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Mortgage Aid Targeted Most-Delinquent Borrowers First, Leaving Others Waiting

July 30: This post has been updated.

 A survey of the biggest mortgage servicers participating in the administration's foreclosure prevention program shows that most have focused their efforts on the most delinquent borrowers first. This helps explain why many troubled borrowers who are not yet in default – but should be eligible for the program – say they've found it hard to get their servicers to modify their loan.

July 4 marks the fourth month of the Obama administration's $75 billion effort. So far, more than 200,000 loan modifications have been offered, the Treasury Department said recently. Officials have said the plan should help as many as 4 million homeowners, but some frustrated borrowers have told us that the program seems to be off to a slow start.

In particular, a number of homeowners who've managed to keep up with their payments have told us they've gotten nowhere with their loan servicers – in some cases, they've even been told to stop payments if they want help.  Credit counselors generally say that homeowners should never default on purpose, even to receive extra aid.

We did the survey of the largest servicers in the program to see how they are implementing the program. You can see the results here.

Under the program – called Making Home Affordable (MHA)– the government offers incentive payments to participating loan servicers that lower homeowners' monthly mortgage payments to 31 percent of their income.

In practice, modifying millions of mortgages requires not only a massive effort to hire and train staff but also a “sea change” in mindset for servicers, who have traditionally focused on collecting monthly payments and foreclosing when necessary, according to Kurt Eggert, a law professor and expert in mortgage servicing at Chapman University.

Servicer Implementation Plan Total MHA Trial
Modifications To Date
Total Loan Portfolio,
as of Mar. 31, 2009
Bank of America /
  • Has been focusing on borrowers who are most delinquent
  • Currently developing a computer model to address other borrowers; should be ready "very soon"
  • In the meantime, it is beginning to put current borrowers into an "MHA-style" modification; when the computer systems are up and running, it will convert them into the MHA program
45,000, as of June 22 $2,112,800,000,000
Wells Fargo
No comment 52,000 as of July 16 $1,767,808,000,000
Chase Financial
  • Giving priority to most delinquent borrowers
  • Could not confirm if borrowers who are current on their payments are receiving modifications
  • Has hired 950 loan counselors since Jan. 1, for a current total of 3,500
87,100, as of June 30 $1,477,630,000,000
Working with all eligible homeowners, regardless of delinquency status No comment $791,936,000,000
GMAC Mortgage
Started by targeting borrowers who are most delinquent, but currently helping all eligible borrowers, regardless of delinquency status. No comment $390,657,000,000

Sources: Bank of America spokesman Rick Simon, Wells Fargo spokesman Jason Menke, Chase Financial spokesman Tom Kelly, CitiMortgage spokesman Mark Rodgers, and GMAC Mortgage Communications Manager Jane Conroy.

Portfolio data from National Mortgage News

Update: Wells Fargo said it had completed 52,000 loan modifications through the government's program as of July 16.

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