With much fanfare, Barack Obama announced in February that the Treasury Dept. would use $75 billion in Troubled Assert Relief Program money to help homeowners avert foreclosures through mortgage loan modifications. Unfortunately, the New York Times’ Peter Goodman relays a study that it apparently has had no impact on people who took out suprime loans: "Modifications of so-called subprime and Alt-A mortgages — those made to people with tarnished credit — actually fell by 11 percent in May from April, according to research by Alan M. White at Valparaiso University School of Law."

But what about people who didn’t take out risky loans but are having payment problems because they lost their jobs? Goodman profiles Eileen Ulery of Mesa, Arizona, who took out a mortgage with Countrywide, which was subsequently bought by Bank of America. Bank of America has received $52.5 billion in TARP bailout cash. It received an unknown amount of bailout money from the Federal Reserve. You would hope that Bank of America, great beneficiary of one TARP program, would encourage its customer to benefit from another TARP program. Goodman reports that’s not the case:

A spokesman for Bank of America Home Loans, Rick Simon, confirmed that the bank offered Ms. Ulery refinancing and not loan modification. The bank is now focusing on modifications only for those borrowers “who are already in severe threat of foreclosure,” he said.

So in this instance the Obama administration’s incentive-based approach to get banks to modify loans didn’t work. It would help, of course, if Bank of America had the slightest sense of shame.-MB

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