Slowdown in BofA mortgage modifications

Bank of America (BofA) has announced that the pace of its government-backed mortgage modifications programme to ease out home foreclosures continued to decline last month.

In August, the bank completed 3,600 permanent mortgage modifications under the US government’s Home Affordable Modification Program (HAMP), which provides incentives for banks to give borrowers mortgage modifications to avoid foreclosures.

Overall, about 10,000 mortgage borrowers received modifications under BofA’s private mortgage programme in August, totalling approximately 600,000 borrowers since January 2008. BofA has completed nearly 79,800 modifications under the HAMP since January this year.

The HAMP, overseen by the US treasury, was implemented to stop the rising numbers of American home foreclosures. Homeowners received three-month trial loan modifications from the banks, and if they meet the requirements during the period and stay on track, their mortgage will be modified permanently.

However, the HAMP came under fire, as critics said it did not properly evaluate borrowers and did not sufficiently measure whether borrowers could avoid re-defaults. In April, the US Treasury Department began requiring full documentation of the borrower’s financial information, and the government has also required banks to underwrite modifications before approving modifications.

The revision of the rules have slowed the number of modifications approved, and allowed fewer borrowers to qualify for the trial programme.