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Treasury department puts pressure on banks to meet end of year deadline to modify home loans

The Treasury Department summoned Bank of America Corp., Citigroup Inc. and other mortgage servicers to Washington today to accelerate U.S. foreclosure prevention efforts ahead of a yearend deadline for some loan modifications.

The banks, which also include Wells Fargo & Co., JPMorgan Chase & Co. and Morgan Stanley, face a Dec. 31 deadline to make permanent the trial refinancings and concessions they extended this year to about 375,000 homeowners at risk of default.

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Banks blame homeowners for delays

An eligible borrower who doesn’t turn in all their paperwork by year-end jeopardizes their chance to get a permanent modification,” said Meg Reilly, a Treasury spokeswoman.

While Reilly said no one will be eliminated from the Home Affordable Modification Program, or HAMP, without a “a thorough review,” the Obama administration has so far failed to come close to the 4 million homeowners it set out to help. Banks have blamed the shortcomings on borrowers failing to turn in all their paperwork and confusion about eligibility standards.

“We, like all the other firms, are surprised that we still have documents outstanding,” said Jack Schakett, a credit loss mitigation strategist at Charlotte, North Carolina-based Bank of America, the largest U.S. mortgage lender. “We’re not going to really know the success of the program until we get a clear picture of what is missing,” Schakett said in an interview.

Rush to permanently convert more than half of the 650,994 loans that were in trial modification plans

Banks are rushing to meet a new Treasury deadline, announced Nov. 30, to permanently convert more than half of the 650,994 loans that were in trial modification plans at the end of October into permanent reductions by year’s end, he said.

Bank of America efforts

Bank of America is trying to move 65,000 trial payment plans into permanent status by Dec. 31. Roughly 20 percent of the borrowers in trial plans with Bank of America haven’t returned any documentation, Schakett said.

Of the 375,000 loans scheduled for conversion to permanent modifications, those that aren’t switched over by Dec. 31 may not be eligible for HAMP again in the future, the Treasury said.

Unemployement at root of far fewer homeowners able to qualify based on HAMP criteria

While the Treasury has identified more than 3.2 million loans as eligible for HAMP, lenders are finding that far fewer qualify based on their criteria. At Bank of America, which accounts for almost a third of the loans targeted by the program, 55 percent of borrowers aren’t eligible because they are unemployed, don’t live in the home or their mortgage payment is less than 31 percent of gross monthly income, Schakett said.

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Banks face sanctions and penalties

Lenders face “consequences” that may include sanctions and monetary penalties if they fail to perform under HAMP, the Treasury said last month. The program requires banks that took federal aid to help homeowners at “imminent risk” of default by lengthening repayment terms, lowering interest rates and making other changes to mortgages to avert foreclosure.
Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=arfLiOez5X2s&pos=6

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Homeowners – Need Some Sound Advice?

Get Out of Debt Workbook
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Stop Foreclosure
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Also get the latest foreclosure news around the country, read Q&As and other resources.

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  5. Treasury Dept admits HAMP report contains data mistakes

Tags: banks face deadline to permanently modify loans, foreclosure prevention deadline

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