WASHINGTON (FinalCall.com) – While the Obama administration’s first monthly Servicer Performance Report detailing the progress of the Making Home Affordable loan modification program claims rapid progress in a few short months, others contend the findings show a failing effort.
“The report card issued by the Treasury Department Aug. 4, shows that financial companies deserve a failing grade in their voluntary efforts to modify home loans to help restore the U.S. economy,” said Michael Calhoun, president of the Center for Responsible Lending.
“The results reveal that only 15 of every 100 families who are eligible for a modification of their mortgage have been offered one. That’s 85 distressed families left with the prospect of losing their home for every 15 offered a helping hand.”
He added, “We applaud the Obama administration for providing data from individual loan-servicing companies to shed greater light on how tax dollars are being spent. This is a major step in holding lenders accountable by keeping the public informed.”
The report details show Bank of America modified just four percent of eligible loans, and Wells Fargo six percent. Wachovia Corp., which was taken over by Wells Fargo in December, modified two percent of mortgage loans.
“We think they could have ramped up better, faster, more consistently and done a better job serving borrowers and bringing stabilization to the broader mortgage markets and economy,” Michael Barr, a Treasury assistant secretary told reporters. “We expect them to do more.”
According to the Treasury Department, the report documents the number of struggling homeowners helped under the program, provides information on servicer performance and expands program transparency.
On Feb. 18, the Obama administration announced a comprehensive plan to stabilize the U.S. housing market.Two weeks later, the administration published detailed program guidelines and authorized servicers to begin modifications immediately.Making Home Affordable provides $75 billion for sustainable mortgage modifications through the Home Affordable Modification Program.
Servicers covering more than 85 percent of loans in the country are modifying loans under the program. More than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun.The government feels this pace for modifications puts the program on track to offer assistance to three to four million homeowners over the next three years.
“Unfortunately, the numbers show that too few people behind on their mortgages are being reached.While the number of families receiving help has increased during the past few months, the number of struggling homeowners continues to outweigh mortgage modifications by a wide margin,” argued Mr. Calhoun. “In June this year alone there were 254,000 foreclosure starts, which is more than the total number of modifications made to date under the current program.”
“The same lenders who have received a taxpayer bailout have spent millions of dollars lobbying against a reasonable solution to the foreclosure crisis that would require no tax funding: allowing judges to modify primary mortgages in bankruptcy courts,” he said.
RealtyTrac, the leading online marketplace for foreclosure properties released its Midyear 2009 U.S. Foreclosure Market Report July 16, which shows that 1 in 84 housing units received at least one foreclosure filing in the first half of the year or 1.5 million foreclosure filings.
Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helped to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005.
“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac.
Mr. Calhoun recommends that Congress and regulators get involved. “For over three years, lenders have insisted they can handle this crisis on their own, but today’s report shows that the time for voluntary action is over,” he said.
Congress and regulators need to “lift the legal barriers that now keep homeowners from seeking reasonable relief through bankruptcy court, publish more detailed information on loan modifications, and reform the broken lending market by creating the proposed Consumer Financial Protection Agency so that we can avoid another financial crisis in the future,” Mr. Calhoun said.