Bank of America defends performance in Making Home Affordable mortgage modification program

By Renae Merle
Washington Post Staff Writer
Thursday, December 17, 2009

Bank of America, the country's largest mortgage lender, on Wednesday defended its performance in the federal foreclosure relief program, saying that far fewer of its customers are eligible for the plan than government estimates indicate and that it is working to cure any deficiencies.

The bank has come under criticism for lagging behind competitors in signing up borrowers to the program, known as Making Home Affordable. By November, Bank of America had registered only 15 percent, or about 160,000 customers, of the more than 1 million delinquent borrowers who are potentially eligible, according to Treasury Department data. That is a far smaller percentage than competitors such as J.P. Morgan Chase and Citigroup.

Only about 340,000 of the 1 million delinquent borrowers identified by Treasury are likely to survive the qualification process, Jack Schakett, Bank of America's credit loss mitigation strategies executive, said on a conference call with reporters. Many of the remaining distressed borrowers have abandoned their home or rented it to tenants, making them ineligible, he said. Others are unemployed and can't afford even lowered payments, he said.

The bank's backlog of delinquent borrowers has also been inflated by foreclosure moratoriums that it implemented starting late last year and a risky portfolio of loans acquired as part of its purchase last year of Countrywide Financial, company officials said. "We're being [judged] as below average, and we really aren't when you look at the numbers," he said. "On average we have more customers that fail the eligibility requirements than competitors."

The government program pays lenders to lower borrower's payments to 31 percent of their income. But the effort has faced a series of stumbling blocks, getting off to a slow start as lenders struggled to keep up with requests for help. Economists now question whether the initiative is well suited to deal with the growing number of borrowers falling behind on their payments because they are unemployed.

Already thousands of homeowners who were enrolled in the effort have been dropped because they fell behind on their payments or their lender determined that they did not qualify after all. And thousands more are at risk of losing their government aid by the end of the year if they do not submit required documents, such as pay stubs, hardship letters and bank statements.

About 48,000 Bank of America borrowers are among those at risk of losing their loan modifications by the end of the year, Schakett said. The company will give those who do not submit their documents on time another two months to apply for a separate company program, he said.

But in those cases, borrowers will lose some perks of the government program. Under the federal plan, borrowers are eligible for $1,000 a year over 5 years that is used to lower their mortgage balance; the bank does not offer a similar benefit. "We have learned that we really need to create a sense of urgency among our customers" to return required documents, Schakett said.

Meanwhile, Citigroup said Wednesday that it will halt foreclosure sales through the holidays. The moratorium, similar to actions taken by lenders last year around this time, will impact about 2,000 homeowners with loans owned by the bank and who face foreclosure sale between Dec. 18 and Jan. 17. The bank wanted to "make sure we didn't foreclose on people during the holidays. This is the wrong time of the year to pursue something like that," said Sanjiv Das, president of CitiMortgage.

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