Reporting from Orange County and Washington — With rising foreclosures still threatening the economy, the Obama administration is trying to pump new life into its much-criticized program to lower payments for homeowners at risk of defaulting on their home loans.
Officials unveiled requirements Monday that would step up government scrutiny and threaten fines on banks and other mortgage lenders should they lag in converting temporary mortgage modifications into permanent changes in loan terms and conditions by the end of the year.
Under the Home Affordable Modification Program, the aim is to reduce monthly mortgage payments for those facing foreclosures to 31% of their monthly income. But many homeowners participating in the program tell horror stories of bureaucratic runarounds in their quest for a permanently lowered mortgage bill.
A trade group for some large mortgage companies acknowledges problems with the complex program and said the industry was working to roll out a universal website to enable people to submit forms and documents online instead of relying on overloaded fax machines.
As part of its newly aggressive action, the administration is summoning executives from the nation's top mortgage servicers to Washington next week to prod them to speed up their efforts.
The effort also involves sending what Treasury Department officials described as three-person "SWAT teams" to the offices of those firms starting Wednesday to help them obtain the necessary documents from borrowers and trouble-shoot problems.
The hope is to shame mortgage servicing companies into doing a better job of making 90-day trial modifications permanent by highlighting those firms that are not performing well and threatening penalties or other sanctions against laggards based on the agreements they signed to participate in the program.
"Servicers that don't meet their obligations under the program are going to suffer the consequences," Assistant Treasury Secretary Michael Barr warned.
The changes also require mortgage lenders and servicers to provide updates to the administration, sometimes twice daily, about each mortgage being modified. Fines and other sanctions could be imposed on those companies that do not meet certain performance obligations.
But housing advocates doubted the tougher stance would work. They said the administration could do little more than kick companies out of the program.
