Realty Check

Published: Tuesday, 28 Jul 2009 | 4:55 PM ET

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When I first read the letter from the secretaries of Treasury and Housing and Urban Development to the 25 loan servicers signed onto the administration's housing rescue program, I thought, "Them's fightin' words!"

The letter states in no uncertain terms:

"We believe there is a general need for servicers to devote substantially more resources to this program...We are asking that all servicers expand servicing capacity and improve the execution quality of loan modifications in order to help the sizable number of homeowners at risk of foreclosure and eligible for the program."

It then summoned the servicers to Washington to meet with Treasury and HUD officials.

Those meetings took place today, behind closed doors.

While we in the media were barred from even a photo-op of the festivities, here's what I've gleaned from sources named and un-named:

The Administration set parameters for the rescue plan (Making Home Affordable) that have, in actuality been met.

To date, under the program, lenders have offered 350 thousand trial modifications, 200 thousand of which have been accepted and are in process with borrowers. (Why 150,000 or those were not accepted is a mystery, but it may be that many borrowers simply didn't want the homes anymore). The rate now stands at about 20 thousand loan mod offers per week. The trouble is, the playing field has changed. The economy faltered further than expected, resulting in more job losses and ensuing increased loan defaults. Hence the need for more action from servicers.

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The administration refused all my requests for real interviews with the guys in the meetings, instead putting out a statement to everyone, touting a commitment from servicers to "significantly increase the rate at which they are performing loan modifications." All this toward a goal of half a million trial mods by Nov. 1. The Administration also said it would take three steps to "improve the program's performance," by reporting monthly how many mods each servicer is doing and the progress of those mods as well as streamlining how they report that progress. As one mortgage industry insider asked me rhetorically, "how are improving reporting and reporting metrics going to help servicers help more borrowers."

As the meetings went on today, I sat down with the COO of the Mortgage Bankers Association, John Courson, who said that while they all have the same goal of stopping foreclosures, the Administration needs to take some responsibility for the slow progress.

It's unfortunate that still there are different rules, different forms and different processes, even between Fannie Mae and Freddie Mac which are both covered by this same program. So those servicers are going to be saying, let's make it standardized, let's make sure that when our people are trained we can make this very efficient by getting one set of rules one set of regulations and one set of forms so we can move quicker and deal with those folks in a more efficient manner.

Courson also noted that a full half of borrowers that are facing foreclosure still refuse to talk to their servicers. "It's a shocking statistic, and it's been very consistent throughout," he says, adding, "this is despite trying more than 20 or 25 times with most servicers with contact by mail, by different telephones at different times of the day, certified letters, personal visits to the property. You can't help these people."

Not all borrowers can nor should be saved. Not every loan deserves a modification. Suffice it to say, the foreclosure problem always has been and still is the responsibility of the lenders, the administration and the borrowers themselves equally. Until all three are working together, the crisis will persist and a full "recovery" in housing will remain out of reach.

Program Alert: Tonight on CNBC 8pm/ET - "Realty Check"

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