Bank of America Corp. and Wells Fargo & Co. were the worst performers among the biggest U.S. banks in modifying loans for struggling homeowners, according to a Treasury Department report.
Bank of America began 27,985 trial loan modifications, or 4 percent of its eligible loans, under the government’s Making Home Affordable program started in March, the Aug. 4 report shows. Wells Fargo had a 6 percent rate, trailing JPMorgan Chase & Co.’s pace of 20 percent, and Citigroup Inc.’s 15 percent.
“Some of the servicers could have ramped up better, faster, more consistently,” Michael Barr, the assistant Treasury secretary for financial institutions, told reporters in a conference call. “We expect them to do more.”
The government is trying to squeeze better results out of its main anti-foreclosure program, which has put about 235,000 borrowers on the path to loan modifications out of the 4 million targeted for help. National Economic Council Director Lawrence Summers has said the Treasury report is an effort to create transparency about which mortgage servicers are helping most.
“The biggest servicers certainly have the biggest ships to turn,” Seth Wheeler, a deputy assistant Treasury secretary for federal finance said in an interview before the report was released. “Some of the strongest performers are smaller servicers, but it’s not a uniform correlation.”
The report shows the levels of homeowner assistance for the 38 companies participating in President Barack Obama’s $75 billion loan modification program. The Obama administration said last month that it’s setting a goal of starting at least 500,000 trial modifications by Nov. 1.
Wachovia Corp., which San Francisco-based Wells Fargo acquired, had a rate of 2 percent, the data shows.
Many banks don’t yet have the capacity to process the volume of loan modifications being demanded, said David Sisko, the head of default management services for Deloitte & Touche LLP. He said modification specialists have gone from processing an average of 50 to 100 loans a month to 200 to 300.
Pasadena, Calif.-based Wescom Central Credit Union had a 28 percent rate for its 136 eligible loans, the best performer on the list. Morgan Stanley’s Saxon Mortgage Services had begun trials on 25 percent of 84,130 eligible loans, the second-best performance. Aurora Loan Services, a former unit of Lehman Brothers Holdings Inc., had started modifications for 21 percent of 72,838 eligible loans.
Eligible loans are at least 60 days past due, in foreclosure or bankruptcy, and originated prior to 2009. The underlying property must be owner-occupied and conform to Fannie Mae and Freddie Mac loan limits, which can be as high as $729,750 in some areas. The data excludes Federal Housing Administration and Veterans Affairs loans.
The Making Home Affordable program requires banks that received federal aid from the Treasury’s Troubled Asset Relief Program, or TARP, as well as mortgage-finance companies Fannie Mae and Freddie Mac to lower the monthly payments for borrowers at “imminent risk” of default. Banks can lengthen repayment terms, lower interest rates to as low as 2 percent and forbear outstanding principal, among other methods.
“A lot of these modifications are very hard to do, it takes time and you can’t rush it,” said Paul Miller, a bank analyst for FBR Capital Markets in Arlington, Va.
Bank of America modified 150,000 loans through other programs in the first half “as we ramped up to make” Obama’s program operational, said Dan Frahm, a spokesman for the Charlotte, N.C.-based company.
“Just as you can’t judge a student’s performance for the semester by looking at their grade for one class, Making Home Affordable is one component of a comprehensive program Bank of America has in place to support homeowners,” Frahm said. •
