Consumer Law

Lenders Drop the Ball on Refinancing Plan

By Randall Ryder

The government’s “Financial Stability Plan” is still viable, but the Treasury Department admits that only a fraction of people eligible are receiving new mortgages.

Only 9% of eligible borrowers have received modified mortgages.

The biggest offenders? Wells Fargo only modified 6% of their loans, Bank of America only modified 4%.

The “successful” lenders—J.P. Morgan and GMAC—modified 20% of eligible loans.

Each lender receives financial incentives from the government for every refinance. These incentives are in addition to the billions of dollars in bailout money provided to the banks last year. Mike Heid, the co-president of Wells Fargo Home Mortgage said “It’s in our best interest to modify every customer that we can.” Notably, Wells Fargo has the third-highest number of delinquent loans and a 6% modification rate—which seriously calls into question the aforementioned quote.

Many of the lenders have been or are currently being sued

A St. Paul public interest law group has filed a lawsuit against the Treasury Department, alleging it has violated people’s due process rights by denying them access to the program. A recent AP news investigation discovered that multiple companies that stand to benefit from the government’s plan have charged customers illegal fees and committed countless other unethical acts.

Shockingly, out of the 38 companies that stand to benefit from the government’s plan, at least 30 of those companies are currently being sued for claims ranging from charging of excessive fees, premature foreclosures, and illegal collection practices. Some of the bigger players—Bank of America, Wells Fargo, JP Morgan, and Citigroup—make up the list of 30.

Federal mortgage program defaulting on a pledge? | Star Tribune

Gov’t mortgage partners sued for abuses | Yahoo! News

Full post as published by Caveat Emptor on August 06, 2009 (boomark / email).