As recently as a few weeks ago, the Treasury Department seemed pretty unhappy(PDF) with how quickly mortgage servicers were extending loan modifications to struggling borrowers under its Making Home Affordable Program. That led quite a few people–including me–to write stories like this one, ruminating on why things weren’t taking off more quickly.
This morning Treasury got much more specific about which servicers it is–and isn’t–annoyed with. The department’s first servicer performance report (PDF) shows that certain companies have really embraced the program: Saxon, Aurora, GMAC and JP Morgan Chase are among the firms that have started trial modifications for at least 20% of borrowers who are 60 or more days delinquent.
And then there’s the other end of the spectrum, including some pretty big names, the firms that have done “an infinitesimally small amount,” in the stern words of Treasury official Michael Barr. There we’re talking about Wells Fargo (which has started trial mods on just 6% of 60+ day delinquencies), Bank of America (4%) and Wachovia (2%), among others.
What accounts for the discrepancy?
I can certainly believe–as Treasury would have us–that some servicers have simply been quicker to respond and more invested in ramping up their ability to deal with loan modifications. Many of these organizations have proven remarkably inept at running other parts of their mortgage-related business–underwriting, for instance–so why would we expect them to have their act together on this?
I would, though, caution against drawing too many conclusions from this initial batch of data for two reasons.
First, not all loan modifications fall under the the Making Home Affordable Program (HAMP). Servicers get paid to make the government-sanctioned modifications, so it seems like they would shove any other modifications they might have going on into that mold. But we don’t know if that’s actually true, and since Treasury isn’t collecting data on non-HAMP mods, there could be a significant number of other mods out there.
Second, we don’t yet have any data on how many of these modifications are successful in the long-term. Rewriting the terms of a loan so that it seems like a borrower can afford it is one thing. Actually pulling it off–keeping the homeowner current over the course of years to come–is quite another.
That’s not to say we shouldn’t get on the case of servicers who aren’t playing ball. Especially, I would say, Wachovia Mortgage, which not only has a low rate of trial mods underway (2%), but also a shockingly low percentage of trial mod offers extended–3%, compared to Bank of America’s 13% and Wells Fargo’s 12%. I just also wouldn’t get too heady yet about the servicers that are already enthusiastically playing ball–since that’s different than winning.
Barbara!