Servicer Report Puts Biggest Modifiers on the Defensive

When the Obama administration released "the first servicer performance results":http://www.ustreas.gov/press/releases/tg252.htm/ Tuesday from its Making Home Affordable modification program, the news seemed mostly sunny. Servicers had responded in force to help distressed homeowners, with 400,000 modification offers made and 230,000 trial modifications underway. “MHA has made rapid progress in a few short months,” the Treasury concluded. But the government’s results also held "a stinging rebuke to some of the country’s largest banks.":http://www.treas.gov/press/releases/docs/MHA_public_report.pdf/ Bank of America and Wells Fargo were among the slowest modifiers in the nation, with BOA starting trial modifications on only 27,985, or 4 percent, of its eligible loans. Well Fargo fared only slightly better, making mods on 6 percent of its loans. By contrast, JP Morgan Chase, a host of smaller banks and even beleaguered lender GMAC Mortgage managed to modify 20% or more of their eligible portfolio. “Some of the servicers could have ramped up better, faster, more consistently,” said Michael Barr, the assistant Treasury secretary for financial institutions, in a conference call Tuesday with reporters. “We expect them to do more.” Of course, larger banks have more loans in the 60-day-or-more delinquency category that qualify for MHA modifications. And they have previously cited volume and understaffing as key issues that make it difficult for them to unwind their mortgage morasses. The individual touch is often a necessity for modifications, too. Just last week, servicers who visited lawmakers in Washington complained that the modification process was cluttered and confusing to many homeowners, who often didn’t even know what assistance they qualified for. In such situations, smaller lenders with lesser volumes are at an advantage. "Borrowers are quite confused," Sanjiv Das, the chief executive of CitiMortgage â€" a subsidiary of Citigroup -- told American Banker on Tuesday. "You have a lot of people who had lost a job or lost hours and are now faced with the prospect of not being able to pay their mortgages. They are not even sure what questions to ask with respect to the options they have on their mortgage." Some legislators aren’t pleased with the big banks’ excuses. In a hearing last month, Senate Banking Committee Chairman Christopher Dodd (D.-Connecticut) issued a tongue-lashing to the Obama administration for delays in modification and loss-mitigation programs. But many lenders say that sense of urgency from authorities isn’t helping homeowners’ cause; it’s muddying it. “The government is under a lot of pressure to react and they announce these programs where the infrastructure is not in place to service the program,” Paul Miller, a bank analyst for FBR Capital Markets in Arlington, Virginia, told Bloomberg Tuesday. “A lot of these modifications are very hard to do, it takes time and you can’t rush it.”