Thanks for the bailout. Now what is this about mortgage modifications?
What’s with these guys?
After getting untold billions in various federal bailout specials, you would think the nation’s largest lenders could play ball on mortgage modifications.
Apparently not, as is clear in the coverage by the Globe and other media outlets of the Treasury Department’s new report card on mortgage modification efforts by the big lenders.
The Obama Administration earlier this year rolled out $50 billion in incentives to prod lenders to help modify the mortgage of as many as four million distressed homeowners.
So far, only a meager nine percent have been signed up for a three month trial modification program. Basically, make your payments during that period and it goes permanent.
But the biggest banks couldn’t even meet that rather anemic threshold.
Bank of America, which holds as many as 800,000 mortgages considered eligible for reworking, had modified just 4 percent, while Wells Fargo had restructured just six percent of its share.
Anyway, by accident or design, the Globe’s business also ran a story today on a local lawyer taking some of these very same lenders to court over their mortgage lending practices.
I’m typically skeptical of lawyers filing class action suits.
But after reading about all the bank foot dragging, I had found it hard not to cheer on the Boston attorney Gary Klein.
He’s seeking class action status for his suits against lenders Bank of American Home Mortgage and Wells Fargo Home Mortgage.
Klein is taking aim at mortgages that grow larger over time, with unpaid interest building upon the principal, until, say five years out or so, the borrowers on are the hook to pay the whole thing back.
Well, what a deal.
Klein, in his suit, contends the lenders knew – or should have known – that the borrowers would ultimately be unable to pay.
For what it’s worth, Bank of America has released a statement blasting the suit “without merit’’ while Wells Fargo said it had not yet been served with a complaint and couldn’t comment.
Maybe loan modification is a pain for many of these big banks, who feel they’ve got bigger things to worry about.
That’s pretty short-sighted – and potentially disastrous given the legal and political backlash that’s brewing.
