Realty Check

Is Treasury Trying to Make Banks Look Bad?

Today the Treasury Department released its monthly Servicer Performance Report through February on the 75 billion dollar Home Affordable Modification Program.

This is the report that shows how many loans are in the trial phase, how many have been converted to the permanent phase, and which banks are doing more and which are doing less.

The bank report card is always fodder for all kinds of claims against the big banks.

Treasury officials are always saying they want the banks to do more.

The trouble is, the report is misleading.

I know this because I was so misled I actually reported something inaccurately when the embargo on the report lifted at 2pm today.

Here's how I got mixed up...and you tell me if you think my annoyance at this confusion is justified.

On p. 5 the report presents a "waterfall"to show how many of the current 6 million loans that are 60+ days delinquent (that means some can be in the foreclosure process already) are eligible for the program.

So they take you from 6 mil to 3.4 mil eligible loans (and remember that's loans) by taking out those servicers not in the program, non-owner occupied and FHA/VA. So then they get you to eligible borrowers by taking out the people who just don't have the income to afford any modification or who have already abandoned the home. (Here's another look at page 5)

So now let's go to p. 7 where the Treasury calls out the banks.

Take a look at the first column: They use eligible loans, not eligible borrowers (you find this from the total at the bottom 3.4 million) and that's what they base their percentage of loans in modification on, which is really their version of the success rate of these banks. Bank of America tells me that when you do the same waterfall that Treasury uses, they really have 600,000 eligible borrowers.

So if you take, from the Treasury's chart, that B of A has 261,216 loans in trial and permanent modifications, and do the percentage out of 600,000 eligible borrowers, then that's really like a 43 percent modification or success rate if you will, not the 24 percent listed...and that type of calculation goes for all the others servicers as well. 

I'm not saying 43 percent is a great percentage either, I'm just saying that's more accurate. It would seem you should take the percentage out of eligible borrowers, not loans, to be fair.(Here's another look at page 7)

So I hereby apologize to B of A for saying they had a 24 percent success rate and for misstating that they have a 1 million share of the 1.8 million mod eligible borrowers.

I'm still waiting for a response from Treasury as to why they do their percentages this way.

Questions?  Comments?