Last week, a government report documented the underperformance of the federal Home Affordable Modification Program, which began in 2009 amidst great hope that it would be a big help for underwater homeowners. It hasn't worked out that way. According to the report, the program — run, it should be noted, by the big banks, such as Citi, Chase, Bank of America and Wells Fargo — has turned down 72% of applicants since the program began.
As reported by the New York Times, representatives from these banks variously disputed these statistics or defended their practices as a natural response to applicants' lack of follow-through.
But [Christy] Romero, whose title is special inspector general of the Troubled Asset Relief Program [and who authored last week's report], said the high rejection rates her office found pointed to problems at the banks, not with borrowers.
“We’ve always known that a lot of people were being denied for loan modifications,” Ms. Romero said. “When we started looking at these numbers — 80 percent or more at the larger servicers — it’s so telling that something is not right in these operations.”
As the report noted, Treasury has a responsibility to ensure that the banks involved in the program are not wrongfully rejecting homeowners for a modification. But that’s not happening, Ms. Romero said.
Read the full NYT story, evocatively titled "A Slack Lifeline for Drowning Homeowners," here.