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Bank of America Disappoints On Their Loan Modification Efforts

According to a recent CNBC article by Albert Bozzo, participation by banks in the governments$75 billion program to modify home loans has been off to a slower start than expected.

Interestingly, Wells Fargo and Bank of America, both of whom have had significant increases in their non-performing assets, are two of the most reluctant banks to modify loans.

Wells Fargo has extended loan modifications to just 12% of eligible borrowers.

Bank of America has extended loan modifications to just 13% of eligible borrowers. One would think because of the TARP money as well as billions in loan guarantees Bank of America has received from the government that their participation rate would be higher.

On the other hand, "Nationstar Mortgage ranked first with a 45-percent offer rate. Saxon Mortgage Services (37 percent) and Aurora Loan Services (36 percent) were next".

Additionally, JPMorgan has extended loan modifications to 30% of eligible borrowers.

Citigroup has extended loan modifications to 21% of eligible borrowers.

Interestingly, the article goes on to say that of the 117,259 loans that JPMorgan has attempted to modify, only 20% of those borrowers are actually participating.

Bozzo states, "In all, the government hopes to assist as many as 7 million to 9 million needy homeowners, through loan refinancing or modification to prevent foreclosures. About 85 percent of the estimated 55 million outstanding mortgages are covered under the program."

The lackluster performance so far continues to bring into question as to whether it is even in the loan servicers financial best interest to modify loans. According to a recent New York Times report, Goodman makes the case that loan servicers actually financially benefit when borrowers go into default.

Posted by Mark MacKenzie on 08/09/2009 08:32 AM

Comments (34)

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34 Comments on Bank of America Disappoints On Their Loan Modification Efforts

AUG

Great Mark. Shed some light on this subject.

Of course, the "loan modification" completed by Chase, etc. often are merely extending the term of the loan.

It is extremely rare for a mortgage company to agree to a reduction in principle and that is the only thing that's going to cure the negative equity.

Loan Mods are a rare commodity in my opinion and the one's I have seen are not fixes but patches to the situation.

Mark - I see that the majority of your posts are rehashing news sources that are already out there. A lot of doom and gloom. It would be nice if you added some of your personal insight and beliefs to some of these news stories.

From the consumers that end up with a loan modification, 6 months later more than half of them are on default again.

why?

Because they are upside down. . and they know they will be upside down for the next 10 years.. .

Since the statistics supporting successful loan modifications are so low, perhaps banks should only modify a small percentage of their loans. Maybe it is not in their best interest to waste a lot of time and money for people who will default again in a few months? (Just brainstorming here; I'm not a bank executive :-)

Lenn: The principle reduction that is being offered with these loan modifications won't buy a cup of coffee. The modifications are simply intended to keep people in their homes, nothing more.

Dick & Dixie: Agreed. They are simply buying time.

Christopher & Stephanie: Seriously?

First, did you know about this information? I would bet that not every person that reads my blog knows about this. Isn't this the point of blogging, to share information?

Second, I think tax-payers would like to know that a company like Bank of America, that has been the recipient of massive government bailouts is not participating aggressively in this program. Shouldn't they be held accountable? Or do you not care?

Third, I write about this because it is a focal point of the governments efforts to "fix" the housing market. If this $75 billion program is not going to work, isn't that something that people should be aware of? Isn't it something that the government should be held accountable for?

Fourth, I think I have added my personal insight into this, "One would think because of the TARP money as well as billions in loan guarantees Bank of America has received from the government that their participation rate would be higher." I made this point in MY headline.

Finally, if you dig just a little deeper you would see that the reason I blog and the reason I wrote my recent book is to provide a cost-effective solution that would actually put a back-stop to residential and commercial property values.

Maybe you don't think falling property values is a concern to millions of Americans, banks, and the broader economy. I do.

Fernando: I agree completely. There is a difference between housing affordability and home values. I don't think the government has recognized this yet.

Melissa: I think that this is what we are seeing, unfortunately. Loan modifications are not the solution to this crisis.

Mark - I believe that recipients of TARP funds should be penalized if they don't assist a certain percentage of distressed homeowners, but only those homeowners who will be able to pay their modified mortgages.

The banks are using and abusing American Taxpayers and thumbing their noses at the regulatory authorities.

I think there is more money in foreclosing possibly. you would think that banks act in their best interest. When loan mods do that I think we will see more. in the meantime, let's sit back and watch home prices sink further as more foreclosures happen.

Mark, interesting that we in the trenches knew this already, I have heard this over and over about BOA and Wells Fargo. However, interesting also that they haven't been slapped hard. If I have heard this over and over again, I am sure that the FEDS have heard this over and over...

I don't have any answers, I am just sick and tired of bad behavior.

Just another example of our govt not having a clue or the guts to do the right thing. Billions and no oversight, shocking. I wish congress was more like NASCAR and just wear their sponsors on their jackets.

Mark,

I was surprised to see Wells Fargo not helping more people as they get a lot of my business due to their ability to get my deals closed and how well the local people handle everything.

As for Bank of America, I am not as surprised. Bank of America seems to be in a real funk right now and are having all kinds of problems right now and while they used to be a place I utilized in the past, they have become one I stay away from.

Lenders need to step up and help their customers. I will keep an eye on these lenders in the future thanks to your blog!

I actually read and saw on the news BofA was only at 4% approval to all of their mod apps. And that Chase was only at 6% approval on loan mods. The problem is that getting modified sometimes raises the monthly payment as you have to be behind in payments and they just add it back in. This actually happened to someone in my office.

Mark - Most of the "modifications" to date are not true modifications and are only postponing the inevitable.

Seems as if the Giants are the ones who fail to help the homeowner with the funding that was provided by the government.

Could be why my 1,000 shares of B.O.A. have drastically dropped from $72.00 per share and now produce laughable dividends while the ivory tower keeps passing out BONUSES !!!

They should have a much higher rate for modifications since they took over Countrwide. They did a lot of no documention loans. Very sad indeed. Our tax dollars at work.

Lenn said it all...for me to say anymore I'd have to name names and I don't want to risk being "sued first and asked questions later".

I have a friend who actually put 20% down during the height. Of course she is underwater and then some. She fell behind due to her and her husband losing a job and then they both got a job (but were making significantly less.) She successfully negotiated a loan mod on her property with the new jobs (you still have to qualify income wise) and was very happy with the terms. Well she ended up getting a lawyer. They cashed the first check and then set a trustee's sale date. The lawyer had to stop it in the 11th hour. I believe that was filthy to get that far and then take money and then set a sale date. I understand she was behind and all but she is ready to make that asset performing. This is B of A

Renee,

Your story about your friend is chilling. I have clients with BofA and they were accepted for a loan modification. I got an email from them the other day saying they needed to talk about it. I have a feeling the news won't be good.

As far as taking money and then still setting sale date? Makes me wonder. I know someone that just sent a large sum of money to put a hold on the default. He asked for confirmation that they would do that, and the loan servicing company said they wouldn't do that until AFTER they got the money. Makes me wonder - what lengths lenders may go to.

You may want to add Citibank to your list of companies who seem to drag their feet.

It is very frustrating to see big lenders who took the bailout and as Stewart says are thumbing their nose at the people.

Mark, I wrote a blog "Banks Become Chefs . . . and Cook the Books" and I bring up my own theory of why banks are so reluctant. Would love to have your comments: http://activerain.com/blogsview/1142192/the-banks-become-chefs-and-cook-the-books

Hope you don't mind the link . . .

Mark- The reluctance is in the fact of the stats. Loan modifications are more times than not a band aid over a cut that is not going to stop bleeding. 80% of all the clients we have are loan mods where the homeowner stopped making the payments even on the loan mods. Just putting off the inevitable. Katerina

Mark - I just reblogged this. I think an immediate recall of TARP funds may incentivize some of these big banks to make good on loan mod promises.

In my opinion it was more rhetoric to make people feel better and provide a sense of hope. Nothing less, nothing more.

Mark,

I read this story when it came out. I think the funny thing is Wells Fargo is one of the best lenders to work with on a short sale but B of A still sucks.

Also notable in that article was the lenders who aren't participating in the program like Homeq.

Given the difficulty of getting a modification, I've wondered if they're not in the lenders' best interest.

Some banks are making it very tough for borrowers to keep their home and loan

It would seem from the outside looking in that most banks like owning vacant deteriorating properties.

Hi Mark -- I've been hearing this data released this week and while it doesn't surprise me, it does make me unhappy as there are real consumers on the receiving end of this nightmare.

Stewart: I agree with you on this. Ordinarily, I don't think the banks are obligated to do anything that the government wants them to do. However, the bailouts change all of this.

Joe: That is seeming more and more like a reality the more I dig into this. Banks only do what makes financial sense.

Andrea: I agree 100%.

David: This is hilarious, "I wish congress was more like NASCAR and just wear their sponsors on their jackets."

Russell: I think Bank of America is in for a long couple of years of losses due in part to their purchase of Countrywide as well as their credit card division.

Linda: I agree, if a loan modification does not lower payments, it will not be successful in at least buyint time.

John: The modifications are buying time. That is it.

Roland: As I said, Bank of America was a big surprise. They, along with Citigroup, have been one of the biggest recipients of government loan guarantees.

Michael: Indeed. Wall St. is back!

Carol: Tax dollars hard at work, paying bonuses to Merrill Lynch.

David: Lenn does have a gift for saying what needs to be said. :)

Renee: Amazing. Stories like that I think tell just how dire some banks are.

Anna: It all comes down to money apparently, even for banks that have been bailed out by tax-payer money.

Carla: I will take a look at it. I don't mind the link at all, unless you are selling a juicer. ;)

Katerina: I agree with your assessment. What is interesting though is why some banks are being so aggressive pursuing them while others are not.

Christianne: Thank you very much, I appreciate the re-blog. Unfortunately, I don't think that the government will allow any of the big banks to fail. They will get as much TARP money as they need.

Tony: I don't think you are too far off the truth.

Brian: It appears that Bank of America is still struggling with the distressed loan aspect of their business.

Christine: There is more and more evidence that this may indeed be the case.

Russ: Unfortunately, this is the case. Which is a cause for concern because this is the focal point of the current administration's housing plan.

Damon: Funny, but true.

Chris: According to the MBA, 12.07% of all mortgages are at least 30 days late. That is a lot of homeowners that need help.

I have a neighbor that was in the middle of negotiating a loan mod with Countrywide. Then the terms changed a month later when BoA took over. Her payment is now higher than before.

Mark,

It's a very complicated issue but you would still expect these major banks to do more than what they've done. If it is in their best interest, they'll do it. Otherwise?

NOV

Great Article!
My mother's loan modification was a nightmare when she went direclty through her lender.

Then after they denied it, she was scammed by a loan mod company out of Florida.

She finally got the loan modification through an A Rated BBB company called Mortgage Assitance Group out of Glendale, AZ.

Her payment was reduced by 30% and they used government funds paid off all her arrears.

Its important as consumers to point out the good guys with all the scams out there.

Here is their information if you know anyone that needs their loan modification programs.

Mortgage Assistance Group 7055 West Bell Road, Ste 22 623-486-4505 www.mag-az.com

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