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U.S Government Wants 500,000 Trial Modifications By Nov 1st

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July 28^th, 2009

 

New York – The Treasury Department announced that there will be an increased speed in mortgage modifications under the Obama foreclosure prevention program. The administration is expecting to see 500,000 trial modifications put in place by Nov 1^st 2009 with 200,000 already underway.

 

Government officials invited executives from 25 participating servicers to Washington in order to have a round table discussion on how to improve the 5-month old government mortgage plan. The administration and the industry have been under pressure from complaints of many struggling borrowers about a series of problems. Borrowers complaint that their calls and applications were being ignored coupled with loss of documents.

 

According to Treasury Secretary, Tim Geithner, there are too many homeowners at risk of foreclosure and that the purpose of the meeting was to brainstorm ways to speed up the program and relief efforts.

 

The loan modification program announced in February 2009 allows borrowers to lower their monthly payments to no more than 31% of their gross income. The modification will be made permanent after the homeowner makes 3 months of on-time payments. To increase participation in the program, the government has provided incentive payments to homeowners, servicers and mortgage investors.

 

Till date, the government has employed $20 billion to the program and will commit a total of $70 billion. The government loan modification program which was implemented by in April and May 2009 has received fierce criticism. Read our related story: Obstacles To The Loan Modification Program.

 

According to statistics, 1.5 million people have lost their homes to foreclosure on the first half of 2009. This represents a 15% spike from the year before.

 

President Obama admittedly said that the program is failing to stem the foreclosure problem. He said that the government modification program has helped to modify many mortgages but has not kept up in speed with all the foreclosures that are currently happening all over the country.

 

The administration’s modification program has expectations of helping as many as 4 million borrowers avoid foreclosure. Although government officials feel that they are on path of reaching their target, the Government Accountability Office is doubtful in a report last week about reaching this goal.

 

To improve the troubling modification industry, the administration proposed to collaborate with institutions to establish strict performance measures such as determining ‘average borrower wait time’, document processing and response time for completed applications. The first progress report on each servicer will be released by officials in August outlining the number of trail modifications offers that were extended and accounting for those that are underway.

 

The morning till afternoon meeting with Treasury and Housing department officials were met with participating servicers which include Citigroup, JPMorgan Chase, Bank of America, Ocwen and Wells Fargo. A separate meeting was then conducted with housing counselors in the later part of the day.

 

At the morning meeting, servicers voiced their need to see a standardization of documents including definitions to help speed up the application review and reporting process. They also requested for the government to develop a website in order to allow applicants to submit their applications electronically rather than the conventional fax method. Financial institutions are also investigating as to why 50% of the troubled borrowers they contacted did not respond.

 

Servicers believe that the goal set-forth by the government can be achieved if they hire and train more staff.

 

According to Sanjiv Das, chief executive of CitiMortgage at Citigroup, they have beefed up their loss-mitigation staff, created call center capabilities and invested in training to fully make this program work. 

 

 

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