U.S. Treasury to Publicly Grade Mortgage Servicers Over Loan Modifications
The U.S. Treasury Department plans to publicly grade mortgage servicers on how well they respond to homeowners seeking reductions in payments as the government encourages loan modifications to stem foreclosures.
Timothy G. Massad, acting assistant secretary at the U.S. Treasury Department, said the agency will publicize servicer compliance beginning next month, according to the text of a speech prepared for delivery today at Harvard University in Cambridge, Massachusetts. He said companies will be graded on how they evaluate homeowners’ eligibility for aid and how quickly they respond to customers.
“This is a voluntary program based on a contract,” Massad said in his prepared remarks. “We do not regulate the servicers and we cannot fine them.” Transparency, he said, is the best way to improve servicer behavior.
The U.S. House of Representatives is scheduled to vote tonight on a bill to eliminate the two-year-old Home Affordable Modification Program, which pays banks to modify borrowers’ monthly mortgage payments. HAMP is an Obama administration’s programs intended to reduce foreclosure filings, which fell last month to 225,101, the lowest in three years.
Massad is scheduled to speak to students at Harvard’s Mossavar-Rahmani Center for Business and Government at the John F. Kennedy School of Government. He said the grading of mortgage companies will be based on data collected by the Treasury during 2010.
Republicans and Democrats have complained about the programs’ effectiveness, particularly HAMP. A government watchdog, the Congressional Oversight Panel for the Troubled Asset Relief Program, criticized how aid was delivered.
“A major difficulty in implementation of this program has been poor servicer performance,” Massad said. “The servicers were accustomed to collecting payments on performing loans; they did not have the people, the procedures or the systems to deal with this crisis.”
Servicers collect monthly mortgage payments and handle other administrative chores for lenders. They also may modify or foreclose on a loan in default.
The five biggest loan servicers by portfolio size are Bank of America Corp. (BAC), Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. (C) and the GMAC unit of Ally Financial Inc. They service more than half of the $10.6 trillion in U.S. home loans by value, according to data from news website MortgageDaily.com.
The Treasury is projected to spend about a fourth of the $50 billion allocated for HAMP, according to the Congressional Budget Office. The program has spent about $1 billion so far.
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