A report released by the U.S. Treasury Department showed that the nation’s nine largest banks have not been very active in conducting loan modifications under the Obama Administration’s “Making Home Affordable Program.”
The program, which is funded by $50 billion in government aid, is aimed at reducing foreclosures throughout the country by modifying a borrower’s loan in order to reach a reasonable monthly payment based on their income.
Since the program was implemented by the Obama Administration on March 4, only 9 percent of all eligible loans have been modified for a total of 235,247, according to the Treasury Department. The target of the program is to help 3 to 4 million homeowners over the coming years.
Of the nation’s nine largest banks, JP Morgan Chase & Co. led the way, but still only modified 20 percent of its 394,075 eligible loans for a total of 79,304 since the program launch. Citigroup has modified 15 percent or 27,571 of its 185,418 eligible loans.
There are a total of 38 financial institutions that have signed up to participate in the housing affordability program, covering roughly 85 percent of the mortgage market. Of those institutions, about 10 have not performed any loan modifications to date.
In order for a home loan to be eligible for modification it must be at least 60 days past due or in foreclosure and had to of been originated between 2003 and 2009. The loan also must be for the borrower’s primary residence and conform to Fannie Mae and Freddie Mac loan size limits, which can be as high as $700,000 depending on the market.
Banks are allowed to adjust interest rate downward by up to 2 percent, expand the repayment timeline and forgive portions of outstanding principal in order to lower monthly payments for borrowers at serious risk of foreclosure.