Although they participated in the Obama administration’s Making Home Affordable Program, Wells Fargo, Bank of America and J.P. Morgan Chase will not be compensated for their efforts to help struggling borrowers lower their monthly mortgage payments[1]. A senior administration official announced yesterday that due to the need for “substantial improvements” to the loan modification process, these lenders and servicers will no longer be able to collect their fees for participation in the program. The official alleged that the servicers failed in basic program requirements like contacting borrowers. Servicers can collect at least $1,000 for each permanently modified loan, but these three lenders will not be eligible for payments on any permanent modifications made from June onward. Payment denial is the only route for regulation of the servicers since the Treasury Department cannot impose fines or penalties through the Making Home Affordable Program. Instead, it is hoped that withholding incentive money will “shame servicers into shaping up.” The official noted that the administration does not believe that withholding incentives will make lenders more reluctant to modify loans.
While it is true that all three of these lenders – and many others – have not done a particularly good job in the loan modification department, is it fair to back out on an agreement made with them for compensation? Is this the right way to handle the problem, or should lenders and servicers who behaved unscrupulously be litigated against or punished through loss of borrower business instead?
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Let us know what you think of the federal government’s attempt to deal with poor loan modification results and the perceived “failure” of the Making Home Affordable Program in the space below.
[1] http://www.washingtonpost.com/business/economy/federal-fees-halted-to-3-mortgage-servicers/2011/06/08/AGCC1bMH_story.html
I assume, perhaps naively that the lenders read the Federal contract they signed to participate in the Home program? They did not comply with the requirements stipulated in their contract. Where’s the beef?
They never wanted to do loan mods in the first place and now it’s obvious the meaningless $1000 per successful modification given was no incentive at all. Most lenders did not take initiative to create successful programs. Instead they put together token departments/programs just to satisfy the gov’s feable attempt at showing the American public they were doing something to help.
Now that the banks have succeeded in drawing out the process, doing just enough not to get prosecuted, producing nothing but token success, and having the Gov stand behind them throughout, you can bet the loan mod programs are all but done.
Yet you will see them tout greater success as they manipulate the publicized numbers. Simple math says less and less will now be applying and as the applicants thin out, the dismal loan mod depts will be better capable of performing.
America 0 Banks 10-Banks win again!
Lenders did not have to participate in loan mods to get paid for the bum loans they made. The loan mod program set up by the gov’t was just what (Paul above)was stated. Since the banks could get paid the difference between the foreclosed amount and the REO resale amount in the short term, why take the hit in the long term financing? It doesn’t good make money sense, so I am not surprised that this loan mod program was a big smokescreen to what is really going on. When it comes to the gov’t fixing things, they are either behind the eightball or looking out for their interests and their people. For some reason, it’s always about the banks’ bottom line, not yours and mine.
“The official noted that the administration does not believe that withholding incentives will make lenders more reluctant to modify loans” ???????????????????????????????
If that’s true, then that implies that offering the incentives would not make lenders more inclined to modify loans. So, why was the incentive offered in the first place? Just one more gesture to make it look like the administration is doing something without having to really take responsibility and do something that really would make a difference. Politics as usual.
The homeowners would have been better served witht the $1000/mo loan mod money than the crooks. My experience with JPMC was a four year mod program where they did nothing which ended in they demand for all the money in full a year ago forcing me into chapter 13 to save the home. Why did I not get a mod? They said I could sell my house to pay them back because there was equity involved. They are evil and they have the government helping them. Giving someone an incentive to be honest is crazy, we already know they are corrupt and have no reason to change.