First Six Banks To Get Massive Government Subsidies
The Treasury Department finally announced on Wednesday, April 4th the names of the first six banks that will get massive government subsidies.
The names of banks and what they’ll be getting are;
• JPMorgan Chase – $3.6 billion in subsidy and incentive payments
• Wells Fargo – $2.9 billion
• Citigroup – $2 billion
• GMAC Mortgage, $633 million
• Saxon Mortgage Services, $407 million
• Select Portfolio Servicing, $376 million
The government’s program was announced on February 18th but specific details have only just become available, and the delay caused major frustration amongst housing counselors and distressed homebuyers.
The stated aim of the program is to help as many as nine million borrowers to stay in their homes, and Wells Fargo recently said in a statement, “We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership”.
The two-part plan requires servicers to either reduce monthly payments to no more than 31% of an eligible borrower’s pre-tax income, or to refinance eligible mortgages, even if the homeowner has little or no equity.
The government has so far allocated $75 billion, to subsidize a part of the payment reduction, and it will also provide tens of thousands of additional dollars in incentives to participating servicers and borrowers.
Servicers will receive $1,000 for each loan modification, plus another $1,000 a year for three years if the borrower stays current. On top of this, the government will provide an additional $500 to servicers, and $1,500 to mortgage holders if they modify their at-risk loans before the borrower falls behind.
Homebuyers will get up to $1,000 a year for five years if they keep up with their payments, and the money will be used to lower their loan principals.
When asked “Where all this money come from?”, Treasury spokesman Andrew Williams answered, “We’re confident we’ll have enough money”.