Treasury Pushes Servicers to Do More Permanent Mods

The Treasury Department is setting up a Homeownership Preservation Office to ride herd on servicers that are failing to turn trial loan modifications into permanent modifications. The Obama administration also is threatening to impose sanctions and fine servicers with low conversion rates. Servicers participating in the administration's Home Affordable Modification Program have placed over 650,000 borrowers into trial modifications and 375,000 are due to convert to permanent modifications by yearend. The administration wants to achieve the highest conversion rate for those 375,000 borrowers. "We must now refocus our efforts on the conversion phase to ensure that borrowers and servicers know their responsibilities and are converting trial modifications to permanent ones," said Phyllis Caldwell, who heads the new Homeownership Preservation Office. Treasury/Fannie Mae account liaisons are being assigned to monitor servicers' performance. "Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences, which could include monetary penalties and sanctions," according to Treasury.