Loan modifications off to slow start

The Obama administration has released what it says will be a monthly report card on efforts to keep Americans from losing their homes to foreclosure. What it shows is that things are off to a slow start.

Under the administration’s “Making Home Affordable” loan modification program, just 9 percent of U.S. borrowers, or 230,000 trial modifications, have begun out of the 400,000 loan modification offers that have been extended.

Lenders get financial incentives from the U.S. Treasury under the Troubled Asset Relief Program (TARP) to help them modify loans. In May, the Treasury pledged up to $798 million to Aurora Loan Services. That figure was cut to just under $460 million in mid-June, based on the company’s actual use of the program.

“The purpose of the report is to document the number of struggling homeowners already helped under the program, provide information on servicer performance and expand transparency around the initiative,” according to a U.S. Department of the Treasury statement.

The pace of modifications puts the program on track to help up to four million homeowners over the next three years, according to the report.

The report, which details the progress of the 38 servicers, finds Saxon Mortgage Services, a subsidiary of Morgan Stanley, leads the way, with 25 percent of its delinquent loans in trial modifications.

Ocwen Financial Corp, a West Palm Beach, Fla.-based servicer of subprime mortgages, has just 5 percent.

Some of the major banks have done better than others with modifications, including JPMorgan Chase, with 20 percent, and Citigroup, with 15 percent. On the other hand, Wells Fargo — Colorado’s largest bank — had 6 percent and Bank of America had 5 percent.

The Obama administration has asked servicers to ramp up implementation to a cumulative 500,000 trial modifications started by Nov. 1. This would more than double in three months the number of trial modifications started in the first five months of the program.