WASHINGTON — Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren't doing enough to help borrowers at risk of losing their homes.
Treasury Department officials said Monday they will step up pressure on the 71 companies in the government's $75 billion effort to stem the foreclosure crisis. They will start this week by sending three-person "SWAT teams" to monitor the eight largest companies' work and requesting twice-daily progress reports.
The mortgage companies have had a hard time getting borrowers to complete the needed paperwork for the loan modification program. Nearly 60 percent of the 375,000 borrowers who qualify to have their loan modifications completed by year-end have either submitted incomplete paperwork or none at all.
The program, announced by President Barack Obama in February, allows homeowners to have mortgage interest rates cut as low as 2 percent for five years.
The administration is feeling intense pressure from lawmakers and consumer advocates to speed up progress. As of early September, only about 1,700 homeowners had finished all the paperwork and received a new permanent loan. About one-third of borrowers who have submitted complete applications are still waiting for a decision.
In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the lagging mortgage companies. While big lenders such as Citigroup and Wells Fargo have made double-digit gains in the percentage of eligible borrowers signed up for trial modifications, other companies such as Ocwen Financial and American Home Mortgage Servicing have only increased their borrower participation by 6 percentage points or less since July.
Paul Koches, executive vice president of Ocwen Financial Corp., said his firm had already saved 90,000 of its roughly 370,000 distressed homeowners from foreclosure before the program began. As of October, Ocwen had started trial modifications for 11 percent of its borrowers, up from 5 percent in July.
Consumer advocates say the program has a key flaw. Because participation was voluntary, the government has little it can do besides shaming the industry into doing better.