The Federal Reserve said it is leaving its target on short-term rates in the 0-0.25% range, stating that the economy is recovering more slowly than expected and the labor market is weaker than anticipated.
As the nation’s housing market continues to teeter, the Treasury Department on Thursday penalized three of the nation’s largest banks for subpar performance in administrating a government-sponsored program to modify mortgage loans for distressed homeowners.
As part of a new assessment of mortgage servicers, Treasury officials said they would withhold incentive payments for the three banks — Bank of America, JPMorgan Chase and Wells Fargo — until the problems are resolved. At that point, those payments would be made, a Treasury spokeswoman said.
In May, the three banks received $24 million in incentives as part of the modification program.
The Treasury Department has previously withheld payments from mortgage servicers, but Thursday’s action focused on some of the biggest players in the program. Called the Home
Affordable Modification Program, or HAMP, it is voluntary for mortgage servicers. Nearly all of the nation’s largest banks have signed contracts to participate.
The Obama administration has long been criticized as being too easy on the mortgage servicers, and Thursday’s announcement did little to quiet that criticism.
Neil M. Barofsky, who resigned in March as special inspector general for the bank bailout, described the assessments and penalties as a “lost opportunity” to hold lenders more accountable.
“It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” Mr. Barofsky said in an e-mail.
Timothy G. Massad, assistant Treasury secretary, defended the approach. He said the assessments of banks and other mortgage servicers “will serve to keep the pressure on servicers to more effectively assist struggling families.”
“We need servicers to step up their performance to meet the needs of those still struggling,” he said in a statement.
The mortgage servicers were evaluated on a scale of one to three stars during the first quarter on whether they had identified and searched for eligible homeowners; assessed homeowners’ eligibility correctly; and maintained effective program management, governance and reporting.
Bank of America received the lowest grade, one star, on four of seven areas that were evaluated; Wells received one star in three areas; and Chase, in one.
A fourth mortgage servicer, Ocwen Loan Service, was also assessed as needing substantial improvement, but Treasury said it would not withhold payments to Ocwen because it was negatively affected by a large acquisition of mortgages to service.
Six other mortgage servicers were graded as needing moderate improvement. There were no servicers deemed as needing only minor improvement.
Wells Fargo issued a statement saying it was “formally disputing” the Treasury’s findings.
“It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury,” said spokeswoman Vickee J. Adams, who said the criticisms were dated and did not reflect recent improvements.
Chase said it too had made significant improvements. “The bank respectfully disagrees with the assessment,” the company said in a statement.
Dan B. Frahm, a spokesman for Bank of America, said that the bank was “committed to continually improving our processes to assist distressed homeowners” through the federal modification program and its own internal program. But he added, “We acknowledge improvements must be made in key areas, particularly those affecting the customer experience.”
The modification program was created using $50 billion that was set aside from the bank bailout to help distressed homeowners. The idea was that the Treasury Department would provide incentives to mortgage servicers and investors to modify mortgages for struggling homeowners, rather than foreclose on them.
The administration predicted that three million to four million Americans would benefit, but so far, only 699,053 permanent modifications have been started.
To date, Treasury has spent about $1.34 billion on HAMP. One problem was that the mortgage servicers, at least initially, were not prepared to handle the onslaught of modifications, and homeowners complained that paperwork had been routinely lost and trial modifications had dragged on for months.
by Andrew Martin with New York Timeshttp://www.nytimes.com/2011/06/10/business/10hamp.html?_r=1
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