According to a Treasury Department report, the largest U.S. banks have found it more difficult to meet demand for loan modifications than their smaller rivals. As stated by a U.S. Treasury official, the pace and effectiveness of the government’s anti-foreclosure programs has been limited by the inability of some mortgage servicers to keep up with demand.
David Sisko, the head of default management services for Deloitte & Touche LLP said that the Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. are likely to show the poorest levels of homeowner assistance among the 31 companies participating in President Barack Obama’s $75 billion loan modification program. The government said it wants to clearly show the companies that are doing the most to help.
In order to help as many as 4 million borrowers save their homes, Obama’s Making Home Affordable loan modification program was introduced this year. So far, about 200,000 trial loan modifications have begun, and the new administration announced last month that it’s setting a goal of starting at least 500,000 by Nov. 1.
Sisko stated that many banks don’t yet have the capacity to process the volume of loan modifications being demanded. The specialists in modification have gone from processing an average of 50 to 100 loans a month to 200 to 300.
The Making Home Affordable program requires that the 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 should lower the 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.
But the issue is that a lot of these modifications are very hard to do, and it takes time. A group of lenders have also met with Obama administration officials on July 28 and have promised to step up the pace of loan modifications to keep more homeowners from sliding into foreclosure. Thus there is some slow and steady progress, which might yield great results in the future.
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