Recognizing that its distressed mortgage rescue program is not meeting expectations, Obama Administration officials dressed down executives from the country’s biggest banks including Bank of America, Wells Fargo and J.P. Morgan Chase yesterday. Treasury Department officials have insisted that they want half a million mortgages modified by November 1st.
Since the program’s inception in March, the Obama Program has modified only 200,000 while more than a million homeowners received default notices in the first half of the year. Lenders get a government subsidy to help offset loan modification costs. Rising unemployment and falling home values have hampered the efforts.
Officials from the U.S. Department of Housing and Urban Development and the Treasury asked bankers to respond more quickly and hire additional staff to handle the demand for loan modifications. Lenders asked the administration to streamline the program, with uniform applications and a single web portal to expedite processing. Bankers also said they are wrestling with the criteria to evaluate who is in enough final hardship to qualify.
Bankers also met later with housing counselors and advocates, who claim that the loan modifications are taking too long to approve.
Yesterday, Minnesota’s Foreclosure Relief Project in St. Paul filed class-action lawsuit against the U.S. Treasury Department, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac claiming that the Home Affordable Program has been wrongly rejecting applications from qualified homeowners without explaining why or offering a right of appeal. The lawsuit seeks to halt foreclosures nationwide until all distressed homeowners can be properly evaluated.
Other news of the day indicates that the housing crisis may be bottoming out. Standard and Poor’s Case Shiller home price index showed that single family home prices rose in the U.S. from May to April – the first monthly increase in nearly three years.
Treasury Secretary Timothy F. Geithner said in a statement that the Home Affordable Program effort is now on track to meet its goals. “Still, too many homeowners are at risk of foreclosure right now,” Geithner stated.
CitiMortgage chief executive Sanjiv Das said the meeting was “an important step.”