Three major banks have lost federal mortgage modification incentives in delivering a foreclosure relief program until they make big changes to improve their practices.
Obama administration officials have told Bank of America, JPMorgan Chase & Co., and Wells Fargo & Co. that they must make “substantial improvements” to the way they administer the Home Affordable Modification Program, and they will not receive any more federal money from the program until they do so. For example, officials noted that banks need substantial improvement in correctly evaluating borrowers’ incomes, which is a critical component for determining eligibility for the program. Some of the banks also need to improve how they identify and contact borrowers for the program.
Last month, the banks received $24 million in payments through HAMP, but no more payments will be made until servicers improve their performance, officials warned.
While Bank of America agreed that it needed to improve its practices in the program, JPMorgan Chase and Wells Fargo say they disagree with the poor evaluation. Wells Fargo, in fact, says they plan to contest the administration’s evaluation of how well it’s done with administering HAMP. The review, which examined all 10 servicers who administer the program, found that all 10 were performing below its benchmarks.
This marks the first time the Obama administration has taken major punitive action against banks in the HAMP program, which has been under attack in recent months from some lawmakers and critics who say the program has not done enough to help save home owners from foreclosure. Republicans in the House of Representatives voted to end the program earlier this year. However, the measure has yet to pass the Senate and the White House already has threatened a veto.
John J. O’Dell Realtor® GRI