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Three of the nation’s largest mortgage servicers will no longer
receive payments tied to their participation in the Obama
administration’s main foreclosure prevention initiative until they
improve their performance in that program, a senior administration
official said Wednesday.
Bank of America, J.P. Morgan Chase and Wells Fargo need to make
“substantial improvements” to collect fees through the Making Home
Affordable Program, which helps struggling borrowers by lowering their
monthly mortgage payments.
The companies failed to meet basic program requirements, such as properly contacting borrowers, the official said. The details are scheduled to be released Thursday in a report that will assess the performance of the 10 largest participating servicers.
Through the initiative, servicers can collect at least $1,000 for each loan they permanently modify. The payment is meant to entice servicers to participate in the voluntary program, which has doled out $560 million in payments since its launch in March 2009.
The three targeted servicers — which received $24 million in payments last month — will not receive payments for permanent modifications reported from June onward until they address their weaknesses.
No estimates are available yet for how much will be withheld.
A fourth servicer — Ocwen Loan Servicing — also ranked among the worst performers, but it will continue to receive payments because its poor showing was due primarily to a portfolio of loans it recently acquired from another company, the official said.
The move is the first major action taken against servicers participating in the embattled program, which has been criticized as ineffective and too soft on the servicers.
The House recently approved a Republican-led measure that would kill the initiative in part because of its lackluster results, but the measure has not gained traction in the Senate.
When the program was created, the administration projected it would prevent 3 million to 4 million foreclosures before it expired in December 2012. But it is expected to fall far short of its goal, having permanently modified only about 700,000 loans so far.
The Treasury Department, which oversees the program, does not regulate the institutions that participate and therefore cannot impose fines or penalties, said the official, who spoke on the condition of anonymity because the information has not been made public. The only available leverage is to withhold incentive payments, the official said.
Doing so is not likely to discourage lenders from modifying loans, the official said. Instead, the strategy and the in-depth analysis of each lender should shame servicers into shaping up.
“It’s a temporary withholding to get them to fix the problem,” the official said.
Borrowers and the investors who own mortgages also receive incentive payments for participating in the program. Their payments will not be withheld.
SOURCE: The Washington Post
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