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Obama administration tells mortgage loan servicers to do better

[Jun 9, 2011.]


The Obama administration wants three big banks to do a better job of helping borrowers with loan modifications. The administration also is withholding financial incentives to the servicers of mortgage loans, according to the U.S. Treasury Department.

Three big mortgage servicers urged to do more

The Obama Administration's Housing Scorecard identified Bank of America, J.P. Morgan Chase and Wells Fargo Bank as the three mortgage loan services in need of improvement. A fourth bank, Ocwen Loan Servicing, was also named as needing improvement, but funds are not being withheld from the bank "as their compliance results were substantially and negatively affected by a large servicing portfolio acquired during the compliance testing period," according to a Treasury statement.

Acting Treasury Assistant Secretary for Financial Stability Tim Massad said in a statement:

While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling. These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.

Not enough home mortgage modifications

The government's home modification program has been criticized for not helping enough troubled borrowers. Many borrowers who were thought to be eligible for the program have been turned down for mortgage loan modifications or began the program but never received a permanent modification. Although almost 4.8 million loan modification arrangements were started between April 2009 and the end of March 2011, less than 700,000 are permanent modifications, according to the Treasury.

Meanwhile, the housing market is still struggling. Housing prices fell 5.1 percent in the first quarter of 2011 from a year earlier, according to the S&P Case-Shiller Home Price Indices, sending prices back to mid-2002 levels. The report showed that 19 of the 20 metropolitan statistical areas (MSAs) covered by the index fell, with the exception being Washington, D.C., which rose 1.1 percent on a monthly basis and 4.3 percent on an annual basis.

A double-dip in home prices

"This month's report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index, the 20-City Composite and 12 MSAs all hit new lows with data reported through March 2011," David M. Blitzer, chairman of the Index Committee at S&P Indices, said in a statement.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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