Gov’t Halts Incentives for Wells Fargo, Other Banks
San Francisco-based Wells Fargo & Company and two other banks are losing financial incentives from the federal government because they need to make “substantial improvements” to their processes relating to a federal initiative called the Making Home Affordable Program (MHA).
In addition to Wells Fargo, the U.S. Department of the Treasury is withholding financial incentives for Bank of America, NA and J.P Morgan Chase Bank, NA, because a recent report found that the banks are not in compliance with the program's guidelines.
The MHA program was created in March 2009 by the Obama administration and provides opportunities for homeowners facing foreclosures to modify or refinance their existing mortgages and make their monthly payments more affordable. Banks get incentives from the government for participating in the program.
During the first quarter, the department reviewed financial institutions that participate in the MHA program and evaluated them on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management, and governance.
“While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” Tim Massad, acting treasury assistant secretary for financial stability, said in a statement. “These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.”
The financial incentives for the three banks that are in need of “substantial improvements” will be withheld until they make specific improvements identified by the government. In certain cases, particularly where there is a failure to correct identified problems within a reasonable time, the Treasury Department may also permanently reduce the financial incentives.
The Treasury Department identified six other firms-American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest Bank, and Select Portfolio Servicing-that require moderate improvements to their MHA program processes, but they will not lose their financial incentives.
Wells Fargo issued a statement on Thursday disputing the Treasury Department's claims, saying the report paints an unfairly negative picture of the bank's modification efforts and contradicts previous written assessments.
“The report reviews activities that date back a year or more, and in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners,” the company wrote.
Wells Fargo is among the state's 10-largest employers with about 20,000 employees in Minnesota.