Yesterday, the Treasury Department released its latest data on the Home Affordable Modification Program (HAMP), which has come under significant fire due to the unwillingness or inability of mortgage servicers to get enough eligible borrowers into the program. The new report isn’t making things look any better.
According to Treasury, about 728,000 borrowers have been enrolled in the program, up from 650,000 last month. But of these, just 4 percent (31,382) have made their way from the three-month trial stage of the program to a permanent modification.
Earlier this week, Bank of America and JP Morgan Chase went to Capitol Hill, where they suggested that borrowers themselves were responsible for HAMP’s lack of progress, because they can’t seem to get their documents together and filed. BofA claimed that more than three-fourths of the borrowers eligible for a permanent modification have not gotten their documents in. “It is unclear why this has happened to such a high degree,” the bank said.
Even if we accept BofA’s numbers at face value — and as ProPublica’s Paul Kiel pointed out, “the data from servicers should be viewed with skepticism” — then how does BofA explain that just 98 borrowers have been given permanent modifications. That’s less than .1 percent of the homeowners who received trials. Even if only 15,000 borrowers have gotten their documents filed correctly, why have fewer than 100 received a permanent modification?
For comparison’s sake, JP Morgan Chase, with a portfolio half the size of BofA’s, has 4,302 borrowers with permanent modifications. Are JP Morgan’s clients simply better at getting their documents together?
For all of Bank of America’s whining about irresponsible homeowners, it is clearly failing compared to some of the other servicers. BofA is likely dragging its feet because there is no consequence for failing to enroll borrowers in the program, and because it has been pushing its own, lousier, private modification program.
Treasury — both with its monthly reports and public scoldings — is hoping that the servicers will be shamed into getting their act together. But as Rep. Maxine Waters (D-CA) said, “I don’t buy the White House’s latest attempt to prod servicers into doing loan modifications…I don’t think the jawboning and the trying to embarrass these servicers into doing the right thing works.”
To that end, as part of its effort to pass financial regulatory reform legislation today, the House debated a provision that would allow judges to cram-down mortgage payments for borrowers who file for bankruptcy. Since negative equity (being “underwater”) on a mortgage is still the main cause of defaults and foreclosures — and because servicers would be loath to see judges unilaterally raking down mortgage payments — such a provision would likely prod banks into doing more for borrowers.
The House passed cram-down earlier this year, only to see it defeated in the Senate, and with the Senate not any more likely to pass it this time, House members might be hard pressed to vote for it. But the measure would absolutely push lagging banks to do more for borrowers, and as Treasury’s latest numbers show, the servicers could use that push.