WASHINGTON — The Obama administration is blaming the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says they've done little to help people at risk of losing their homes.
Wells Fargo, Bank of America and JPMorgan Chase have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said Thursday.
Based on those lenders' lackluster success for the first three months of 2011, the government is withholding financial incentives that amounted to up to $1,000 per permanent loan modification. Treasury said the three lenders incorrectly determined that many people were ineligible for the program.
The lenders are disputing the data. They say the findings are based on old reports, not audits from the first quarter of the year as the Treasury claimed. One of them, Wells Fargo, is formally appealing the government's decision to cut off its incentives.
The report "paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury," Wells Fargo said in a statement. It said the report "in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners."
The three lenders have already received about $24 million from the government as of last month.
The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications.
More than 1.6 million troubled homeowners received trial modifications over the past two years. Roughly 44 percent of those who applied, or about 700,000, have had their mortgage permanently lowered as of April. A majority of the applicants, or about 843,000 homeowners, have dropped out of the program.
Homeowners who are accepted into the program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 a month.
Homeowners have complained that the program has been a bureaucratic mess. Many have said they were disqualified after banks lost their documents and failed to return their phone calls. Banks have blamed homeowners for failing to submit needed paperwork.
Bank of America issued a statement acknowledging that the lender must make improvements in key areas. But it said it has made progress in several of the factors that the Treasury cited.