US to Push Mortgage Lenders To Modify More Home Loans
The US Treasury announced plans to push lenders to modify more loansafter the administration's $75 billion housing rescue plan, called Making Home Affordable, fell short and foreclosures continued rising.
The new effort, called a "Modification Conversion Drive," is a nationwide campaign to "help borrowers who are currently in the trial phase of their modified mortgages convert to permanent modifications," the Treasury said.
Treasury officials said of the 650,000 trial modifications now in place, roughly 375,000 are scheduled to convert to permanent modifications by the end of the year. This new program includes outreach tools, borrower resources and servicer accountability.
The drive will also include what Treasury called "servicer accountablilty" which will require top loan servicers to submit a schedule demonstrating their plans to reach a decision on each loan.
If they don't meet performance obligations they could be fined, but there are no details yet on how high the fines could go. Servicers will be required to report to the Administration the status of each modification for additional transparency.
In turn, the Treasury is rolling out more web tools for borrowers, including links to documents, and reaching out to state and local community stakeholders to help with outreach.
Last month, the Congressional Oversight Panel for the TARP found less than 2,000 of the more than half million loan mods made since the program began in June had become permanent. The trial period has been extended to five months due to overwhelming paperwork.
The plan was purported to save 3 to 4 million homeowners from foreclosure. It is now estimated there are 7 million delinquent loans in the pipeline.
Many mortgage companies, however, said they have had trouble getting borrowers to return necessary documents to complete the modifications, which allow homeowners to have their mortgage interest rate reduced to as low as 2 percent for five years.
"The documents were confusing. Borrowers did not understand the process wasn't closed until the documents came in," Sanjiv Das, chief executive of Citigroup's mortgage unit, said earlier this month.
"Even when the documents came in, they were not always complete." Mortgage finance company Freddie Mac has hired an outside company Titanium Solutions to send real estate agents around the country to knock on borrowers' doors and help them complete the paperwork.
"It can be a little bit intimidating," said Patrick Carey, Titanium's chief executive. "They don't, in many cases, understand exactly what is being asked of them."
The program has come under heavy criticism for failing to do enough to attack a tidal wave of foreclosures.
Analysts say the foreclosure crisis is likely to persist well into next year as rising unemployment pushes more people out of their homes.
About 14 percent of homeowners with mortgages were either behind on payments or in foreclosure at the end of September, a record level for the ninth straight quarter, according to the Mortgage Bankers Association.
The Congressional Oversight Panel, a committee that monitors spending under Treasury's bailout program, concluded last month that foreclosures are now threatening families who took out conventional, fixed-rate mortgages and put down payments of 10 to 20 percent on homes that would have been within their means in a normal market.
Treasury's program, known as the Home Affordable Modification Program, "is targeted at the housing crisis as it existed six months ago, rather than as it exists right now," the report said.
Meg Reilly, a Treasury spokeswoman, said the program would, among other steps, make more aid available to struggling borrowers and expand the number of organizations providing help.
Homeowners who may be eligible for assistance can call 888-995-HOPE, or visit the Web site www.makinghomeaffordable.gov to learn more.
—AP contributed to this report
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