The Naming Names Approach To Mortgage Adjustment

McClatchy reports on...surprise!...banks behaving badly when it comes to modifying mortgages. The Obama administration has decided that maybe a little public humiliation will motivate lenders given taxpayer money to lend with to actually freakin' lend it.

The Obama administration on Tuesday offered the first of what will become monthly reports on mortgage modifications, including a name-and-shame approach that'll allow the public to see which banks are and aren't working to help keep struggling Americans in their homes.

The first report, covering more than 30 lenders, found a dismal performance to date from two banks — Bank of America and Wells Fargo — that have received large sums of taxpayers' bailout money. The report is likely to produce more pressure on these two institutions because the rescue money spent on them was expected to encourage greater lending and more loan modifications.

In a conference call, Assistant Treasury Secretary Michael Barr said that servicers who collect monthly mortgage payments on behalf of banks and investors who hold pools of mortgages had modified 230,000 distressed mortgages since mid-February. The administration wants large mortgage servicers to modify 500,000 troubled home loans by Nov. 1.

Not even halfway to that goal with just 90 days to go. The real problem is the big megabanks like Wells Fargo and BoA have no intention of speeding things up.

Publishing the first of its monthly reports on the performances of individual lenders and servicers, the Treasury Department found that Bank of America serviced 796,467 mortgages that were thought to be at least 60 days late on payments and potentially eligible for lower monthly rates.

The bank, however, extended modification offers to just 99,649 homeowners, or about 13 percent of those eligible, the Treasury report said, and it began trial loan modifications with only about 4 percent, or 27,985 borrowers.

Wells Fargo led the banking sector's voluntary loan-modification program during the Bush administration's efforts. Yet Tuesday's Treasury report didn't show Wells Fargo in a favorable light, finding that while the bank serviced 329,085 mortgages that were 60 days late, it extended offers to only 38,673 homeowners, or about 12 percent of those eligible, and started trial modifications with another 20,219 loans, about 6 percent of eligible.

Banks have the money to give out millions in bonuses and make billions in quarterly profits, but they don't have the resources to help mortgageholders modify their loans to keep them in their homes. That's quite interesting. Banks would rather drag this out in bankruptcy court than help people keep their homes. Banks are playing game theory: If individual banks modify individual mortgage rates, they're locked in to that lower rate and lose money long term. If they drag the process out however, there's a chance they can foreclose now and then sell another adjustable rate mortgage on the same house in a couple of years, getting the banks more money short term especially should the housing market turn around.

The banks in other words are waiting for the courts to clear the decks of the destitute so they can get back to manufacturing another housing bubble over the next decade. For that they need new blood to see new mortgage products to, and for that they need the old suckers over the last decade or so to get kicked out of their homes. The banks are betting another housing bubble is coming when the credit crunch logjam breaks and the housing market finally stabilizes. They're trying to stall until the board resets.

So they can begin all over again. Short term profits. Gotta make those bonuses, you know.