Seminole County Foreclosure News: Making Home Affordable Program Not Working as Intended, Banks Punished

The federal government has decided that several major banks are not doing a good enough job in modifying home loans through the Making Home Affordable Program, which was designed to prevent foreclosures. The Obama administration claims that the servicers need “substantial improvement” of their modification practices.

This comes after an audit that revealed shortcomings in the participating lenders’ calculation of income. Errors were found in these calculations on more than 22% of the loans audited. The correct calculation of income is important because it determines eligibility for the program and the terms of the modification.

Due to the results of the audit, the Treasury Department has revoked incentives that the banks received for completing modifications. Last month, the largest lenders received $24 million in incentives, however, that will end until they can demonstrate improvements in their process. Of the 10 largest loan servicers, the Treasury said none of them are doing a sufficient job with their modifications. Several others are cited as needing moderate improvement. Included in the audit were Bank of America, Wells Fargo, and JPMorgan Chase.

All of the banks have denied that their practices are unfair. JPMorgan Chase has formally disputed the report, claiming that it does not reflect recent changes that have helped more homeowners to modify their loans.

Removing incentives may not ultimately help with the banks’ handling of foreclosure cases, however, because Making Home Affordable is a voluntary program for banks. To date, the program has been mostly ineffective in curbing the nationwide mortgage crisis. However, the move does shed light on the banks’ failure to sufficiently address the troubles homeowners are facing. Hopefully this is just the first step in getting lenders to work toward helping the country out of the foreclosure mess it has created.