Mortgage servicers completed more than twice as many loan modifications for troubled borrowers under private programs last year than they did through the Obama administration's main plan to reduce foreclosures.
Loan servicers including Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. made 1.24 million modifications through proprietary programs in 2010, according to a report today from HOPE NOW, a coalition of more than three dozen lenders. The government's Home Affordable Modification Program, or HAMP, had 512,712 permanent loan adjustments, the group said.
The Obama administration's program has been criticized by housing advocates, lawmakers and watchdog groups as it trails its goal of helping 3 million to 4 million homeowners avoid foreclosure. Borrowers are getting more loans modified through private plans because the programs offer more generous terms and have less stringent requirements than HAMP, said Faith Schwartz, executive director of HOPE NOW in Washington.
"Proprietary modifications can be more flexible," Schwartz said in a telephone interview. "You have to remember that taxpayer dollars are at stake with HAMP."
Private modifications can be offered to investor-owned properties, require less documentation than the federal program and can reduce payments below the federal minimum of 31 percent of gross income, she said.
Of Wells Fargo's 621,621 modified mortgages last year, 86 percent were done outside of HAMP, the San Francisco-based bank said in a Jan. 31 statement. The company is the second-largest U.S. mortgage servicer after Bank of America, according to industry newsletter Inside Mortgage Finance.
"Servicers have additional programs that address the vast number of customers in need who are not eligible for, or who likely will not qualify for, the federal government's programs," Tom Goyda, a spokesman for Wells Fargo, said in an e-mail today from Ellisville, Missouri.
More than half of the people who started trial modifications with the federal program had their loans canceled and 20 percent of people with permanent modifications were at least 60 days delinquent in their payments after one year, the Treasury Department reported Jan. 31.
HOPE NOW's Schwartz said she didn't have information on the rate of proprietary loan modifications that re-defaulted.
A record 2.87 million properties received notices of default, auction or seizure in 2010, according to RealtyTrac Inc., an Irvine, California-based data service. That number may jump 20 percent this year as unemployment remains high and banks resume repossessions after a slowdown amid inquiries into documentation practices, the company said last month.
HOPE NOW is an alliance of 38 companies including mortgage servicers, investors and insurers. Fannie Mae and Freddie Mac, the mortgage-finance companies under federal conservatorship, are among the members