The Obama administration has blamed the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says these companies have done little to help people at risk of losing their homes. The Treasury Department said that Wells Fargo & Co., Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes.
Based on those lenders’ lackluster success for the first three months of 2011, the government is withholding financial incentives that amounted to up to $1,000 per permanent loan modification. The three lenders incorrectly determined that many people were ineligible for the program, according to the government. As expected, the lenders are disputing the data. One of them, Wells Fargo, is formally appealing the government’s decision to cut off its incentives.
As of last month, the three lenders had already received about $24 million from the government. The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications.
More than 1.6 million troubled homeowners received trial modifications over the past two years. Roughly 44% of those who applied, or about 700,000, have had their mortgage permanently lowered as of April. A majority of the applicants, or about 843,000 homeowners, have dropped out of the program. Homeowners who are accepted into the program receive interest rates as low as 2% for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 per month. Homeowners have complained that the program has been a bureaucratic mess.
Source: Atlanta Journal Constitution
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