Too Big to Comply

Treasury released a detailed  report for the HAMP mortgage modification program today, for the first time rating the major banks and servicers on a variety of metrics.  Worst in three of four categories was BankofAmerica.  BofA, along with Wells Fargo and Chase, will have payments from Treasury suspended until their compliance under the HAMP contracts improves.  The report provides a trove of statistical confirmation of what homeowners, counselors and legal aid lawyers around the US are experiencing - temporary agreements that never become permanent, servicers losing and misrecording borrower information, and not communicating effectively with homeowners about applications and decisions. 

Apart from the failures of the big three banks, HAMP is improving in some ways, but still not reaching enough homeowners.  Only 30,000 HAMP modifications are being added each month, while new foreclosure starts hover around the 150,000 to 200,000 per month level.  The number of temporary modifications in limbo past the 3-month program limit before becoming permanent is way down, except at the big three banks, which now account for half of all temporary mods passing their six month mark.  Last month's report also showed that reperformance is improved:  even after 12 months fewer than 20% of HAMP modified mortgages were back in default, a far cry from the 60% to 70% failure rates of the industry modifications done in 2007 and 2008. 

The retooling of BofA's servicing shop so far does not appear to have produced much improvement.  With the housing market in a double-dip, and foreclosures stubbornly refusing to abate, it may be time for Treasury to face up to the deleterious consequences of the massive concentration in the mortgage industry. 

It will also be interesting to see what steps, if any, our nationalized-but-still-imagining-themselves-as-private GSE's might take.  Treasury's sanctions don't cover the GSE loans that are being maladministered by the big banks.  Will Fannie and Freddie follow Treasury's lead?

Comments

[Mike Dillon]

Due respect, Professor, but I've been watching this song and dance in one version or another for 10 years now. Why do people think that servicers are going to VOLUNTARILY change their business platform?

Until something more substantial than anything that can be written off as a "cost of doing business" tax is stapled to someone's forehead this is going to be the norm for the foreseeable future.

For dog's sake, Ocwen just purchased Litton... That is just simply so poetic I've been laughing since the announcement. Not that it's actually funny. It's not. It's absolutely disgusting. Paul Koches and Larry Jr. and Sr. The only thing that would make that alliance any more unholy is if Tom Basmajian crawled out from whatever rock he's been under.

But until/unless those in control of things decide to quit parroting Robin William's "Stop or I'll say stop again." punchline from Live at the Met, this is what the U.S market and homeowners is in for. At least case law is beginning to catch up. That will at least help those who can still afford legal counsel.

[Knute Rife]

I'm waiting for B of A's "Mouths of Sauron" to start saying, "We can't process these mods and short sales because the mortgage insurers are making demands that render it all unfeasible." Then the insurers will say, "But the MBS pools aren't signing off, so how do you expect us to?" And then they all point fingers at one another while the regulators stand and watch and the loans go down the drain. "Thou cant not say I did it; never shake thy gory locks at me."

[Judge Roy Bean]

Really - "The retooling of BofA's servicing shop so far does not appear to have produced much improvement."

Retooling?

Why retool what was operating as designed? Just because some ineffectual collection of government minions declares it should be so does not mean it will be - and it hasn't and won't be.

He who has the gold still makes the rules.