By Mike Colpitts
Nearly four years after the foreclosure crisis began to make inroads to wreck the U.S. economy and mortgage lenders started foreclosing on homes without proof of ownership, the U.S. Treasury is finally taking action to withhold payments to three of the nation’s largest banks as a way to penalize their mortgage servicing companies.
The move comes after 51 members of Congress sent a letter to the Treasury asking them to take action in efforts to get the nation’s largest banks to improve efforts to modify mortgages for homeowners at risk of foreclosure.
The report, released by the Treasury department indicated that the nation’s largest lender, Bank of America, which took over Countrywide Mortgage at the height of the financial crisis, JP Morgan Chase and Wells Fargo need to make “substantial improvements” to their programs before they will get paid by the Home Affordable Modification Program again. The program was implemented as part of the Obama administration’s efforts to aid distressed homeowners.
The three giant lenders own mortgage servicing companies, which handle most of their bank’s loan servicing. The Treasury department determined that the servicers did such a poor job at working with mortgage holders to modify loans and communicating with consumers that they are withholding future payments until improvements are made.
“More than two years after the Home Affordable Modification Program HAMP) was launched, I am pleased that the administration has finally decided to take enforcement seriously and penalize three servicers who have as a matter of standard practice, foreclosed on millions of homeowners, often without properly screening them for modifications or otherwise following program rules,” said Representative Maxine Waters (D-CA).
Waters sent a letter with 50 other House Democrats dated March 28, to the Treasury demanding that the department begin fining servicers who failed to abide by HAMP requirements. “I am pleased that the Treasury Department took our call for enforcement seriously, and worked quickly to implement a new payment-withholding regime,” said Waters in a written statement. “Nicely asking mortgage servicers to follow the rules hasn’t worked.”
“We sent this letter because it was clear that a lack of consequences for misbehavior has encouraged servicers to cut-corners and even wrongfully foreclose on homeowners. Through Congressional hearings and conversations with my constituents, it became clear that lost paperwork, conflicting and confusing guidance from servicer staff, forged documents and even unsubstantiated loan modification denials were the norm in the industry.”