Three of the nation’s biggest banks have failed to live up to new performance guidelines under the Obama administration’s main foreclosure relief program and will be cut off from receiving financial incentives until they improve.
Bank of America, J.P. Morgan Chase and Wells Fargo were found to be in need of “substantial improvement” under the administration’s Home Affordable Modification Plan, the administration said Thursday.
The new assessments are intended to compel the nation’s biggest mortgage servicers to improve their practices in the program, officials said. The foreclosure program has long been criticized as ineffective and falling short of its goals in helping troubled borrowers. The program is voluntary and provides financial incentives for banks to modify loans.
“While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” said Tim Massad, acting assistant secretary for financial stability in the Treasury Department. “These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.”
Ocwen Loan Servicing LLC was also found to be needing substantial improvement but funds were not denied to that company because its poor performance in the first quarter was largely due to its acquisition of a portfolio of troubled loans. The administration graded the top 10 servicers in its program, and all of them were found to be needing improvement.
In April, 29,000 homeowners received a trial modification under the HAMP program and 29,000 received a permanent modification. The permanent modifications had a median payment reduction of 37% — or more than $500 every month.
[Updated 11:20 a.m. June 9: The immediate reactions from the large banks were mixed. Wells Fargo, in a sharply worded statement emailed by spokeswoman Vickee J. Adams, said that it would formally contest the characterization of its performance by the administration and that the report “does not fairly reflect” the bank’s record.
“It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury,” Adams said. “The report reviews activities that date back a year or more and in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners.”
Bank of America, in an emailed statement from spokesman Richard G. Simon, said that it acknowledged that it needed to improve its practices. The bank said that more than 127,000 of its homeowners had completed modifications through the HAMP program and more than 850,000 through other homeowner assistance programs.
“We acknowledge improvements must be made in key areas, particularly those affecting the customer experience,” Simon said. “We have made great progress in several key performance areas and, in the first quarter, Bank of America was responsible for one of every four modifications completed under HAMP. We believe future reviews will confirm that progress.”
Chase did not immediately respond to a request for comment.