Treasury withholds mortgage modification fees for three major servicers
The Treasury Department will withhold Home Affordable Modification Program fees for Bank of America ($13.44 -0.07%), Wells Fargo ($40.68 0.48%) and JPMorgan Chase ($53.02 0.73%) for poor performance in the program.
A Treasury compliance team reviewed how the top-10 servicers performed in the program during the first quarter. All 10 needed at least moderate improvement, according to the Treasury.
The Treasury said it would have withheld fees for Ocwen Financial ($43.53 -0.77%), but its results were impacted because of its acquisition of other portfolios during the testing period.
HAMP launched in March 2009. Participating servicers started nearly 700,000 permanent modifications since. The Treasury uses Troubled Asset Relief Program funds to pay servicers $1,000 for every permanent modification and another $1,000 every year the new loan is current.
The program will fall short of its initial projections of reaching between 3 million and 4 million borrowers. The Treasury installed updated guidelines since the program launched requiring servicers to gather documentation before starting the three-month trial period in June 2010. Another rule requires servicers to provide a single-point of contact to borrowers, who long complained of lost paperwork and foreclosures while the servicer considered them for the program.
This action against BofA, Wells, JPMorgan Chase is the first monetary penalty against a participating servicer since the program began. Servicers pushed back against the report after it came out Thursday.
The Treasury did say the compliance reviews are retrospective, which means anything needing improvement may already be under remediation. However, if the changes aren't made harsher penalties may come.
"In certain cases, particularly where there is a failure to correct identified problems within a reasonable time, Treasury may also permanently reduce the financial incentives," the Treasury said.
Write to Jon Prior.
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