Treasury warns Chase of permanent HAMP witholdings
by JON PRIOR
Wednesday, December 7th, 2011, 2:00 pm
The Treasury Department will withhold Home Affordable Modification Program payments from JPMorgan Chase (JPM: 34.00 +2.32%) and Bank of America (BAC: 5.89 +1.90%) for the third straight quarter.
According to a third-quarter assessment of the mortgage servicers participating in HAMP, the Treasury found Chase was the only firm "in need of substantial improvement under the program" and has not yet addressed problems the Treasury found in previous quarters.
The Treasury said it would "permanently reduce" payments owed to Chase unless its problems are fixed in time for the first quarter of 2012. According to the results, Chase was found to regularly miscalculate the income of homeowners. Furthermore, the lender failed to contact borrowers effectively and committed numerous errors in delivering HAMP progress reports to the Treasury.
"We are disappointed with our rating, and will continue to work hard to improve our processes and controls," a Chase spokesman said.
BofA was moved from needing substantial improvement to moderate improvement needed, but the Treasury said it will still withhold payments to BofA. The Treasury said the servicer "has made progress in addressing a number of items."
The Treasury launched HAMP in March 2009. Participating servicers started 883,076 permanent modifications since, including 26,100 in October, which is in line with the monthly average. But it is far short of the 3 million to 4 million initially projected. Congressional panels and oversight committees have continually pressed Treasury to crack down on servicers that are not doing enough.
Both Chase and BofA combined to start 315,000 permanent HAMP modifications and extended more than 800,000 three-month HAMP trials.
The Treasury uses Troubled Asset Relief Program funds to pay servicers $1,000 for every permanent modification and another $1,000 every year the new loan is current.
According to Treasury data, more than $87 million in HAMP payments went to Chase so far, and another $80 million went to BofA. Beginning in first quarter of 2011, the Treasury began assessing the 10 largest servicers for contacting borrowers, how evaluations are conducted and results reported.
BofA and Chase have yet to receive any funds this year as a result. The Treasury also withheld funds from Wells Fargo (WFC: 27.05 +1.50%) in the first quarter, but it made enough improvements to get the money back after the second quarter reviews.
"The mortgage servicing industry lacked accountability and transparency when this crisis started," said Treasury Assistant Secretary for Financial Stability Tim Massad. "Publishing these servicer assessments is key to our efforts to hold servicers publicly accountable for their performance and keep necessary pressure on them to improve. We've seen movement in the right direction, and we will keep this up so that the industry continues to change its ways."