Too Big to Fail? Not When it Comes to Helping Homeowners
Posted by Tim at 06/15/11 11:06 AM

By Viviana Santiago

As reported by the U.S. Department of the Treasury, Bank of America, J.P. Morgan Chase, and Wells Fargo, three of the nation’s largest banks, were found to be in need of “substantial improvement” under the Obama administration’s Home Affordable Modification Plan (HAMP) for failing to comply with the program’s mortgage modification guidelines. The Treasury Department has publicly chastised the banks and will withhold financial incentives of around $8 million per bank. But in 2010 alone, Bank of America racked in profits of $3 billion. Sadly, it seems that withholding $8 million is unlikely to bring about substantially increased compliance. See the report here (PDF).

The HAMP program was conceived to compel the nation’s largest mortgage servicers to improve their practices by requiring a high level of disclosure around servicer performance in three main areas: homeowner evaluation and assistance; identifying and contacting homeowners; and program reporting, management and governance. The program was designed to help millions of financially struggling homeowners to avoid foreclosure by modifying loans to a level that is affordable and sustainable. HAMP lays out clear loan modification guidelines for servicers like Bank of America, J.P. Morgan Chase, and Wells Fargo.

Unfortunately, participation in HAMP is voluntary. But we think it should be mandatory and the consequences for refusing to comply with clear guidelines should be severe enough to deter banks from behaving this way in the future. Just as kids in school face strong consequences for their failing grades, so should the banks. When you’re already too big to fail and fail anyway, the ramifications for the public are far reaching. Banks cannot be permitted to continue with their egregious practices, failing to provide timely loan modifications to qualified homeowners in dire need of help. This is especially unfair, afterall, since the banks relied on the public to bail them out in their time of need. For consumer stories, click here .

What can you do?
1. Learn more about your bank’s mortgage modification policies and HAMP compliance
2. Tell your bank directly that their failure to comply with HAMP is unacceptable.
3. Write to the Department of Treasury and demand required participation in HAMP and higher penalties for failing banks