Bank Of America Stands Out For Poor HAMP Performance

Bank Of America Stands Out For Poor HAMP Performance

Bank Of America Stands Out For Poor HAMP Performance
First Posted: 09-27-10 12:30 PM | Updated: 09-27-10 12:30 PM


Bank of America stands out among the biggest mortgage servicers for an exceptionally poor performance under the Obama administration's Home Affordable Modification Program, according to data recently released by the government.

The eight largest servicers have offered an alternative mortgage modification to 44.5 percent of homeowners whose HAMP modifications have been canceled, but Bank of America has offered alternate mods to only 24 percent of the 148,129 homeowners whose trial modifications the bank canceled. For homeowners denied trial modifications, 31.3 percent have been offered alternate modifications by the Big Eight. Bank of America has offered alternate mods to just 11 percent of these folks.

"Bank of America seems to be stubbornly refusing to go along with the program," said Valparaiso University Law School professor Alan White, who first flagged Bank of America's standout performance in a Public Citizen blog post.

"BofA has also mastered the art of false hopes," wrote White. "It has converted only 26% of trial modifications to permanent ones, while servicers as a whole have achieved a rate of over 50% (still terrible, but it's all relative.) Over half of BofA's trial modifications are more than six months old, despite the fact that they are supposed to convert to permanent or be canceled after three months."

Bank of America did not immediately respond to a request for comment from HuffPost, but every month the bank puts out a press release touting its mortgage modification progress the day before the Treasury Department puts out its HAMP data. Bank of America boasted last week of its "industry-leading 79,859 completed modifications through the government's Home Affordable Modification Program." It has more permanent modifications than any other servicer, but that may be because the bank has an eligible pool of delinquent mortgages more than twice the size of every other servicer's (except Chase, which services 201,771 mortgages to BofA's 383,482).

The goal of HAMP, under which the government gives servicers $1,000 incentive payments to give eligible homeowners a five-year "permanent" modification after a three-month trial period, was to "enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure." Treasury Department officials now shy from that goal as more people have been kicked out of the program than have been given permanent mods.

The Treasury Department has not fined a servicer for noncompliance with HAMP or even formalized a penalty scheme. The Government Accountability Office reported in June that Treasury's lack of penalties for bad servicers "risks inconsistent treatment of servicer noncompliance and lacks transparency with respect to the severity of the steps it will take for specific types of noncompliance."

Bank Of America To Begin Principal Reductions On Underwater Loans

Arthur Delaney
arthur@huffingtonpost.com | HuffPost Reporting Become a Fan Get Email Alerts from this Reporter
Bank Of America Executive Acknowledges Poor Service In Mortgage Mod Program
First Posted: 06- 2-10 12:47 PM | Updated: 06- 2-10 01:46 PM
WHAT'S YOUR REACTION?

Inspiring
Greedy
Typical
Scary
Outrageous
Amazing
Innovative
Infuriating
Read More: Bank Of America, Bofa, Principal Forgiveness, Principal Reduction, Underwater, Underwater Homeowners, Business News

51
144
views

Get Business Alerts

Share Comments 46
Bank of America on Wednesday announced details of a plan to partially forgive debts of homeowners who owe more than their homes are worth -- and a bank executive expressed disappointment in the company's efforts to put customers in mortgage modifications via the government's Home Affordable Modification Program.

"We certainly know that as we rolled out the modification process we have not handled our customers to the standards Bank of America is accustomed to," said Jack Schakett, a Bank of America credit loss mitigation executive during a conference call. A reporter had asked about homeowners' tales of lost paperwork and frustration when applying for loan modifications.

Bank of America has put 11 percent of HAMP-eligible borrowers delinquent for 60 days or longer into "permanent" five-year modifications -- the lowest rate of the four biggest banks participating in the program. (JPMorgan Chase has granted permanent mods to 16 percent of eligible 60-day delinquent borrowers. Citibank: 18 percent. Wells Fargo: 20 percent.)

Schackett said the bank has been staffing up and currently employs 16,000 people in the distressed home ownership area. Bank of America put more HAMP homeowners into permanent mods in April than in any previous month.

"We continue to train and retrain to try to improve our process and we've done a lot of things to try to make sure we don't lose documents anymore," he said. "We do think the experience is getting better and better, but again, it's still not the level we would hope it to be because we still have more customer complaints than we believe are acceptable."

As part of its anti-foreclosure efforts, Bank of America announced Wednesday it would forbear and ultimately forgive principal for deeply underwater borrowers whose home values have plunged below the amount they owe the bank. Such homeowners are among the most likely to strategically default -- stiff the bank and stop paying the mortgage, even if they can afford it.

HAMP's goal is to mitigate the foreclosure crisis by reducing eligible borrowers' monthly payments to 31 percent of their monthly income, usually through cutting the interest rate and extending the term of the loan, and only in rare cases by reducing principal. Bank of America's National Homeownership Retention Program will help get HAMP-eligible homeowners to 31 percent by first forbearing principal and ultimately forgiving it if homeowners remain in good standing on their payments.

Story continues below

Schackett used an example of a homeowner who owed $250,000 on a home worth $200,000. The bank would take $50,000 off the mortgage and put it in an interest-free forbearance account. If the homeowner keeps up with his payments on the $200,000, the bank will forgive 20 percent of the forbearance account for each of the next three years, and for an additional two years if the homeowner remains underwater.

Bank of America said it has 43,000 customers in HAMP trial plans who are eligible for principal cuts. Schackett said the Treasury Department would announce a three-year principal forgiveness program under HAMP later on Wednesday. Bank of America customers would be evaluated for one program or the other on a customer-by-customer basis. "We worked with Treasury to try to come up with a situation that's best for our customers and also meets our investor needs."

Get HuffPost Business On Twitter, Facebook, and Google Buzz!
Know something we don't? E-mail us at huffpostbiz@gmail.com

Read more from Huffington Post bloggers:


Rep. Darrell Issa and Rep. Jim Jordan: The HAMP Hoax: How the Obama Administration is Hiding the Failures of a Disastrous Program
The HAMP mortgage modification plan only delays foreclosure for distressed homeowners -- but doesn't prevent it -- and these families wind up wasting their mortgage payments while Treasury remains mum.

Jonathan B. Mintz: The Top 10 Financial Products and Services that Must Be Regulated in 2010
It's time to reset the debate and get specific about what the CFPA might actually do. Here is my "Top 10 Must-Regulate" list -- the top products and services the CFPA should take on to protect consumers.