Banks step up changes to loans
The sluggish $75-billion federal mortgage relief program got a boost from Wells Fargo & Co. and Bank of America Corp., both of which stepped up their efforts last month to modify home loans.
The two banks, which took a total of $70 billion in taxpayer bailout funds to shore up their finances, have been roundly criticized on Capitol Hill for not moving quickly to help distressed homeowners.
Last month, Bank of America more than doubled the number of home loan modifications it started, to 59,891, over its July numbers, while Wells Fargo increased its modifications 64% to 33,172. That helped pump up the industry’s response to the slow-starting federal program 53% to more than 360,000 modifications, according to figures released Wednesday by the banks and in the Treasury Department’s now monthly report.
Still, the Obama administration’s Making Home Affordable program isn’t getting to struggling homeowners quickly enough, some argue. The administration itself set a target of modifying 500,000 mortgages by Nov. 1.
“I am disappointed at the pace of this program,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Kevin Stein, associate director of the California Reinvestment Coalition, a homeowner advocacy group, said, “These numbers still aren’t where they should be.”
Even the Treasury Department acknowledged that the pace of modifications had to pick up.
“There are signs the plan is working,” Michael Barr, assistant Treasury secretary for financial institutions, told the House committee Wednesday. “But we can do better.”
The department’s monthly report, its second since the program was launched in March, should get some credit for giving the program a boost, Stein said.
“For the first time, last month we were able to see data on which companies were helping families avoid foreclosure and which companies were not,” he said. That exposure for July’s activity, he said, shamed especially Bank of America and Wells Fargo, which had turned in embarrassingly low numbers in July.
Also, although 85% of the mortgages nationwide are held by institutions voluntarily participating in the program, Stein suggested that banks and other lenders would be moving faster if participation were mandatory.
Up to 4 million homeowners have mortgages that qualify for adjustment under the administration’s program.
Bank of America, Wells Fargo and other loan servicers said slowdowns were caused by the need to increase staffing in loan-servicing departments and by government delays in distributing information about the program. Wells Fargo said it was well on its way to modifying more than its share of eligible loans.
Overall, about 1 in 5 eligible homeowners, or nearly 19%, have had their mortgages changed through the program, the report said. In July, that number was about 9%.
In some cases, loan servicers are using the plan’s rules to keep homeowners from taking part, which results in homes heading to foreclosure anyway, said Bruce Dorpalen, director of housing counseling for the Assn. of Community Organizations for Reform Now, or ACORN.
“We need stronger enforcement,” Dorpalen said. “We’re still finding foreclosure sales going through with no review to see if homeowners are eligible for loan modifications.”
ACORN is calling for the federal government to impose a one-year freeze on foreclosures to allow homeowners more time to figure out whether they are eligible for loan changes under the program.
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