The U.S. government is handing back it had withheld from Bank of America Corp. and J.P. Morgan Chase & Co. after concluding that the lenders fixed problems in how they managed an Obama administration foreclosure-prevention program.
The Treasury had suspended incentive payments owed to the two big banks under the federal Home Affordable Modification Program, or HAMP. It had been withholding that money since June, after the government found deficiencies in how the banks evaluated homeowners seeking help and communicated with them.
Wells Fargo & Co. also had its payments withheld, but those payments resumed after it got a clean bill of health last September. The agreement to resume payments to the two large lenders was part of a broad agreement settling allegations of foreclosure abuses that state and federal officials reached with mortgage lenders last month.
Payments should be made to the two banks in the weeks after the foreclosure settlement is filed in court, which is expected to be imminent. J.P Morgan had $89.1 million in incentive payments withheld through February, while Bank of America had $81.8 million in incentive money withheld.
“By shining the spotlight on key practices, we have prompted servicers to improve their implementation” of the loan-assistance program, said Tim Massad, an assistant Treasury secretary. “However, there is still more work to be done to ensure that the industry treats all borrowers properly,” Wall Street Journal reported.
Dan Frahm, a Bank of America spokesman, said the bank “has consistently demonstrated improvement across key performance categories, is performing at or better than our peers.”
A Chase spokesman said the bank worked hard to improve servicing, adding: “We’re continuing to make demonstrable progress across mortgage banking and won’t be satisfied until we get the highest rating from the HAMP audit.”
The Obama administration launched the HAMP program in early 2009 in an effort to aid homeowners struggling in the wake of the housing bust. The government pays lenders incentives to help borrowers avoid foreclosure by reducing their mortgage payments.
The program has helped nearly 769,000 U.S. homeowners avoid losing their homes through permanent loan modifications as of the end of January, up from around 763,000 in December, according to Treasury statistics.
Nearly 1.8 million homeowners have started the program since its launch, but many haven’t qualified for the program after an initial trial phase. Others were unable to make payments, even at lower levels, and dropped out. The administration initially projected that between 3 million and 4 million borrowers would be helped.