White House penalizes big banks over mortgage mod program
UPDATED INTERVIEW
Now to the troubled housing market. The White House says three big banks are not doing enough to help struggling homeowners keep up with mortgage payments. Bank of America, JPMorgan Chase, and Wells Fargo will lose millions of dollars from a federal mortgage modification program that’s been one of the Obama Administration’s main tools in helping the housing market.
Marketplace’s Amy Scott joins us live with the details. Good morning.
AMY SCOTT: Good morning.
HOBSON: Well why are these banks being singled out by the White House?
SCOTT: Well, the Treasury Department says they haven’t been doing a good enough jobs of things like finding homeowners who might qualify for a modification and communicating with those borrowers. The federal government pays these banks an incentive to participate in the program. Last month, BofA, JPMorgan Chase and Wells Fargo got about $24 million total. Banks dispute the findings, but they’re not going to get any more money until they make some changes. And some analysts are suggesting they might pull out of the program all together.
HOBSON: Might pull out of the program all together. And if they do that how effective can these modification programs which are meant to keep people in their homes really be?
SCOTT: Well the efforts haven’t helped nearly as many people as the Obama administration had hoped. I spoke earlier with Chris Mayer who teaches real estate at Columbia University. He says, there aren’t that many people left who could really benefit from a modification.
CHRIS MAYER: There are a couple million loans that have not been making their payments for the better part of two years. At this point those need to be foreclosed.
Mayer has another idea to jump star the housing market, which would be to take advantage of these low interest rate we’re seeing of about 4.5 percent to help more people refinance who don’t qualify right now. But you know, there’s just not a lot of political will to spend more tax payer money bailing out the housing market.
HOBSON: Marketplace’s Amy Scott joining us live, thanks so much.
SCOTT: You’re welcome.
ORIGINAL INTERVIEW
JEREMY HOBSON: The White House is punishing three big banks for not doing enough to help struggling homeowners. Bank of America, JPMorgan Chase, and Wells Fargo will lose millions of dollars from a federal mortgage modification program.
Marketplace’s Amy Scott joins us live with the details. Good morning.
AMY SCOTT: Good morning.
HOBSON: Well Amy, why are these banks being singled out by the White House?
SCOTT: Well, the Treasury Department looked at the ten largest mortgage servicers participating in the modification program. And the Department found problems with all of them but said four needed substantial improvement on things like finding people eligible for the program and communicating with them. Three of the banks — BofA, JPMorgan and Wells Fargo — got a combined $24 million from the program last month. That’s an incentive to participate. The banks disputed the findings and they won’t get any more money until they make some changes.
HOBSON: And the success of these mortgage modifications programs have been questionable a lot of analysts are saying. Now as a result of this I see that the banks may drop out of the programs all together. What does that mean going forward as people try to fix the housing market?
SCOTT: Well, it could mean a very slow recovery. As of April, as it is, only about 600,000 homeowners have received a permanent modification through the program. The administration and consumer advocates had been hoping the program would help a lot more people. And there’s really not a lot of political will right now to spend more money bailing out the market.
HOBSON: Marketplace’s Amy Scott, thanks so much.
SCOTT: You’re welcome.
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