Wednesday, August 5, 2009

Banks can't handle loan modifications....

WSJ(8/5) UPDATE: Foreclosure Plan Is Off to a Bumpy Start (From THE WALL STREET JOURNAL)
By Ruth Simon
A report card released Tuesday by the Treasury Department showed wide variations in how quickly mortgage companies are helping financially troubled borrowers under the Obama administration's foreclosure-prevention plan. So far, more than 400,000 borrowers have been offered help. Over 235,000 borrowers, or roughly 9% of those eligible for the program and at least 60 days past due, have begun trial mortgage modifications, the first step to getting a loan reworked. Among the largest mortgage-servicing companies, J.P. Morgan Chase & Co. has put the most borrowers on a trial modification, having begun the process for roughly 79,000 of them, or about 20% of those whose loans are at least 60 days past due. Saxon Mortgage Services, a unit of Morgan Stanley, has begun trial modifications for more than 21,000 borrowers, or roughly one-quarter of its delinquent borrowers eligible for the program. Other companies have made less progress. Bank of America Corp. has begun trial modifications for fewer than 28,000 borrowers, or about 4% of those who are delinquent, while Wells Fargo & Co. so far has started with about 6% of such borrowers. Borrowers can get help under the Obama program if they are behind on their loan payments or current but at risk of imminent default. They must typically make three months of reduced payments during the trial period before they can qualify for a full modification. Administration officials said they were releasing the data in an effort to hold mortgage companies accountable. "While the program has ramped up in an impressive way, there are significant variations among servicers in their performance," said Assistant Treasury Secretary Michael Barr. He said some companies need to boost capacity or improve employee training. In September, the government will begin requiring mortgage companies to tell borrowers why their modification application was turned down, Mr. Barr said. Some borrowers say they are being denied help under the program even though they fall within its guidelines. The Obama program, announced in February, provides financial incentives to mortgage companies and investors to reduce loan payments to affordable levels. The administration has called on mortgage companies to boost the number of trial loan modifications to 500,000 by Nov. 1. Administration officials have said the program could ultimately help as many as three million to four million homeowners. Anthony Sanders, a real-estate finance professor at George Mason University in Fairfax, Va., said government officials should focus on the success rate for loan workouts, not the number being done. The administration's figures don't present a full picture of each company's activities. Bank of America said it completed 150,000 loan modifications in the first six months of this year outside the Obama program. Wells Fargo said it completed 240,000 modifications in the first seven months, mostly outside the program. Unlike some companies, Wells Fargo has been requiring certain borrowers to fully document income, slowing the pace of its modifications under the program. Mortgage companies are facing increased pressure to step up the pace. Sanjiv Das, chief executive of Citigroup Inc.'s CitiMortgage unit, said he receives an update at 7:30 each morning on the number of completed modifications. CitiMortgage has begun trial modifications for about 15% of its delinquent borrowers eligible for the Obama program. Mortgage servicers face substantial challenges. Call volume is running 500% above normal levels, said David Sisko, a director with Deloitte & Touche. Meanwhile, mortgage-servicing companies have boosted staffing by an average of just 30% to 40%. Mr. Sisko said employees who evaluate borrowers for loan modifications now are responsible for an average of 200 to 300 loan files, up from 50 to 100 in the third quarter of 2008. Some companies appear to have been quicker to respond than others. J.P. Morgan put its own modification program in place last fall and began gearing up for the Obama plan even before the final details were announced, said David Lowman, who runs J.P. Morgan's mortgage business. Still, like its competitors, J.P. Morgan also had trouble keeping up with the volume of customer calls, Mr. Lowman said. Bank of America, meanwhile, has been slower than some companies to implement some parts of the program, such as help for borrowers who are current on loan payments but still at risk of default. The company is also operating two different loan-modification systems, one for legacy loans and one for mortgages originated by Countrywide Financial Corp., which it acquired last year. The Countrywide operation has gotten up to speed more quickly, a company spokesman said, largely because it had agreed to step up modifications as part of settling a lawsuit brought by state attorneys general regarding Countrywide's lending practices. Bank of America is "very supportive" of the program, said Steve Bailey, the company's mortgage-servicing executive. But "it's difficult to implement," he said. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/nae/al?rnd=NEQpysjVnESC%2BGfnLGdDUw%3D%3D. You can use this link on the day this article is published and the following day.

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