Mortgage Servicers Set To Defend Record At Treasury Meeting
July 27 2009 - 7:40PM
Dow Jones News
Executives from 25 mortgage servicers are set to defend their
record helping strapped borrowers at a meeting with top
administration officials Tuesday.
Each company has agreed to send two senior executives to the
Treasury Department to discuss how to improve their performance
under the Obama administration's $75 billion foreclosure-prevention
effort.
Industry lobbyists said they were told Treasury Secretary
Timothy Geithner may appear at the meeting, which is expected to
last several hours. Treasury and the Department of Housing and
Urban Development will issue a press release after the meeting
concludes, Treasury spokeswoman Meg Reilly said.
With foreclosures mounting at an alarming monthly pace, the
Obama administration is under intense pressure to improve the
program, which has had a lackluster start. So far, it has helped
far fewer borrowers than officials had anticipated.
"Servicers are going to voice their opinion that the program was
rolled out without a lot of forethought and not enough time for
them to ramp up," David Sisko, Deloitte Services LP's head of
default management and loss mitigation, said he expected servicers
to say in the meeting.
"They're overwhelmed. They're simply overwhelmed," he said.
When officials unveiled the effort in March, they predicted it
would help as many as 4 million borrowers get modified loans and up
to 5 million underwater borrowers refinance into more affordable
mortgages.
But overloaded servicers, surging unemployment and rising
mortgage rates have combined to throw the administration way off
track.
Only about 200,000 borrowers had received trial modifications
and about 55,000 underwater borrowers had refinanced under the
program, Reilly said.
Lawmakers are ratcheting up pressure on the administration to
make the program a success. Senate Banking Chairman Christopher
Dodd, D-Conn., last week sent a letter to Geithner and Housing
Secretary Shaun Donovan asking them to look into alleged abuses by
servicers participating in the program.
Diane E. Thompson, an attorney at the National Consumer Law
Center who trains attorneys representing troubled homeowners,
testified before Dodd's panel that she had observed frequent
non-compliance with the program's rules.
For example, she said servicers are charging borrowers fees for
modifications, initiating foreclosures while loans are still
pending review for modification and turning down qualified
borrowers - all prohibited under the program.
"The administration needs to find a way to hold servicers
accountable," she said in an interview.
Deloitte's Sisko said servicers were increasing staff to meet
surging customer inquiries about modifications, but that they
weren't always building employee skills so more could perform
modifications. He also said low interest rates, particularly in the
second quarter, had pulled staff qualified to help strapped
borrowers onto the origination side of the business.
The administration will begin next week to issue reports on each
servicer's performance in the program as an incentive for servicers
to improve.
It has also asked Freddie Mac (FRE), which was designated the
government's compliance agent for the program, to develop a "second
look" program to minimize the chances that borrowers were wrongly
denied a modification.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com