The Treasury Department has agreed to pay $171 million that it withheld from Bank of America, and JPMorgan Chase after the two servicers fixed problems in how they handled government-backed residential loan modifications.

In mid-year 2011 Treasury suspended incentive payments owed to the two megabanks under the Home Affordable Modification Program (HAMP).

The Treasury said the decision to resume payments to the two large servicers was part of a broad agreement reached last month regarding the robo-signing allegations.

Payments should be made to the two banks in the weeks after the foreclosure settlement is filed in court, which could come shortly.

JPM had $89.1 million of incentive payments withheld through February, B of A, $81.8 million.

Among home mortgage servicers, BofA ranks second, JPM third, according to figures compiled by ASR's sister publication National Mortgage News and the Quarterly Data Report.

"By shining the spotlight on key practices, we have prompted servicers to improve their implementation" of the loan-assistance program, said Tim Massad, an assistant Treasury secretary. "However, there is still more work to be done to ensure that the industry treats all borrowers properly."

The HAMP program has been in existence since early 2009. Under the initiative, the government pays lenders incentives to help borrowers avoid foreclosure by reducing their mortgage payments.

To date, HAMP has helped nearly 769,000 homeowners avoid losing their homes through permanent loan modifications.

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