Bank of America has been one of the least cooperative banks participating in Treasury's slow-going program to modify mortgages and prevent foreclosure, but last week I received a lending report from BofA with a fishy paragraph:
Over the past 21 months, we’ve helped modify mortgage loans for 445,000 homeowners or, on average, more than 21,000 each month. In addition to these results through our own programs, we helped move almost 100,000 customers into trial modifications through the Administration’s Home Affordable Modification Program (HAMP) in the third quarter.
Wait a minute. BofA has been performing Treasury modifications through the Home Affordable Mortgage Program more slowly than almost every other peer institution, and had been complaining about how they didn't have the resources or infrastructure to move any faster. But now we find out that even as they complained about the lack of resources, they've been doing hundreds of thousands of non-Treasury modifications, which, as I reported in the spring, are usually worse than getting no modification at all. How are they doing this? Andrew Jakabovics and Pat Garafalo at the Center for American Progress have found out: BofA is directing potential HAMP participants into its proprietary modification program, something the HAMP program is supposed to discourage:
In case there remains any ambiguity as to whether a servicer can pull borrowers out of the pool to offer them a non-HAMP-compliant modification before determining their status under HAMP, Treasury official Herbert Allison recently testified, “under HAMP’s loan modification guidelines, mortgage servicers are prevented from ‘cherry-picking’ which loans to modify in a manner that might deny assistance to borrowers at greatest risk of foreclosure.”
So BofA can’t simply suggest an alternative program to this homeowner without determining eligibility for HAMP, and by doing so, it is potentially lowering the number of successful HAMP modifications it completes. Given the size of BofA’s portfolio, its compliance with program rules — particularly as it pertains to getting eligible borrowers into the program — directly impacts the public’s perception of the success of HAMP. If BofA were performing as well as CitiMortgage, Treasury would have reported an additional quarter million mortgages in its HAMP totals.
This is, of course, ridiculous. The whole point of HAMP was to make modifications that helped troubled borrowers and the broader economy, not use the facade of a government program to trick homeowners into changes that could end with them owing even more money and still potentially losing their homes.
-- Tim Fernholz