Lenders Pressured to Modify More Mortgages

The Obama Administration is putting increased pressure on the nation's lenders to step up the pace of mortgage loan modifications performed under the government's Making Home Affordable (MHA) foreclosure avoidance program.

At a meeting in the nation's capital on Tuesday, administration officials told representatives of 25 mortgage servicers that it wants to see half a million MHA trial loan modifications initiated by Nov. 1, just three months from now. A total of 200,000 trial loan modifications have been approved in the first five months of the program.

"With over 200,000 trial loan modifications already under way, we are on track to meet our goals," said Treasury Secretary Tim Geithner, in a statement released after the meeting. "Still, too many homeowners are at risk of foreclosure right now. Today's meeting was an opportunity to identify ways to accelerate the program and bring relief faster."

The Making Home Affordable Program was launched in early March with great fanfare as a way to help up to 9 million at-risk homeowners avoid foreclosure by giving lenders government incentives to modify or refinance their mortgages. Since then, the program has been beset by consumer complaints that lenders are dragging their feet on the program and stonewalling applicants, while lenders have said the program's complexity and unclear guidelines have been major obstacles to implementing it.

First progress reports due Aug. 4

To goad the banks into faster action, the administration has previously announced that it will begin issuing progress reports on individual lenders beginning Aug. 4. The reports will include such information as the number of trial mortgage loan modifications the lender has approved and the number of final modifications completed. The administration will also track such data average wait times for borrowers calling for assistance, response time for completed applications and accuracy of information provided.

The administration has also directed government-backed mortgage lender Freddie Mac to develop a "second look" program to identify situations where qualified applicants have been inappropriately or inadvertently denied a loan modification. The program will seek to both address individual cases as well as systemic problems in order to improve approval rates for qualified applicants.

Lenders offer own suggestions

The lenders offered their own suggestions for improving the program, including standardizing the documentation required from borrowers applying for loan modifications. They also suggested that a single Web site be set up for accepting applications from all borrowers under the program, and requested further clarification of the standards used to determine when a homeowner is in enough financial distress to qualify for the program.