The Obama administration’s goal of helping up to 9 million homeowners refinance their mortgages or obtain loan modifications "is well within reach," according to a Wells Fargo executive in charge of the bank’s loan servicing division.
Wells Fargo refinanced about 750,000 mortgages in the first half of the year, and provided 200,000 trial and completed loan modifications — nearly double the same period a year ago, said Mary Coffin, executive vice president of Wells Fargo Home Mortgage Servicing.
Testifiying at a Senate Banking Committee hearing, Coffin said that because Wells Fargo represents about 20 percent of the market, nearly 4 million Americans may have already refinanced or received loan modifications this year.
But the Obama administration says some loan servicers are doing a better job than others, and will begin publicly reporting their results beginning next month, Treasury Department Assistant Secretary for Financial Stability Herb Allison said in prepared testimony to lawmakers.
Without effective action to prevent foreclosures, many analysts project that more than 6 million families could lose their homes in the next three years, Allison said.
William Apgar, senior advisor for mortgage finance to Housing Secretary Shaun Donovan, warned that the current "very high level of unemployment" makes the already difficult task of helping families struggling to meet their mortgage payment even harder.
As the economy has weakened, unemployment has become an increasing cause of mortgage default and foreclosure, Apgar said.
The Bureau of Labor Statistics reported today that the national unemployment rate was little changed from May to June at 9.5 percent, but has increased 3.9 percentage points from a year ago.
According to data aggregator RealtyTrac, seven states accounted for two out of three of the 1.53 million foreclosure-related filings the company tallied in the first half of the year. Unemployment exceeded the national average in all but one of those states.
Among the seven states, California had the largest number of foreclosure-related filings (391,611) and 11.6 percent unemployment. California was followed by Florida (268,064 filings, 10.6 percent unemployment); Arizona (89,799 filings, 8.7 percent unemployment); Illinois (68,932 filings, 10.3 percent unemployment); Nevada (68,708 filings, 12 percent unemployment); Michigan (60,786 filings, 15.2 percent unemployment); and Ohio (58,937 filings, 11.1 percent unemployment).
Michigan’s 15.2 percent jobless rate was up 7.1 percentage points from a year ago, and is the highest in the nation. The state had the dubious honor of being the first to see unemployment surge above 15 percent since West Virginia in March 1984. Nevada (12 percent unemployment), Rhode Island (12.4 percent), and South Carolina (12.1 percent) have never registered higher jobless rates.
In his prepared testimony, Apgar said the Obama administration is exploring options that would provide mortgage assistance to unemployed workers. The plan will reportedly include measures that would allow homeowners to stay in their homes as renters after a foreclosure.
Coffin testified that Wells Fargo began making loan modifications under the Obama administration’s Making Home Affordable Modification Program (HAMP) within a week of the April 6 release of the program guidelines from Fannie Mae and Freddie Mac, and is now in the process of finalizing 52,000 HAMP loan modifications.
Last month, 83 percent of Wells Fargo’s loan modifications involved payment reductions, reducing the risk of re-default and foreclosures, Coffin said. …CONTINUED
Bank of America default management executive Allen Jones testified that the Making Home Affordable program "has become the centerpiece" of Bank of America’s home retention efforts. He said 80,000 Bank of America customers have been offered HAMP modifications or are already in trial modifications.
While the Home Affordable Refinance Program (HARP) is only an option for borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, and whose loan-to-value (LTV) ratios don’t exceed 125 percent, HAMP modifications have no LTV limits and are potentially available on about 85 percent of all mortgages, Allison said, regardless of whether the loans are owned by Fannie or Freddie.
About 325,000 trial modifications have been offered under the HAMP program, he said, and "tens of thousands" are underway.
Coffin said about 30 percent of Wells Fargo’s seriously delinquent borrowers don’t qualify for the HAMP program because they have an FHA or VA loan, and another 15 percent do not meet the program’s basic program requirements.
The Department of Housing and Urban Development is working on final guidance that will allow the Federal Housing Administration to implement a Home Affordable Loss Mitigation Option, Apgar said, which will expanding the FHA’s authority to engage in foreclosure prevention by offering a partial claim up to 30 percent of unpaid principal balance combined with a loan modification.
The FHA will be able to employ the strategy on loans that face imminent default, rather than waiting until borrowers stop making payments, and will be granted the authority to facilitate loan modifications through assignment of loans to address disincentives to loan servicers relating to having to purchase the loans from Ginnie Mae pools, Apgar said.
Another obstacle to meeting the Obama administration’s ambitious targets for loan modifications and refinancings is the sheer volume of work.
Coffin said Wells Fargo has boosted the number of employees engaged in working with borrowers by 54 percent in the first half of this year, to 11,500. The Feb. 18 announcement that the HAMP and HARP programs were coming generated a flood of inquiries, Coffin said — including a significant increase in calls from borrowers who were still current on their loans.
Historically, 5 to 10 percent of inquiries for loan workouts came from borrowers who were current, she said. Now the number is more like 40 percent.
Jones said in the last year, Bank of America has nearly doubled the number of employees engaged in "home retention" efforts with borrowers, to more than 7,400. Those employees handle an average of 80,000 calls a day, or more than 1.8 million calls a month, he said.
Allison noted that Donovan and Treasury Secretary Timothy Geithner recently wrote all 27 loan servicers participating in the HAMP program, informing them that there appeared to be "substantial variation" in their performance, and inconsistent results in converting loan modification offers into actual trial modifications.
The administration is asking all servicers to "move rapidly" to expand their capacity and "improve the execution quality of loan modifications," Allison said, and will begin publishing monthly, public reports on their performance beginning Aug. 4.
Success will require adding more staff than previously planned, expanding call center capacities, providing a process for faster decisions, bolstering training, enhancing online capabilities, and sending additional mailings to potentially eligible borrowers, he said.
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