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White House Sends First Pre-Foreclosure/Loan Mod Report Card

Loan Modifications

Program was designed to help 4 Million Homeowners…

Bank of America and Wells Fargo both got very low marks on the Obama administration’s first monthly report card on the program designed to help stem the foreclosure crisis. But the real problem lies in the vact that only 15% of eligible borrowers were offered the loan modification program.

In March, the government launched a $50 billion program to help up to 4 million financially troubled borrowers by modifying their loans to lower the payments. But the administration is off to a slow start; according to the first monthly progress report on the performance of the loan modification program introduced by the Obama administration, only 15% of the borrowers eligible to participate in the program have been offered loan modification so far. Among the 38 firms that are participating in the program, several loan servicing companies including American Home Mortgage Servicing and PNC Financial Services Group Inc. have not modified a single loan. The best performer among large firms is Saxon Mortgage Services Inc., which has implemented trial loan modifications to 25% of its eligible borrowers. Mortgage firms have been criticized for not doing enough to expedite the program.

Both Bank of America Corp. and Wells Fargo & Co. – which have received billions in federal bailout money – were below average. BofA, which did not immediately comment, modified 4 percent of eligible loans, and Wells Fargo 6 percent.

The government’s initial target was to assist up to 4 million distressed homeowners. However, just about 200,000 homeowners have received loan modifications so far. According to RealtyTrac, 1.5 million households have received at least 1 foreclosure notice in the first 6 months of this year. “We want to go faster,” said Michael Barr, the Treasury Department’s assistant secretary for financial institutions. “There are a bunch of servicers that are lacking in performance. They have to lift their game.” Some analysts say that modification procedures take time given the complexity involved. “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.

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