April 16, 2009 11:30:18 am
Six large US banks could pocket nearly $10 billion in federal subsidies if they modify troubled home loans and are able to save homeowners from foreclosure,the Treasury Department said on Wednesday.
The mortgage specialty arms of Citigroup,JPMorgan Chase and Wells Fargo & Co. would each earn over $2 billion for modifications that have long-lasting success,according to the Treasury’s formula.
The money is available through a $50 billion program to encourage mortgage servicers to ease the terms on troubled loans. Many more mortgage servicers will be eligible for the subsidies,the Treasury said.
The total amount of subsidy available to each lender is based on “the size of their book of business,” a Treasury official said.
Under President Barack Obama’s housing rescue plan outlined in early March,a mortgage service company will receive $1,000 for steering a troubled borrower into a new,affordable loan.
Those $1,000 payments would continue for three years as long as the borrower is able to stay in the home.
The Treasury dubs the program “pay for success” as it is meant to hold troubled borrowers in a long-term loan.
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