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Bank of America Mortgage Issues

Tuesday, August 4, 2009 15:47
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According to the Treasury Department Bank of America and Wells Fargo were the worst among the big banks for doing mortgage modifications for struggling home owners.

The Treasury Department states that Bank of America has to date only worked on 4% of eligible loan modifications or 27,985, and Wells Fargo has only worked on 6% of eligible loan modifications to date. The government program to aid with the home mortgage crisis, Making Home Affordable program started in March, yet Bank of America and Wells Fargo are slow out of the gate to help their customers with failing mortgages. However JPMorgan Chase and Company has help 20% of their customers with failing mortgages, and Citigroup Inc has helped 15% of their customers with failing mortgages to looking to refinancing their homes under the Making Home Affordable program started in March.

The Treasury Secretary Michael Barr, says some of the financial institutions should have and could have done more to help their customers with their troubled mortgages so far and we expect more from them in the future.

The government is currently working with around 235,000 or the targeted 4 million of those with troubled mortgages. The director of the Economic Council Lawrence Summers said the report showing the performance of the banking institutions is to make clear who is helping the troubled mortgage customers and helping to achieve the goal of the governments anti-foreclosure program.

The larger lenders like Bank of America and Wells Fargo have many more troubled mortgages to deal with and it will certainly take more effort than some of the smaller lending institutions, but none the less it needs to be done to help the customers and the country to stabilize the mortgage crisis.

The Making Home Affordable program started in March and has $75 billion available for loan modification, and the goal is to have at least 500,000 trial modifications in place by Nov 1 according to President Obama.

According to David Sisko the head of default management services for Deloitte and Touch, many companies can’t handle the volume of loans being demanded by the government program. According to David Sisko normally lending institutions handle 50-100 home loans a month and the government is asking then to do is to handle 200-300 home loans a month. You would think with the high unemployment rate and the amount of money at stake the banks could find people to process the additional loans and meet the governments request. Some of the smaller banks are managing to get the job done for example: California Based Wescom Central Credit Union has done 28%, Morgan Stanleys / Saxon Mortgage has done 25%, Aurora Loan Services has done 21%, and GMAC has done 20%. You would think if the small banks could get the job done, the large banks could follow suit and do the same when the stability of the country is at stake.

To be eligible for the program the house must be owner occupied and at least 60 days past due, and either in foreclosure or bankruptcy. The house and mortgage in question also must conform to Fannie Mae and Freddie Mac loan limits, some of which are as high as $730,000 in some areas, and the loan must have been started before 2009. The government program Making Home Affordable program demands banks that were given federal aid from the Treasury, or who took Troubled Asset Relief Program known as TARP funds as well as mortgage companies Fannie Mae and Freddie Mac to help borrowers in imminent risk of defaulting on their loans. Some of the ways the lending institutions are supposed to help are by lowering payments to borrowers, lengthen terms on loans, lower interest rates, and to forbear outstanding principal, among other methods. It seems the banks were happy to take the TARP monies, but are not in as big a hurry to help the troubled mortgage customers. The loan modifications are understandably hard to do, but none the less we have to take the time as the economic strength and future of the country are at stake.

Bank of America and Citigroup received about $45 billion in TARP, and only took $25 billion. Likely the TARP funds that Bank of America received made it easier to pay the billions to the Merrill Lynch Top executives as part of the merger that the SEC investigated. Yet Bank of America can’t find the time to get the needed mortgages processed to meet the governments goals.

A group of loan service companies met with President Obama on July 28 and said they will step up the pace of the loan modifications and work to keep homeowners from sliding into foreclosure whenever possible, according to the Treasury. The large banks are saying they have ramped up and are attempting to tackle the huge task of modifying all the troubled mortgages, though the demand and task are great. Top banking industry officers are blaming government rules for the loan modifications being done so slowly, and Senate Banking Committee Chairman Christopher Dodd assailed sluggish results on administration from anti foreclosure programs as well.

The number of homes either in default or seized through June in 6 months according to California based Realty Trac was 1.5 million. Clearly we have a huge problem with the number of troubled mortgages, and need to step up the pace to remedy the situation.

Some say the mortgage market is turning around, but warn it took a long time to create the financial situation we are in and it will take a long time to get through it as well. I think we need to consider that the loose regulations of lending institutions lead to the number of troubled mortgages, and the banks need to be pushed to work harder to fix the mess they help make. The banks and lending institutions were happy to make money on the mortgages and ride the wave of money on all the shaky loans that are now coming back to bite them. They need to be made to meet the government set goals to help turn around the financial mess that they help create for the good of the country and our economy.

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