Slow start for second mortgage HAMP program

By Mary Ellen Podmolik
Posted July 20, 2010 at 12:30 p.m.

Only four of the eight largest mortgage servicers have committed to participate in a government-sponsored, yet voluntary, program designed to aid troubled homeowners with second mortgages, new data released Tuesday shows.

Of the four servicers participating in the second lien modification program — Bank of America, CitiMortgage, JPMorgan Chase and Wells Fargo Bank — only Bank of America and Chase were “operationally ready” and extending modification offers to consumers this spring, the Treasury Department said Tuesday.

Servicers that chose not to assist borrowers with their second liens include American Home Mortgage Servicing, GMAC Mortgage, Litton Loan Servicing and OneWest Bank.

The Obama administration said it continues to talk with additional servicers about helping consumers modify their second liens on a property, a thorny issue that has kept some homeowners from qualifying for mortgage modifications.

“Dealing with the second lien is an important issue,” said Bill Apgar, assistant secretary of the U.S. Department of Housing and Urban Development.

Meanwhile, all eight of the largest servicers are participating in the government-sponsored Home Affordable Foreclosure Alternatives Program, which offers incentives to homeowners, servicers and mortgage investors who participate in short sales or deeds in lieu, rather than foreclosures.

The housing scorecard also showed that in the Chicago area, the number of permanent mortgage modifications rose almost 15 percent last month and just passed the 20,000-mark since the program got underway in the spring of 2009. Meanwhile, another 18,150 mortgages were in active trial modifications last month, a drop of 23 percent from May.

The cancellations were expected, as servicers moved to a new requirement that they only offer trial modifications to borrowers who provide complete documentation. Of the 91,119 trial modifications canceled nationally last month, more than 60 percent had been in trial for six months or longer. About 45 percent of homeowners in canceled HAMP trials with the eight largest servicers entered modification programs set up by the companies themselves.

Nationally, the report shows that 51,205 permanent modifications were begun in May, bringing the total number of active HAMP modifications to 389,198. Almost 9,000 homeowners with permanent modifications have fallen out of the program.

It also showed that some servicers are doing a better job than others in working through the process of determining which trial modifications should be made permanent. Treasury officials met with large servicers in May to prod them to speed the decision-making process on trial payment plans that had lingered more than six months and the companies vowed to clear the backlog by the end of June, according to Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office.

However, the June report shows that JPMorgan Chase continued to have the largest share of active so-called “aged” trials in June and in fact it rose from May’s report.

A report last month from the Government Accountability Office criticized the Treasury Department for not detailing any specific consequences for those servicers that do not follow the HAMP initiative.

“The facts speak for themselves in terms of those who’ve done a better job than others,” Caldwell said. “It’s important to remember this is a contractual program. We are absolutely looking at every remedy we have available, which includes withholding incentives and claw-back of incentives.”

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