank of America's delinquent borrowers who were potentially eligible for the program had been given a loan modification. That compares with 27 percent, or 117,000, for J.P. Morgan Chase, and 33 percent, or 68,000, at Citigroup, the Treasury reported. The figure for Saxon Mortgage Services, which is owned by Morgan Stanley, is 41 percent, or 32,000.

"We're sure working hard," Ken Scheller, senior vice president for home retention at Bank of America, said when asked about his company's low ranking. "We don't want to be down there." He added that the bank had modified 215,000 mortgages outside the federal program this year, including some under the terms of a settlement reached with state attorneys general related to subprime loans issued by Countrywide Financial, which Bank of America bought last year.

Many of the 62 other mortgage lenders participating in the government program have also ramped up, industry officials said. Wells Fargo reported that call volume tripled after the program was announced in February, prompting the company to hire an additional 5,800 employees to address loan modifications this year. Citigroup increased its loss-mitigation department from 450 employees in early 2008 to more than 4,000. J.P. Morgan Chase switched from a paper fax system to an electronic one to handle the volume of documents being submitted by borrowers.

"I remember two years ago sitting at a table with lenders and asking, 'Are you guys staffed up for this?' And they were like, 'Yeah, we're prepared,' " said Mark A. Calabria, an expert in financial regulation at the Cato Institute. "This was a much bigger wave than the lending industry was expecting."

The problems are especially acute at Bank of America, partly because its mortgage portfolio more than doubled with the acquisition of Countrywide, analysts said. Countrywide had a loan portfolio heavy with risky mortgages and delinquent borrowers. Especially now, Bank of America is "like a big oil tanker, and it takes time for them to shift focus," said Guy Cecala, publisher of Inside Mortgage Finance.

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