Mortgage Firms Prodded to Modify More Loans
The Obama administration is pressing mortgage-servicing companies to step up their efforts to modify troubled loans under its housing-rescue program, the latest sign of frustration with the pace at which mortgage companies are reworking troubled loans.
“We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share,” Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan said in a letter to 25 mortgage-servicing firms.
The letter was sent Thursday to the chief executives of companies that have signed contracts to participate in the government program, which provides financial incentives for mortgage companies and investors to reduce borrowers’ payments to affordable levels.
More than 270,000 borrowers have received modification offers under the program. But housing counselors complain many borrowers are waiting for help as mortgage-servicing companies get up to speed. The administration has said its program could help as many as four million homeowners.
The administration has “started to see a significant ramp-up” in modification activity, the letter said. But it added, “there appears to be substantial variation among servicers in performance and borrower experience.” It called on mortgage-servicing companies to beef up staffing and training, and to provide “an escalation path for borrowers dissatisfied with the service they have received.” Freddie Mac, which serves as compliance agent for the program, will be developing a “second look” process in which it will audit a sample of rejected modification applications, the letter said.
The letter also called on mortgage companies to suggest ways the administration can improve the program’s design.
Housing counselors say they have been disappointed by the lack of progress under the administration’s program. “We are not getting anywhere near the level of resolutions we expected,” said Bruce Dorpalen, national director of housing counseling for Acorn Housing Corp., which works with financially troubled borrowers. “The real issue is that generally the servicers are not up to speed.”
Often, housing counselors “must educate the staff of the servicers about their own program,” said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, Calif., which counsels homeowners. “Homeowners on their own are not able to navigate the system.”
By RUTH SIMON
Source: Wall Strret Journal