(Updates with Treasury official Herb Allison's comments)
By Corbett B. Daly
WASHINGTON, June 24 The four largest mortgage
lenders in the United States were grilled on Capitol Hill on
Thursday about the limited number of home loans they have
modified for homeowners facing foreclosure.
"I just wonder how hard you are really trying?" Rep.
Dennis Kucinich asked David Lowman, chief executive of home
lending at JPMorgan Chase & Co (JPM.N).
Lowman said JP Morgan had been understaffed to handle the
demand from struggling homeowners seeking to restructure
payments, though they have added staff in recent months.
"Why are you denying loan modifications to my
constituents?" Kucinich, an Ohio Democrat, asked Lowman,
calling JP Morgan Chase uncooperative with borrowers.
Ohio has been one of the hardest-hit states in the U.S.
home foreclosure crisis.
The House Oversight and Government Reform Committee also
summoned chief executives of the home lending units of Bank of
America Corp (BAC.N), Citigroup Inc (C.N) and Wells Fargo & Co
(WFC.N) to answer questions about their loan modification
Also at the witness table was American Home Mortgage
Servicing Inc, which collects loan payments but does not make
or hold loans. AHMSI is known in the industry as a monoline
servicer, while the other four firms both make and service
In 2009, the Obama administration announced the $75
billion Home Affordable Modification Program, known as HAMP,
which provides incentives to loan servicers to modify loans
for troubled borrowers. HAMP has been widely criticized as
ineffective. Less than $200 million has been spent to date.
The Treasury Department said on Monday more people had
been kicked out of trial loan modifications than had received
About 150,000 borrowers who could not prove their income
or keep up with the new payments had their modifications
canceled in May, bringing the total number of cancellations to
about 430,000, or more than one-third of the 1.24 million
trial modifications started since the program's inception.
HAMP NOT THE ONLY SOLUTION
The number of borrowers who have received a permanent loan
modification rose to 340,459 in May -- about 11 percent of 3.2
million HAMP eligible loans.
"This is not just about HAMP," the panel's chairman,
Edolphus Towns, said, referring to the modification program.
"I think the mortgage banking industry has got to
recognize that HAMP cannot be the only solution to the
mortgage foreclosure crisis," the New York Democrat told the
Herb Allison, assistant Treasury secretary for financial
stability, noted that there was little precedent on how to
design a large national program and the administration has now
begun to put pressure on servicers to increase modifications
by publicly releasing data on their performance.
"The HAMP program fundamentally changed the servicer
industry from one based on collecting payments and processing
foreclosures, to one that provides payment assistance to
qualified homeowners," Allison said in a prepared statement
released after the hearing.
All of the executives said they have made more loan
modifications than just HAMP modifications.
JP Morgan Chase said it has completed about 173,000
permanent modifications, including roughly 47,500 HAMP loans,
since the beginning of 2009.
Bank of America said it has completed more than 630,000
loan modifications since January 2008, including roughly
70,000 HAMP loans.
Rep. Steve Driehaus, an Ohio Democrat, urged the
executives to stop foreclosure proceedings while they
negotiated new loan terms with borrowers.
"We are sending a very mixed message when we are
proceeding with foreclosure while negotiating" a loan
modification, Driehaus said.
Citi and Wells Fargo said they do stop foreclosure
proceedings as soon as loan repayment talks begin. Bank of
America, JP Morgan Chase and AHMSI said they continue to
pursue foreclosures on a dual track strategy, though
foreclosure remains an option of last resort.
(Reporting by Corbett B. Daly; Editing by Jan Paschal and