Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren’t doing enough to help borrowers at risk of losing their homes.
Treasury Department officials said Monday that they will step up pressure on the 71 companies participating in the government’s $75 billion effort to stem the foreclosure crisis. They will start this week by sending three-person “SWAT teams” to monitor the eight largest companies’ work and requesting twice-daily reports on their progress.
The mortgage companies, also known as loan servicers, have had a hard time getting borrowers to complete the needed paperwork for the administration’s loan modification program. Nearly 60% of the 375,000 borrowers who qualify to have their loan modifications completed by year’s end have either submitted incomplete paperwork or none at all.
“Borrowers must understand the urgency of getting their completed paperwork in so they do not miss out on the opportunity for more affordable mortgage payments,” said Phyllis Caldwell, who recently was named to lead the Treasury Department’s homeownership preservation office.
The program, announced by President Obama in February, allows homeowners to have their mortgage interest rate reduced to as low as 2% for five years.
The administration is feeling intense pressure from lawmakers and consumer advocates to speed up progress. As of early September, only about 1,700 homeowners had finished all the paperwork and received a new permanent loan. About one-third of borrowers who have submitted complete applications are still waiting for a decision.
In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the mortgage companies that are lagging.
While big lenders such as Citigroup and Wells Fargo have made double-digit gains in the percentage of eligible borrowers they have signed up for trial modifications, other companies such as Ocwen Financial have increased their borrower participation by only 6 percentage points or less since July.
Paul Koches, executive vice president of Ocwen, said his company had already saved 90,000 of its roughly 370,000 distressed homeowners from foreclosure before the government program began.
As of October, Ocwen had started trial modifications for 11% of its borrowers, up from 5% in July.
Tags: borrowers, foreclosure, foreclosure crisis, homeowners, lenders, loan modifications, loan services, mortgage companies, Obama administration, Treasury Department, wells fargo
