Treasury Responds to Mortgage-Mod Criticism

The Street:


On Why It's Taken So Long:

To be candid, the mortgage companies weren't set up to deal with this sort of thing. They were used to sending people to collections and collecting their money and doing what they needed to do. You're dealing with a scale and a demand that they never had to deal with before...

It's important also to remember that when this crisis started, we saw a lot of homeowners with subprime mortgages struggling. But now ... the face of a person who is struggling has changed from a homeowner with a subprime mortgage to a homeowner who has either had a curtailment of income or is dealing with unemployment. And so we just try to remain responsive as the economy changes.

On Changes Implemented to Make the Program More Effective:

We have an unemployment program under "Making Home Affordable" to provide a forbearance to give homeowners a bit of a break until they can afford to pay their mortgage again and get back on track. But [we] also ... work with housing finance agencies in the hardest-hit states to set up programs that are really tailored to their local needs.

On Servicers' Better Performance Outside of the Home Affordable Modification Program:

I think what "Making Home Affordable" has done in many ways is, it forced their hand a little bit ... [by] getting their processes in place more quickly, [and] shifting from this idea of a debt-collection model to an underwriting model, where they look at what a homeowner really can afford to try and work with the homeowner in a much more meaningful way.

It set that affordability target of a debt-to-income [ratio] of 31% ... as an affordable mortgage. That's not only now being used in "Making Home Affordable," but for many of the homeowners who were unable to access "Making Home Affordable" for whatever reason. A lot of mortgage servicers are using that same model in their own proprietary modifications.

So it really actually has mortgage companies thinking in a way they never had before. They shifted staff onto their loss-mitigation teams. I've seen a lot of mortgage companies now set up brick-and-mortar homeownership centers to actually work with struggling homeowners.

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