Since the beginning of the program, we’ve reported on problems homeowners have encountered with their servicer – lost documents, delays, and costly errors. Although Treasury Secretary Tim Geithner sharply criticized servicers for these problems earlier this year, so far it’s been all bark and no bite from the administration. The Treasury has yet to penalize any servicer for breaking the program’s rules.
[picapp align=”left” wrap=”true” link=”term=loan+modification&iid=7360948″ src=”http://view3.picapp.com/pictures.photo/image/7360948/thousands-new-york-area/thousands-new-york-area.jpg?size=500&imageId=7360948″ width=”234″ height=”147″ /]Lost in this is the fact that there is no incentive for the financial institutions to cater to those receiving loan modifications. The treasury is the one footing the bill (to the tune of $75 billion in taxpayer money), meaning it’s a third payer. When costs are shifted to third parties the incentive for the companies to cater to the needs of the lenders is diminished. After all, the homeowners aren’t the ones paying the subsidy, the government is. And, the government doesn’t appear to be interested in ensuring the money is spent wisely.
Notably, the report mentions that many have turned to private modification programs after being dropped from the program. Maybe they’ll get better service.