Posts Tagged ‘wells fargo home loans’
Bank of America Among Worst for Loan Modifications
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 this year, the report today shows. Wells Fargo had a 6 percent rate, trailing JPMorgan Chase & Co.’s 20 percent and Citigroup Inc.’s 15 percent. Wachovia Corp., which Wells Fargo acquired, had a rate of 2 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 today. “We expect them to do more.”
The government is trying 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 yesterday before the report was released. “Some of the strongest performers are smaller servicers, but it’s not a uniform correlation.”
‘A Little Nimbler’
The report shows the levels of homeowner assistance for the 38 companies participating in President Barack Obama’s $75 billion loan modification program, commonly referred to as HAMP. The Obama administration said last month that it’s setting a goal of starting at least 500,000 trial modifications by Nov. 1.
Overall, 15 percent of borrowers eligible for the program have been offered changes to their mortgage terms and 9 percent have entered into a trial modification, the report 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.
“The smaller banks and servicers are probably a little nimbler,” Sisko said.
‘Woefully Understaffed’
Pasadena, California-based Wescom Central Credit Union had a 28 percent rate for its 136 eligible loans, the best performer among servicers on the list that had at least 100 qualifying mortgages. Morgan Stanley’s Saxon Mortgage Services had begun trials on 25 percent of 84,130 eligible loans. Aurora Loan Services, a former unit of Lehman Brothers Holdings Inc., had started modifications for 21 percent of 72,838 eligible loans. GMAC Mortgage Inc. was at 20 percent.
“Unless key challenges are addressed, this program will never get to full scale,” said Brenda Muniz, the legislative director for the Association of Community Organizations for Reform Now, or ACORN. “Servicers remain woefully understaffed, they are overwhelmed by the large volume of borrowers seeking loan mods and they are violating” program terms, she said.
Some banks are requiring borrowers to make up-front payments to receive modifications and foreclosing on loans without reviewing their eligibility for modification, she said.
Eligible Loans
Eligible loans under HAMP are those that 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 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 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, Virginia.
Bank of America, Wells Fargo
Bank of America modified 150,000 loans through other programs in the first half “as we ramped up to make” Obama’s program operational, Dan Frahm, a spokesman for the Charlotte, North Carolina-based company, said yesterday.
“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.
Wells Fargo modified more than 240,000 mortgages in the first seven months of the year, including 20,219 through Obama’s program, the San Francisco-based company said in a statement.
“HAMP was just a piece of the overall loan modification story,” said Mike Heid, co-president of Wells Fargo Home Mortgage. The delay in ramping up capacity at Wells Fargo is “just a function of program availability, when the guidelines and specific requirements became known,” he said.
Obama announced the programs in February, and final criteria for administering the modifications on loans owned by Fannie Mae and Freddie Mac were released in April. Specific program guidelines for loans owned by other investors were provided in June, and the Treasury just last week gave new details for loans backed by the Federal Housing Administration.
Less Restrictive
Heid said Wells Fargo is also speeding up the way it processes loans for the program, requiring income verification and other paperwork during the trial modification period instead of beforehand.
“We waited for the actual documents to be in hand before starting the trial modification,” Heid said in an interview. “Now that we have some operating experience with the HAMP program, we think we can be less restrictive on that point.”
Citigroup is “pleased with our numbers and with what we have been able to accomplish in the past two months,” Mark Rodgers, a spokesman for the New York-based bank, said. “But we can, and want to, do more. We look forward to continuing to work with the government, industry participants, non-profits and others to help keep more distressed American borrowers out of foreclosure and in their homes.”
Citigroup and Bank of America each received about $45 billion from TARP, while Wells Fargo took $25 billion.
‘Demand Is Great’
Loan servicers send out bills, collect debts and keep records for mortgage lenders. A group of servicers met with Obama administration officials on July 28 and pledged to step up the pace of loan modifications to keep more homeowners from sliding into foreclosure, according to the Treasury.
JPMorgan Chase is happy with its progress so far, said Christine Holevas, a spokeswoman for the New York-based company.
“That always has to be tempered with the fact that the demand is great; we know that we have more to do,” Holevas said. “We believe we’ve made significant progress. We’ve ramped up, we’ve hired people, we’ve added office space, we’ve invested in technology.”
JPMorgan Chase said June 30 that it approved 87,100 loans for modification under the administration’s plan since April 6.
Under Pressure
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, assailed the administration at a hearing last month for the sluggish results from anti-foreclosure programs, while industry executives spoke of “confusion and delay” from how the government sets rules for the programs.
“The government is under a lot of pressure to react and they announce these programs where the infrastructure is not in place to service the program,” Miller said.
More than 1.5 million properties received a default or auction notice or were seized by banks in the six months through June, Irvine, California-based RealtyTrac Inc. said July 16 in a statement. That’s a 15 percent increase from a year earlier.
Barr said officials are seeing some “encouraging signs” that “our mortgage markets may be beginning to reach a point of stabilization.”
“It’s obviously still early to tell the nature of the mortgage markets what direction they may be headed,” Barr said on the conference call. “These encouraging signs are helpful, but it took a long time to create the financial crisis we are in and it will take a long time to get out of it.”
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net;
