Bank of America has been getting a lot of grief recently (some of it from me and my colleague Andrew Jakabovics) for its shoddy performance on the Home Affordable Modification Program (HAMP). BofA has consistently trailed behind the other major banks in its progress getting borrowers into the program, and in eight months has completed fewer than 100 permanent modifications.
The bank has taken to blaming its lackluster stats on its borrowers’ inability to file documents, which made me ask if the bank thinks its borrowers are somehow more irresponsible than those at other large institutions. This week, the bank organized a conference call, and the answer to my question is evidently yes, BofA does think it has a worse set of borrowers:
[Bank of America] defended its performance in the federal foreclosure relief program, saying that far fewer of its customers are eligible for the plan than government estimates indicate…Only about 340,000 of the 1 million delinquent borrowers identified by Treasury are likely to survive the qualification process, Jack Schakett, Bank of America’s credit loss mitigation strategies executive, said….”We’re being [judged] as below average, and we really aren’t when you look at the numbers,” he said. “On average we have more customers that fail the eligibility requirements than competitors.”
But let’s think about this for a second. Even if we grant BofA’s pulled-out-of-thin-air assertion that two-thirds of the borrowers Treasury deems eligible for the program somehow aren’t, that leaves 340,000 perfectly eligible borrowers, only 98 of whom have received permanent modifications. That’s still a wildly unacceptable .03 percent of eligible borrowers having their mortgage modified permanently.
And then there are reports like this one today in McClatchy, where Kevin Hall took a look at some borrowers who should qualify for HAMP, but are still having their homes sold out from under them. And guess which bank pops up:
In late August, Smith signed and returned paperwork in a prepaid FedEx envelope to Bank of America that said it had received the contract needed to modify the adjustable-rate mortgage he originally took out with the disgraced lender Countrywide Financial, which Bank of America bought last year…The deal favors the lender, but Smith, 55, jumped on it because it kept him in the home. Armed with what he thought was “a permanent modification,” Smith returned a notarized copy of the agreement and made subsequent payments on time. In return, he got a surprising notice from Bank of America saying that his house would be auctioned off on Dec. 18.
Back in October, I wrote that the fatal flaw in HAMP would be trying to incentivize banks into completing modifications, without any consequences for failure. Stories like the one above only confirm that thesis.