Obama Urges Faster Mod Pace
WASHINGTON-Obama administration officials want servicers to pick up the pace of loan modifications as policymakers consider more extreme measures to prevent foreclosures.
Following a meeting with 25 servicers last week, Treasury Department and Department of Housing and Urban Development officials said they expect the servicers to qualify at least 500,000 homeowners for 90-day trial modifications by Nov. 1.
"The administration has established a goal of reaching a half-million modifications," HUD secretary Shaun Donovan said.
Servicers already have 200,000 borrowers in trials to see if they can make three monthly payments on time, which is required before finalizing a modified loan under the administration's Home Affordable Modification Program. Reaching 500,000 by the end of October does not seem too much of a stretch. The administration's goals are "attainable," the Financial Services Roundtable and Mortgage Bankers Association said in a joint statement.
At the meeting, servicers discussed ways HAMP could be simplified and the need for new technologies to streamline the application process for homeowners.
The servicers want to create a "universal Web portal" so homeowners could input their information and speed processing for servicers. Treasury and HUD officials seemed receptive and it is one of the issues the parties will keep working on, according to Paul Leonard, a vice president at the roundtable's Housing Policy Conference. "We hope these kinds of meetings will continue," he said.
Meanwhile, Democrats on Capitol Hill are growing impatient with the results of the servicers' loan modification efforts.
Joint Economic Committee chairman Carolyn Maloney, D-N.Y., said servicers need to speed up the pace of modifications.
"Servicers may be swamped, but families are literally drowning," Rep. Maloney said at a committee hearing.
Rep. Elijah Cummings D-Md., called on the administration to use TARP funds to provide short-term loans for homeowners who lose their jobs. "Congress bailed out Wall Street. Why can't we get help?" he said. Bridge loans would enable them to stay in their homes while they look for work.
"As I told my constituents: 'We will get through this downturn but the question is who will be living in their house after it's over.'"
HUD and Treasury officials have acknowledged that they are considering ways to provide mortgage relief for unemployed homeowners.
Consumer groups are telling Congress that the voluntary efforts of the servicers are not keeping up the number of homeowners entering the foreclosure process and lawmakers need to reconsider bankruptcy modifications.
"We strongly believe that no voluntary program will be effective until there is a backstop available to homeowners," said Keith Ernst, research director for the Center for Responsible Lending. "For that reason, we are pleased that Congress is beginning to revisit the need to permit judges to modify mortgages on principal residences," he told the joint committee.
Sen. Richard Durbin, D-Ill., is expected to make an important speech on Aug. 3 about his plans for reviving his bill that would allow bankruptcy judges to reduce the principal amount of a mortgage.
House Financial Services committee chairman Barney Frank, D-Mass., warned the industry last week that Congress will try to pass a bankruptcy bill again if the servicers don't live up to their commitment to modify loans.
"People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong," Rep. Frank said.
Meanwhile, Treasury is planning to issue monthly reports starting Aug. 4 that will show each servicer's performance, including the number of completed modifications and the long-term success of those modifications.
The first report will likely show the number of loans in the 90-day trials. The first HAMP loan modifications are not expected to be completed until September.
Meanwhile, the Hope Now alliance reported last week that servicers completed 96,000 other loan modifications in June, down 5% from the previous month.
This marks the second monthly decline as the Hope Now servicers put more HAMP candidates through the 90-day trails.
"Despite negative press, most servicers are doing a good job of ramping up to handle the flow of modifications," according to Terry Couto, a servicing consultant and founder of Newbold Advisors, Clearwater, Fla.
He noted that HAMP is a complex program that requires system changes and process changes along with hiring and training new employees.
"Although the results have been poor so far, servicers have made a tremendous effort," Mr. Couto said. "They have dedicated millions of dollars to hire thousands of employees, engage consultants to supplement their staff, establish new outsourcing relationship to meet volume demands and develop new technology."