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Banks Slow to Aid Homeowners, U.S. Says

The Obama administration has pulled back the curtains on a loan-modification program meant to help struggling homeowners, only to show that banks are underperforming.



) -- The Obama administration has pulled back the curtains on a loan-modification program meant to help struggling homeowners, only to show that banks are underperforming.

The Treasury Department released information on Tuesday showing that mortgage servicers have only offered to help 15% of the borrowers eligible for its "Making Home Affordable" program since its inception earlier this year. They have successfully modified only 9% of the 2.7 million delinquent mortgages eligible for modification.

The government calls servicer performance "uneven," with some smaller, lesser-known servicers like

Technology Credit Union

helping none of its customers, and

GMAC Mortgage

making a strong push to refinance 20% of its mortgages gone bad.

"The administration is taking additional steps to improve performance," said a statement from the Treasury.

One of those steps is apparently the public disclosure of servicer performance, for big bailed-out banks that are struggling to improve their reputations. While

JPMorgan Chase

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has extended offers to rework 117,259 troubled loans, or about one-fifth of those eligible,

Bank of America

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has only extended 99,649, or about 4% of its much larger portfolio.

Wells Fargo

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has also posted anemic performance, extending 38,673 offers that represented 12% of those eligible. So far it has begun to work out just 20,219, or 6%. Its newly acquired


division has only offered to help 3% of its eligible mortgages, and begun to work out 2%.

Wells responded with a vigorous defense, saying it has modified more than 240,000 loans this year through July, including those that are part of the government program. The bank noted that more than 90% of its borrowers are current on their mortgages, and that it has the lowest delinquency rate of the top four U.S. lenders.

"Now that the program details are largely complete, our company has been accelerating our use of

Making Home Affordable," said Mike Heid, co-president of Wells Fargo Home Mortgage.


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CitiMortgage division has offered to help 21% of eligible customers, and started the process on 15% of its troubled mortgage debt.

The refinancing process has been a thorny political issue for both the government and the banks, who face operational difficulties with the program as well. Making Home Affordable was rolled out as a savior for troubled borrowers in February, promising to help as many as three million to four million Americans using $75 billion worth of incentives for banks to refinance their loans.

But the program has hit snag after snag, with understaffed banks unable to process the enormous demand from borrowers. As seems to be typical of consumer complaints with banks, the program has been plagued by tales of poor customer service, with some waiting extended periods for assistance, and others being rejected as ineligible without much of an explanation.

Wells, BofA, and others have hired and trained thousands of new employees to help with the backlog created by the administration's sudden rollout of a program for which they were understaffed. However, it may be too little, too late to repair an image in the public eye that has been further damaged by handsome first- and second-quarter profits, based partly on the refinancing boom and tens of billions of dollars in taxpayer support.

The Treasury Department's press release noted that Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan wrote CEOs of participating servicers, asking them to "redouble their efforts to increase staffing, improve borrower response times and streamline the application process." Senior administration officials have also held face-to-face meetings with servicer executives on July 28, in an attempt to pressure them into being more accommodative.

The servicer-data rollout on Tuesday seems to be part of a broader push for the administration to increase transparency about its recovery programs. Treasury promised to distribute "more exacting metrics" on customer service, like average wait time for inquiries, response time, and the completeness and accuracy of information provided.

Freddie Mac


will also be auditing applications that were denied.

-- Written by Lauren Tara LaCapra in New York