Finance Globe

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Three Top Banks Penalized for Falling Short on Home Loan Mods

After reviewing the performance of the ten largest mortgage servicers participating in the Home Affordable Modification Program (HAMP), government officials have decided to halt payments to three top U.S. banks that are not doing enough to prevent foreclosures, the Treasury said in a report on Thursday.

Bank of America, Wells Fargo Bank, and J.P. Morgan Chase were identified as needing “substantial improvement” in their handling of home loan modifications for last quarter and will lose out on financial incentives paid by the Treasury, which oversees HAMP. Ocwen Loan Servicing also fell short of the Treasury’s requirements but will not be penalized because they were negatively affected by a large number of mortgages they took over during the review period.

The Treasury came to their decision based on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance.

Six other loan servicers - including American Home Mortgage, CitiMortgage, and GMAC Mortgage - were considered to be “in need of moderate improvement” and have until next quarter to get up to speed before they risk losing their Treasury payments as well.

“While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” said acting Treasury Assistant Secretary for Financial Stability Tim Massad. “These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.”

The median savings for borrowers who received a permanent home loan modification was $536, or 37% of their before-modification house payment; the aggregate monthly payment savings for permanent modifications is $6.3 billion from HAMP’s inception in early 2009.

U.S. Department of the Treasury
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Saturday, 04 February 2023

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