House Financial Services Committee chairman Barney Frank, D-Mass., is threatening to attach a bankruptcy cram-down provision to a regulatory reform bill if servicers don’t speed up the loan modification process.

Rep. Frank said he is “disappointed” in the servicers’ efforts to implement the Obama administration’s Home Affordable Modification Program. But he noted there are legal obstacles such as second mortgage and servicing agreements that made modification decisions difficult.

The 45 Home Affordable Modification Program servicers are now on track to meet the Obama administration’s initial goal of starting 500,000 trial modifications by Nov. 1, according to Treasury Assistant Secretary Michael Barr. Servicers participating in the administration’s Home Affordable Modification Program had over 360,000 homeowners in 90-day trial modifications as of the end of August up from 235,000 in July, according to the latest Treasury report.

While performance of individual servicers has been “uneven,” Mr. Barr told a congressional panel, “we think all the servicers can do more than they are doing now and we would like to continue to work with them for better results.”

If the frustration over voluntary modifications continues to build, Mr. Frank said, it will make it easier to pass a provision that allows bankruptcy judges to modify mortgages on a primary residence. “The best lobbyists we have for getting bankruptcy legislation passed are the servicers that are not doing a very good job of modifying mortgages. If they do not improve their performance then they improve the chances of the legislation,” Chairman Frank said. Previously Frank has warned that a lack of progress on modifications could lead to more cram-down related legislation efforts.

Meanwhile the major mortgage servicers are preparing for the Treasury Department to roll out a short sale program and they are signing up vendors that specialize in handling these difficult real estate transactions that help troubled homeowners avoid foreclosure. Loan Resolution Corp. chief operating officer Travis Olsen said one of the top 10 servicers has hired his firm to manage the short sale process. “We will take their borrowers who have been denied a home retention plan and hand-hold them during the rest of the process,” he said.

Treasury is expected to provide incentives for servicers to conduct short sales and share some of the costs of paying off second lien holders. “The final details of the short sale program are being finalized, and will be announced as soon as completed,” HUD assistant secretary David Stevens told a congressional panel.

In a short sale, the lender agrees to accept a loss on the sale of the property and forgive the remaining balance on the mortgage. If a modification or short sale doesn’t work, the next stop is foreclosure.

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Newsletter-Chrisman,Rob

Congratulations to David Stevens. On Friday the U.S. Senate confirmed Dave to head the Federal Housing Administration (FHA). Stevens will take over the agency in the middle of their huge surge in business, and many feel that with the non-HVCC appraisals and the fact that the FHA insures mortgages with a small down payment for borrowers who meet its standards are creating the next possible “cause for concern” in the mortgage business.

Would a 3.75% mortgage make you buy a newly built house? TBI, the mortgage arm of Toll Brothers, is offering a 7/1 ARM for 3.75% for loans under that magical level of $417,000. After 7 years, the life cap is 8.75%, which isn’t too bad especially if rates head up. As usual, borrowers can decide to take the current market 30% rates, which have moved back down toward 5%, or below, or take a flier on the ARM loan (probably a good option if the buyer is going to move before seven years). The Wall Street Journal noted that back in January Toll Brothers came out with a 3.99% 30-yr loan, followed by Lennar’s 3.625%, but a few months ago Hovnanian Enterprises said its 3.99% rate sparked “underwhelming” interest from buyers.

Can Bank of America Corp saves its stockholders billions of dollars in fees, supposedly due to U.S. taxpayers for guarantees against losses at Merrill Lynch, by saying the rescue agreement was never signed and the funding never used? Apparently the legal agreement was never completed, possibly allowing BofA to pay nothing of the $4 billion fee it agreed to pay in January. (Do you remember the reaction of your boss when you forget to do something so simple, like sign a form?) Regulators say that the money is owed since BofA benefited from the Merrill deal. Bank of America received a total of $45 billion, plus $188 billion in asset guarantees, so that it could cover Merrill’s losses. Bank of America, by the way, comes out with earnings later this week – and does anyone really want to cross the government?

They don’t seem to be garnering headlines, but on Friday the FDIC closed their 53rd bank this year: the Bank of Wyoming. The BoW had $70 million in assets and $67 million in deposits, and is expected to cost the FDIC deposit insurance fund $27 million by the time it is taken over by Central Bank & Trust (based in Wyoming).

What is going on with the markets? Many expect stocks to continue their slide after Treasury Secretary Geithner agreed with what many analysts felt: that there are still “enormous challenges” for the economy. What do we have this week for economic news, given that, aside from the auctions, the news was fairly limited last week? It is a big news week. There isn’t much today, but tomorrow we have the Producer Price Index, along with the Core PPI, and Retail Sales. Wednesday we’ll see the Consumer Price Index, with Core CPI, Industrial Production and Capacity Utilization, and Business Inventories. Thursday bring weekly Jobless Claims, and the Philly Fed survey, and we end the week on Friday with Housing Starts and Building Permits. Whew! Currently the yield on the 10-yr Treasury note is at 3.30% and mortgages are about unchanged from Friday afternoon.

A woman went up to the bar in a quiet rural pub. She gestured alluringly to the bartender who approached her immediately. She seductively signaled that he should bring his face closer to hers. As he did, she gently caressed his full beard.
“Are you the manager?” she asked, softly stroking his face with both hands.
“Actually, no,” he replied. “Can you get him for me? I need to speak to him,” she said, running her hands beyond his beard and into his hair.
“I’m afraid I can’t,” breathed the bartender. “Is there anything I can do?”
“Yes. I need you to give him a message,” she continued, running her forefinger across the bartender’s lips.
“What should I tell him?” the bartender managed to say.
“Tell him,” she whispered, “There’s no toilet paper, hand soap, or paper towels in the ladies room.”