Three of the nation’s largest mortgage servicers will no longer receive payments tied to their participation in the Obama administration’s main foreclosure prevention initiative until they improve their performance in that program, a senior administration official said Wednesday.
Bank of America, J.P. Morgan Chase and Wells Fargo need to make “substantial improvements” to collect fees through the Making Home Affordable Program, which helps struggling borrowers by lowering their monthly mortgage payments.
The companies failed to meet basic program requirements, such as properly contacting borrowers, the official said. The details are scheduled to be released Thursday in a report that will assess the performance of the 10 largest participating servicers.
Through the initiative, servicers can collect at least $1,000 for each loan they permanently modify. The payment is meant to entice servicers to participate in the voluntary program, which has doled out $560 million in payments since its launch in March 2009.
The three targeted servicers — which received $24 million in payments last month — will not receive payments for permanent modifications reported from June onward until they address their weaknesses.
No estimates are available yet for how much will be withheld.
A fourth servicer — Ocwen Loan Servicing — also ranked among the worst performers, but it will continue to receive payments because its poor showing was due primarily to a portfolio of loans it recently acquired from another company, the official said.
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