Three major banks penalized for loan mod failings

Three major banks have lost federal mortgage modification incentives in delivering a foreclosure relief program until they make big changes to improve their practices, according to the Los Angeles Times.

Obama administration officials have told Bank of America, JPMorgan Chase & Co., and Wells Fargo & Co. that they must make “substantial improvements” to the way they administer the Home Affordable Modification Program, and they will not receive any more federal money from the program until they do so. For example, officials noted that banks need substantial improvement in correctly evaluating borrowers’ incomes, which is a critical component for determining eligibility for the program. Some of the banks also need to improve how they identify and contact borrowers for the program.

Last month, the banks received $24 million in payments through HAMP, but no more payments will be made until servicers improve their performance, officials warned.

While Bank of America agreed that it needed to improve its practices in the program, JPMorgan Chase and Wells Fargo say they disagree with the poor evaluation. Wells Fargo, in fact, says it plans to contest the administration’s evaluation of how well it’s done with administering HAMP.

The review, which examined all 10 servicers who administer the program, found that all 10 were performing below its benchmarks.