Yesterday, the Treasury Department released a report on the progress of mortgage modifications under the Making Home Affordable plan, which is supposed to help 3 to 4 million troubled homeowners stay in their homes. However, the plan has gotten off to a very slow start, with only about 200,000 modifications underway (while 1.8 million homes went into foreclosure in the first six months of 2009). As I’ve pointed out before, 108,000 of those modifications are on mortgages owned by Fannie Mae or Freddie Mac, so privately held mortgages constitute less than half of the modification effort, even though they account for 55 percent of delinquencies.
The Treasury report names specific companies that have been the slowest in getting the modification effort off the ground. As the AP reported, “by publishing the names of companies that are lagging behind in the government’s plan to ease the housing crisis, officials are counting on public outrage to get the industry on track.” But such public shaming has Fox News’ Neil Cavuto all riled up, and he’s protesting the “cockamamie scarlet letter list“:
Think of what the government could be doing here, publicly shaming banks that might be trying to avoid the very thing that got a lot of them asking for federal dough in the first place: providing easy dough to folks who shouldn’t have gotten the dough in the first place…They can’t win, and now on some kind of cockamamie scarlet letter list, they can’t lose.
For his part, Cavuto never misses an opportunity to blame our economic woes on banks lending to poor people who couldn’t pay it back. But there’s a very good reason for giving a bank-by-bank breakdown of the modifications. As this graph shows, there’s a big disparity between the banks doing the most modifications and those doing the fewest.
There’s a clearly discernible break between Citigroup (at 15 percent) and Wells Fargo (at 6 percent). Bank of America, which received multiple infusions of cash from the TARP (totaling $45 billion), has done the worst among the big banks, with trial modifications begun in only 3.5 percent of cases. BofA’s offer acceptance rate of 28.1 percent is less than half of the program’s average.
Is this discrepancy between the numbers indicative of a problem in the structure of the program, or are certain servicers just dragging their feet? The only way to know is to look at the data from individual firms. But Cavuto prefers to cling to his misconceived notion that lending to poor folks created the crisis, and thus some firms doing far fewer modifications is indicative of nothing but those banks’ prudence.
The Washington Independent’s Mike Lillis writes that “it’s worth noting that some of the poorest-performing banks are the same institutions that appeared before Congress just a few weeks ago with declarations that they were cooperating wonderfully.”