Today, the US Treasury Department announced they would withhold incentive payments to JP Morgan Chase, Wells Fargo and Bank of America until their performance in the Home Affordable Modification Program (HAMP) improved.
The Obama administration has taken considerable heat for the colossal failure of HAMP which was originally intended to help struggling homeowners, but after lost paperwork, documented stall tactics by servicers and an extremely low number of homeowners ever seeing a permanent modification despite trial periods, etc.
Feds say the big three banks are failing to prevent foreclosures, citing poor evaluation of income requirement evaluations, therefore, the government says they will stop paying for their modifying delinquent loans.
Housing the biggest drag on the economy
We have been waiting for Obama to make a move, any move after he said in April that housing is the biggest drag on the economy and spoken harshly of bank misdeeds for some time.
According to CNN Money, the payment amount per loan that servicers modify is $4,500 over three years which is a substantial dollar amount when multiplied across the number of loan mods.
Wells Fargo says they will dispute the withholdings because they say their error rate has plummeted, Chase “respectfully disagrees,” it tells CNN and points the finger to the portfolios they’ve taken over in recent years while Bank of America reminds the world they account for one in four HAMP mods and says there is room for improvement.
Will they go through with it?
It is questionable whether or not they will actually go through with these threats, as they got tough in December 2009 and the Treasury marched what they called “swat teams” into servicers’ offices to supervise loan modifications, an ominous move that promised to straighten up the bank DNA, but not a peep has been heard about this since they announced the launch.
We maintain HAMP has been a disaster, a waste of funds and a continued pock mark on the housing sector that has given a lot of homeowners false hope and servicers’ failure to execute modifications has put these homeowners in worse positions as we continue to report.