Obama Sends SWAT Teams Into Mortgage Servicing Offices

Making modifications permanent

This morning, we talked about President Obama’s plan to call lenders to the carpet and he along with the Treasury Department delivered.

Today, the White House threatened to punish mortgage lenders with fines if they don’t speed up giving troubled homeowners a permanent break on their monthly payments. With mortgage delinquencies on the rise, nearly 375,000 borrowers are eligible for permanent loan modifications by the end of December and the Obama Administration want to make sure the banks make good on granting these modifications rather than lolly gagging. Proof of reluctance to move past trial offer periods is that only 1,711 permanent mortgage modifications had been offered by September.

“Banks should be moving more rapidly and more efficiently to decisions once documents are in and we will have more detailed metrics on that in coming months,” Assistant Treasury Secretary Michael Barr said during a conference call, reported by The Guardian.

The loan modification program (Home Affordable Modification Program) is a $75 billion taxpayer-financed program put in place to curb foreclosure rates but loan servicers are known for being slow and ineffective, often “losing” paperwork.

HAMP was implemented to aide struggling homeowners and has come under sharp criticism by the real estate industry and now the Department of Treasury, Department of Housing and Urban Development as well as the White House.

Now, lenders will be required to submit plans stating how they would deem a loan as qualifying for permanent modification and failure to do so it faces penalties and sanctions, some of which may be financial.

Interesting move: swat teams

To prove they are serious, the Treasury is sending what they are calling “swat teams” into mortgage servicers’ offices starting this week to investigate the issues that are slowing decision-making on loan modifications. Servicers will be required to report to the Treasury daily during the modification eligibility period regarding progress in decision making on permanent loan modifications.

Interesting move, Treasury.