Obama Plan is Slow in Loan Modification and Increasing Foreclosure

The Obama Plan came with great fanfare and expectations. Of course, it had done a small dent but is not doing enough to turn the rapid rise in foreclosure especially in Nevada. Nevada is still on top of the foreclosure statistics throughout USA. The Obama Administration’s $75 billion loan modification was able to help only 9 percent of qualified borrower as of July, according to a report released by the U.S. Treasury Department as part of its strategy to force lenders to modify more troubled mortgage loans to trim the growing number of bank foreclosure homes in the country.

The report noted that 10 lenders did not successfully modify a single troubled loan. Leading the list of servicing companies with the most number of loan modifications is Saxon Mortgage Services, the mortgage servicing unit of Morgan Stanley. The unit was able to approve 25 percent of 21,000 of the total 84,000 eligible borrowers for trial modifications.

The report ranked participating servicing companies based on the volume of troubled loans they have modified as percentage of the total borrowers in their portfolio who were eligible for a mortgage modification. Eligible borrowers are those who were 2 months delayed on their mortgage payments and are on the brink of losing their properties to foreclosures.

Both JPMorganChase and GMAC Mortgage approved 20 percent of the eligible loans on their inventories for trial modifications. Wells Fargo trailed the list with just 4 percent completed loan modifications. However, Wells Fargo’s result does not include the loans changed by Wachovia Bank which it acquired in 2008. For its part, Wachovia modified only 2 percent of the loans on its portfolio.

Meanwhile, Bank of America modified 6 percent of loans, including those of Countrywide which it acquired in 2008. CitiMortgage, a unit of Citigroup approved almost 15 percent eligible loans for trial modifications. According to the Treasury report, 235,000 homeowners or 9 percent were approved for the Home Affordable Modification Program out of the 2.7 million borrowers who were deemed eligible for the foreclosure prevention initiative.

The report pointed out that servicing companies offered trial modifications to nearly 15 percent of eligible borrowers or about 400,000. In the case of JPMorgan Chase, it reported 394,000 delinquent home loans on its inventory and offered modification to 30 percent or 117,000. However, the bank was able to renegotiate only 20 percent or 79,000 of the troubled loans.

The Treasury released over $20 billion under the Troubled Asset Relief Program to servicing companies as part of the government’s subsidy for the cost of loan modification.

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