Substantial Improvement was given to Bank of America, Ocwen Loan Servicing, Wells Fargo and JP Morgan Chase. Of those four, three – Bank of America, JPMorgan Chase and Wells Fargo – Treasury is withholding all future financial incentives until they make specific improvements. Should they fail to correct identified problems in a “reasonable time”, it may permanently reduce their financial incentives. As problems are remedied, incentive payments will resume.
Moderate Improvement was given to the remaining six servicers – American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest, and Select Portfolio Servicing. These firms could have incentives withheld in the future if they fail to make certain improvements.
All withholdings apply only to incentives owed to servicers for their participation in the federal program. Incentives slated to go to homeowners or investors will still be paid through the servicer.
No servicer has been identified as needing only Minor Improvement.
Servicers are paid $1,000 for every permanent modification made under HAMP. “Pay for Success” incentives are then awarded to servicers annually for three years as long as the borrower stays current. HAMP participation is voluntary and Treasury doesn’t have the authority to impose fines like a regulator could, they’re using the tools they have to push servicers to take remedial actions when they are not in compliance with program guidelines.
According to the report, there are currently 608,000 permanent HAMP modifications in active status. Servicers converted 29,000 trial modifications to permanent during the month of April and started another 29,000 trial plans during the month. The average length of the trial period has been 3.5 months and 70% of those have been converted to permanent modifications.
The median payment reduction amount permanent modifications is 37%, or more than $500 a month, and they say re-defaults have been “lower than anyone expected.”
Excerpts from this article from DSnews.com by Carrie Bay 6/9/11
- U.S. Treasury penalizes 3 large mortgage servicers (sfgate.com)
- Treasury slams big banks’ mortgage modifications (usatoday.com)
- Treasury Punishes Top Banks for Poor Loan Modification Performance (theroot.com)