January 15th, 2010
05:08 PM ET
12 years ago

More homeowners get long-term help

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2010/images/01/15/art.gi.homes.jpg
caption="More homeowners get long-term help."]

New York (CNNMoney.com) - Intense pressure from the Obama administration spurred loan servicers to ramp up the amount of permanent modifications they offered to troubled borrowers.

The number of long-term adjustments completed under the president's foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier.

Another 46,056 modifications are pending borrowers' final signatures, according to Treasury statistics released Friday.

Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier.

"Treasury is committed to working with servicers and borrowers to sustain this improved pace," said Phyllis Caldwell, chief of Treasury's Homeownership Preservation Office.

Administration officials increased pressure on servicers in November after the slow pace of conversions to permanent modifications raised concerns that the $75 billion plan will fall far short of its goal to help up to 4 million delinquent homeowners.

The administration ramped up its oversight of loan servicers' conversion operations, sending in SWAT teams to break up any logjams and requiring banks to submit updates twice daily on their efforts. Officials also called financial executives to Washington to urge them to quicken the conversion rate.

Housing experts, however, remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released Thursday.

"We have a lot more to do if we're going to address the foreclosure crisis," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition. "The servicers will have to step up to the plate."

One prominent forecasting group, Moody's Economy.com, said this week that it expects the Obama program to save only 400,000 to 1 million borrowers from foreclosure.

A lot of borrowers are too far underwater or don't have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed.

Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn't think there's anything the government can do to keep these borrowers in their homes.

And once these homeowners go into foreclosure, it will hurt the housing market, she said.

"As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices," said Chen, who expects home prices to fall another 10% by the third quarter of this year.

Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork. Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.

Overall, about three-quarters of people are making their payments on time, said Michael Barr, Treasury assistant secretary.

Loan servicers, however, have said they are having trouble getting the necessary documents from borrowers, while homeowners maintain that their financial institutions are repeatedly losing the paperwork. Once their files are complete, borrowers may be denied long-term help if they don't meet the program's criteria.

At Wells Fargo, for instance, a quarter of the 74,000 borrowers who had made three trial payments on time did not turn in all the required documents. Another 25% turned out not to be eligible for modification after their documents were reviewed. The remaining are expected to receive permanent modifications.

Loan servicers efforts continue to vary widely. Citigroup led the pack by placing 47% of its eligible delinquent borrowers in trial modifications, while Saxon Mortgage, a subsidiary of Morgan Stanley, came in at 46%.

Among the other major servicers, JPMorgan Chase put 36% of eligible homeowners in trial modifications, while Wells Fargo put 34% in. Bank of America continued to trail the pack with 19%.

In terms of longer-term assistance, Wells Fargo led the pack among the nation's largest servicers with 2.41% of its eligible delinquent borrowers in permanent modifications. Citi placed 2.1% and Chase 1.68%.

Bank of America, by far the nation's largest servicer, said it has implemented "extraordinary efforts" over the past two months to boost its conversion statistics. The servicer, which had converted only 98 homeowners by the end of November, increased that number to 3,183 a month later. That means
only .3% of its eligible homeowners are in permanent modifications.

Asked repeatedly about the laggards during a conference call with reporters, Treasury officials declined to say what measures they would take to force servicers to improve their modification efforts or whether the banks had met their goals.

Filed under: Obama administration • Treasury
soundoff (10 Responses)
  1. Frank Jones

    Help for the irresponsible=screw the responsible. I'm sure this will not contribute to foreclosures in the future, will it?

    January 15, 2010 05:13 pm at 5:13 pm |
  2. John

    More homeowners get long-term help


    More yahoos who overspent on credit cards, TVs, vacations, boats, cars, and RVs get bailed out by the rest of us.

    January 15, 2010 05:18 pm at 5:18 pm |
  3. Jane/Seattle

    Many of the firms out here "helping" are not very good and very predatory! Money, Competition, and all things system CREATES the conditions it seeks to alleviate. The ads are all over the place, but that's Free Enterprise, folks! Profit from misery, the name of the game!Don't you think? This is why this system is so very flawed and actually creates the type of poverty we now see rampantly. Who you trying to kid?

    January 15, 2010 05:29 pm at 5:29 pm |
  4. Dodd Democrat...

    This is just a drop in the bucket. We need REAL help with REAL numbers.

    We need to do better......this is an embarrassment of huge proportions!!!!

    January 15, 2010 05:38 pm at 5:38 pm |
  5. Ready for 2012

    "Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier."

    So Obama wants to reward deliquent homeowners who probably shouldn't have been allowed to finance a house in the first place by gien them favorable loan rates so they can default on a second loan?

    People receiving loans who traditionally would not have qualified for them is what caused the financial mess this country is in. When is the government going to understand that and stop throwing our tax dollars away on people with bad credit.

    I'll be so glad when the elections of 2010 and 2012 get here so we can vote the democrats and especially Obama out of office.

    January 15, 2010 06:08 pm at 6:08 pm |
  6. B

    Good,its about time the banks started helping after what they have done to middle America..

    January 15, 2010 06:19 pm at 6:19 pm |
  7. tomdavie

    Excellent spin of the numbers there. Did you work overtime to pick those stats out with the party friendly tweezers? As an industry insider, I can tell you flat out this program is just as effective as the Bush 'FHA secure' program was. NADA. ZERO ZIP. Very few stuck with it, and even fewer who really needed it qualified.

    January 15, 2010 06:59 pm at 6:59 pm |
  8. Matt of UT

    The private sector can work this out without government help. My brother calls people all day long helping them with their mortgage whoas. He's found that many people are able to pay, but choose not to. He also found that many people expect the government to take care of the problem.

    All Obama is doing is artificially sustaining the market.

    January 15, 2010 07:27 pm at 7:27 pm |
  9. George Guadiane - Austerlitz, NY

    Less than 5% of those who need help are getting it, based on the numbers in this article – PATHETIC!
    It is important to note, that MOST OF THE DELAY is with the banks. It's not a problem caused by the White House.

    Bankers need to start going to prison for this kind of stuff, I bet they will get "smarter" when that happens.

    January 15, 2010 07:28 pm at 7:28 pm |
  10. Hugo

    More for the nutshell:
    Homeowner's upside down in their mortgage that are now forced to refinance will have the banks tell them to put more cash into their home to correct the loan balance. Anyone upside down in a home with little equity logically says HUH? They are forced to default, the bank forecloses and AIG or other mortgage insurance underwriter has to pay off the nut on the inflated loan. Kind of smells like rotten fish doesn't it? The government has not fixed the problem with Fannie and Freddie or done what needs to be done to correct the job market, yet they want to control your healthcare?

    January 15, 2010 07:56 pm at 7:56 pm |