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Which Banks are -- and Aren't -- Modifying Home Loans?

The federal Making Home Affordable initiative is off to a slow start in its mission of offering mortgage relief to millions of Americans hurt by the real estate bust. That's mostly because adjusting the loan terms, interest rate or principal for, say, a recently unemployed homeowner doesn't pay for banks. Drawing on data released today by the Treasury Department, let's examine how actively financial institutions are using the so-called Home Affordable Modification Program (full disclosure -- my wife and I were recently rejected for loan modification; fuller disclosure -- I'm pissed):

Of the big banks, Bank of America has the worst record in using HAMP (regrettably not my mortgage lender). Of the roughly 796,000 mortgages B of A serviced that were at least 60 days late (counting loans made by its Countrywide unit), it invited some 100,000 homeowners, or 13 percent, to adjust their mortgages and started trial modifications with some 28,000, or four percent.

Such figures sound markedly less impressive than those cited by B of A chief executive Ken Lewis. In congressional testimony in June, he said his company had adjusted more than 311,000 loans since buying Countrywide in July 2008 (those numbers include all B of A modifications, not only those arranged under HAMP), telling lawmakers that the bank remains committed to "working with distressed homeowners to help them retain their homes."

Nor does that four percent total seem entirely consistent with the sentiment recently expressed by Barbara Desoer, president of B of A's home loans and insurance division. "We can control how we build our business to help families achieve their homeownership dreams," she told the California Bankers Association in June. "And all of us can focus on finding solutions to the current crisis that help restore financial security and peace of mind to those we serve."

Wells Fargo has the next worst record among large banks in helping keep families' homeownership dreams alive, with only six percent of its mortgage customers getting a trial modification. Unfazed by single digits, Mike Heid, co-president of Wells Fargo Home Mortgage, nevertheless asserted in a statement today that "HAMP is an important part of the [Obama] administration's efforts to provide mortgage relief and stabilize the housing market." Evidently unconvinced, however, in this case by himself, Heid goes on in the news release to ruefully acknowledge that "we know we've fallen short of our customer service goals in some cases."

The feds aren't pleased with mortgage lenders. "I think we've been disappointed . . . about their performance in helping people in a timely fashion with the respect they deserve under difficult circumstances," Assistant Treasury Secretary Michael Barr told McClatchy.

If it seems like I'm picking on big banks, I am. When they were struggling, both B of A and Wells Fargo sucked down taxpayer dollars like binge drinkers at a frat party. Some of that money came from their own mortgage customers, many of whom need help.

Still, it's worth noting that no mortgage lender of any size is using HAMP as much as the government expected them to when it launched the program in February. Lenders avoid modifying loans for two major reasons: Fear that borrowers who get a modification will re-default on the loan, and hope that financially distressed homeowners will somehow manage to keep up their payments.

Fear and hope. The very stuff dreams are made of.

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