According to the Center for Public Integrity, a private non-partisan firm with the slogan “Investigative Journalism in the Public Interest,” when pressure from Congress and the White House proved ineffective in motivating some reluctant lenders to modify mortgages, the Treasury Department started the Home Affordable Modification Program (HAMP) in hopes of spurring those lenders to action. The program has as much as $50 billion at its disposal to help up to 4 million homeowners stay current on their mortgages. To modify a loan companies participating in the program have to agree to drop mortgage payments to an amount equal to 38 percent of the borrower’s monthly income. The Treasury Department then does a dollar match if the company reduces the payment further to as little as 31 percent. The borrower must successfully complete a three-month trial before the modification becomes permanent.
In return for arranging these modifications, HAMP will pay an incentive to the lenders that can be as much as $4,000 for each successful modification of a delinquent mortgage. A reward of $1,500 is available for modifying mortgages that are still current.
Well guess who is getting all soft, squishy, and eager to help the poor homeowner now?
According to the Center for Public Integrity, of the 25 top companies participating in the program, (44 companies have signed on) at least 21 were “heavily involved in the subprime lending industry.” Most were servicing subprime loans, but several were also subprime lenders.
These firms stand to collect more than $21 billion in taxpayer funds from the program although no incentives will be paid until a borrower completes the trial period.
The Center’s information came from a search of public records and was featured on its website in an article written by John Dunbar entitled You Broke it, You Fix it?
According to Mr. Dunbar, the five companies slated to reap the most cash from the program are:
Countrywide Home Loans Servicing - $5.2 billion. Countrywide’s former parent company was ranked as the top subprime lender in the country on an earlier list compiled by the Center. It is now owned by Bank of America which will collect a total of nearly $7 billion from its ownership of Countrywide and two other subsidiaries.
J.P. Morgan Chase Bank – 2.7 billion. No. 12 on the Center’s subprime list, J.P. Morgan also owns EMC, a former Bear Stearns subsidiary, slated to get $707 million.
Wells Fargo Bank NA, Des Moines, Iowa — $2.4 billion. Wells Fargo was another major player in the subprime debacle. It stands to get over $3 billion from modifications in its own portfolio and that of Wachovia Bank which it purchased after that bank failed.
American Home Mortgage Servicing Inc., Coppell, Texas — $1.3 billion. This is a former subsidiary of American Home Mortgage Investment Corporation which was ranked by the Center as the 22nd largest subprime lender before it declared bankruptcy in 2007.
CitiMortgage Inc., O’Fallon, Missouri — $1.1 billion. A major subprime lender and recipient of billions in federal bailout money.
Others at the top of the Center’s list include GMAC Mortgage, $1 billion; Litton Loan Servicing, 774.9 million; and HomEq Servicing, $674.
And, of course, what list of this nature would be complete without a subsidiary of AIG getting some piece of the dough.
Mr. Dunbar does not identify them by name but says that two firms that have settled charges of illegal collection practices brought by federal regulators and another that voluntarily surrendered its bank charter after it was placed under federal supervision are also on the list.
