FIRM COMMENTARY:  Remember:  Loan servicers usually only make 00.25% to 00.50% of a monthly mortgage payment in fees to service a loan that is not in default.  When a loan goes into default, loan servicers make a mint:  they charge late fees, inspection fees, interest on suspense accounts, BPOs, fore placed insurance, escrow fees, attorney fees, trustee fees, REO fees etc.  It doesn't matter that no payments are coming in from the borrower:  the servicers rack up a huge lien that gets paid off after foreclosure proceeds are received.  Wells, Chase and B of A scoop the money off the top before passing off the loss to a mortgage backed security trust.  They have no skin in the game and no real incentive to help homeowners.

Gov't faults 3 lenders over mortgage-aid efforts

WASHINGTON (AP) - The Obama administration is blaming the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says they've done little to help people at risk of losing their homes. 

Wells Fargo & Co., Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said Thursday.  [Treasury is to blame for not enforcing the HAMP contract and allowing FANNIE MAE to run the program...it's like letting the "Fox watch the Chickens"]

Based on those lenders' lackluster success for the first three months of 2011, the government is withholding financial incentives that amounted to up to $1,000 per permanent loan modification. Treasury said the three lenders incorrectly determined that many people were ineligible for the program.  [The withheld incentive is a drop in the bucket...]

The lenders are disputing the data. They say the findings are based on old reports, not audits from the first quarter of the year as Treasury claimed. One of them, Wells Fargo, is formally appealing the government's decision to cut off its incentives.

The three lenders have already received about $24 million from the government as of last month.

The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications.  [Had judicial loan modification been passed in the Senate...Bankruptcy judges would be modifying loans....this crisis would be almost over.  Too bad broke people don't have lobbyists]

More than 1.6 million troubled homeowners received trial modifications over the past two years. Roughly 44 percent of those who applied, or about 700,000, have had their mortgage permanently lowered as of April. A majority of the applicants, or about 843,000 homeowners, have dropped out of the program.

Homeowners who are accepted into the program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 per month.

Homeowners have complained that the program has been a bureaucratic mess. Many have said they were disqualified after banks lost their documents and failed to return their phone calls. Banks have blamed homeowners for failing to submit needed paperwork.

[AGAIN....Treasury is to blame for not enforcing the HAMP contract and allowing FANNIE MAE to run the program...this has been going on for over 2 years"]

The banks are not obligated to participate in the program, so the administration can't fine them. But Timothy Massad, Treasury's acting assistant secretary for financial stability, said the administration can publicly shame them at a time when foreclosures are at record levels and hurting the broader economy.

"This is a way for us to enhance performance," Massad said.

The banks questioned why the audits date back to the early months of the program. Treasury has tweaked the program dozens of times in its first two years, making it difficult for the companies to comply, they contend.

The report "paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury," Wells Fargo said in a statement. It said the report "in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners."

A JPMorgan spokesman said the bank "respectfully disagrees with the assessment." He said the bank has improved significantly since Treasury's audit.

Bank of America issued a statement acknowledging that the lender must make improvements in key areas. But it said it has made progress in several of the factors that Treasury cited.

Another firm, Ocwen Loan Servcing, was also cited as needing substantial improvement. But its incentive payments will not be withheld.

Ocwen General Counsel Paul Koches said the company took responsibility for 300,000 loans from other servicers since the start of the modification program. Some of the criticism from Treasury was unfair because the loans were the other servicers' responsibility at the time, he said.

Ocwen "never imagined we could somehow be saddled with the actions or inactions of prior servicers," Koches said.

Despite the lenders' complaints, the government stands "by the conclusions we put out," Treasury's Massad said.

Six other firms -- American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest Bank and Select Portfolio Servicing -- require moderate improvement. But Treasury said they will not lose their cash incentives.

The Treasury Department said that when the program began, most of the lenders did not have the needed staff or resources to help the many homeowners seeking lower mortgage payments.

[So I expect any other result?  The servicers are not in the loan mod business....why think they'd be good at it or spend any time or money on such an endeavor...especially servicer who have an economic incentive to foreclose....or risk the chance they may have to buy back defaulted loans from mortgage backed security trusts?]

By DANIEL WAGNER, DEREK KRAVITZ

http://money.msn.com/home-loans/news.aspx?feed=AP&date=20110609&id=13750931