The Treasury Department is providing $9.9 billion to six major mortgage servicers for successful loan modification incentives that will be paid not only to them but to borrowers and investors.
Administration officials asked Citigroup and JPMorgan Chase and the other companies participating in the Obama administration's loan modification program to estimate how many loans in their portfolios can be modified under the new program to determine the possible cost of the incentive payments.
One source familiar with the situation told National Mortgage News that these firms have been lobbying Treasury hard for the incentive payments because they realize the fee income at stake is enormous.
According to published reports, Chase Home Finance is receiving a $3.6 billion allotment, Wells Fargo Bank $2.87 billion, CitiMortgage $2.1 billion, GMAC Mortgage $633 million, Saxon Mortgage Services $407 million and Select Portfolio Servicing $376 million.
Under the Obama plan, the servicer receives a one-time $1,000 incentive for a loan modification, plus an annual $1,000 incentive if the borrower remains current for three years. The borrower can receive an annual incentive of $1,000 that is applied to principal reduction for up to five years. As an incentive to modify the non-GSE loans, there is a one-time payment of $1,500 payment to the investor.