The Obama administration is blaming the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says they've done little to help people at risk of losing their homes.
Wells Fargo, Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said Thursday. The three lenders have received about $24 million from the government last month for the program.
Based on those lenders' lackluster success for the first three months of 2011, the government has removed financial incentives it had given them. They amounted to up to $1,000 per permanent loan modification.
About 843,000 homeowners have dropped out of the program as of April. That's more than half of the roughly 1.6 million homeowners who have started with the program on a trial basis over the past two years.
Treasury said the three lenders incorrectly determined that many people were ineligible for the program.
Another firm, Ocwen Loan Servcing, was also cited as needing substantial improvement. But it was not subjected to the same financial penalties as the other three companies.
Six other firms — American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest Bank and Select Portfolio Servicing — require moderate improvement. But Treasury said they will not lose their cash incentives.
The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications.
Homeowners say the program has been a bureaucratic mess. Many say they were disqualified after banks lost their documents and failed to return their phone calls. Banks blame homeowners for failing to submit needed paperwork.
Those homeowners who are accepted into the program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 per month.
The Treasury Department said that when the program began, most of the lenders did not have the needed staff or resources to help the many homeowners seeking lower mortgage payments.
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