Getting a mortgage modification has been hard enough for homeowners, what with disorganized big banks not having enough well-trained people on staff to deal with the necessary ins and outs of the process. But a new study says that things should’ve been easier under the Home Affordable Modification Program and resulted in 800,000 fewer foreclosures than we ended up with.
ProPublica delves into the study by the Federal Reserve Bank of Chicago, the government’s Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago. The results come down that hefty number of 800,000 homeowners who ended up in foreclosure but shouldn’t have under the government’s foreclosure prevention program.
The results showed that some banks were better than modifying loans than others because they had the extra ammo of larger staffs and better trained employees who knew the best way to guide homeowners to avoid foreclosure.
The study found that if all the mortgage servicers that weren’t as good at modifying loans had performed as well as their peers, there would’ve been 800,000 more modifications under HAMP. That would’ve brought the total to 2 million homeowners who avoided foreclosure, instead of 1.2 million. While it’s still an impressive tally, it’s a lot less than the 3-4 million promised by the administration when HAMP was introduced in 2009.
The authors of the study don’t name names when it comes to the banks and servicers that didn’t perform as many successful modifications, simply saying a “few large servicers [have offered] modifications at half the rate of others. The authors add that some of the banks “may not have responded to the program since doing so would involve changing their business focus from processing and channeling payments to actively renegotiating loans. In addition, this may have involved significantly altering their organizational capabilities, such as building appropriate infrastructure and hiring and training servicing staff.”
Basically — too much work and too much cost to be bothered with.
Bank of America — one of the four largest U.S. banks along with Citi, JPMorgan Chase and Wells Fargo — says it hasn’t done a thing wrong, with a spokesman telling ProPublica that the bank’s “home retention results are significant and in line with our industry peers to date.”
And again, while no mortgage servicers are named, as it is a large mortgage servicer we asked Wells Fargo to respond to the report. A spokeswoman issued the below statement to Consumerist:
Because of the product choices we have made, our disciplined underwriting, and the manner in which we approach foreclosure prevention, our delinquency and foreclosure rates have, over time, continued to be significantly less than the industry average.
93% of our first- and second-mortgage customers were current in their payments as of the second quarter of 2012. Over the last 12 months, less than 2.0% of our owner-occupied servicing portfolio has proceeded to a foreclosure sale.
We help 7 of every 10 customers who choose to work with us to avoid foreclosure through efforts including 781,099 modifications (Jan 2009 to June 2012)—or 2 mods for every 1 foreclosure sale. Through those modifications we have done $5B in principal forgiveness (Jan 2009 – April 2012), including forgiveness customers earn through on-time payments. Of those modifications, approximately 84 percent have been done through our own modification programs and the remainder through the federal government’s Home Affordable Modification Program.
The Treasury Department runs HAMP and responded to the new report and any criticism of its oversight of big banks by saying the program has resulted in “one of the most comprehensive compliance reviews of mortgage servicing operations in the country. Servicers in the Making Home Affordable Program are subject to an unprecedented level of compliance oversight.”
The good news? Modifications that happened under HAMP have worked out better for homeowners than those outside of the program, and there are more modifications than there would’ve been without it. Ah, a bright side.