Based on a second-quarter assessment of the 10 largest servicers participating in the Making Home Affordable Program, the U.S. Treasury Department plans to continue to withhold incentives from Bank of America and JPMorgan Chase. They two lenders have failed to show “substantial improvement” in borrower outreach, borrower evaluations and program reporting, said a Treasury spokesperson, who allowed that “some improvements have been made.” Wells Fargo, which was also punished last quarter by the withholding of incentive payments, has been upgraded to “moderate improvement” and will begin receiving incentive payments for Making Home Affordable loss mitigation.
Freddie Mac is the Treasury’s compliance agent for these programs and that conducts the performance assessments. This morning, a report surfaced indicating that BofA and JPMorgan Chase, among other U.S. lenders, will soon be sued by the Federal Housing Finance Agency (FHFA), which oversees the government-controlled GSE. The FHFA hopes to recoup more money on toxic mortgage securities by arguing that BofA, DeutscheBank, JPMorgan and Goldman Sachs failed to perform legally-mandated due diligence on mortgage securities. It is not demanding a buyback, but rather “reimbursement for losses on the securities held by Fannie Mae and Freddie Mac.” All four of the lenders’ stocks fell in value this morning. All four of the lenders also declined to comment on the potential lawsuit and the Treasury’s ratings.
Do you think that there is too much overlap in federal programs and their supervision of lenders? Is there any way to actually make this system work again?
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