Banks are not like other businesses. They can’t invest their money as they wish. Instead, they are monitored by activists and politicians and have to behave according to a different set of rules.
No wonder that banks went into big financial trouble with the latest housing crash. They can’t operate according to the dictum of maximizing profits in a free market.
The Treasury Department announced penalties on Thursday against three of the nation’s largest banks for what it said was poor performance in the government’s main foreclosure prevention program.
The penalties, against Wells Fargo, Bank of America and JPMorgan Chase, are part of a new scorecard for mortgage servicers in the program, known as the Home Affordable Modification Program, or HAMP. (More details are available in the Treasury Department’s release and scorecard.) A fourth mortgage servicer, Ocwen Financial, was also deemed subpar but not penalized.
The program is intended to provide incentives to mortgage servicers and investors to make it more financially advantageous to modify a troubled mortgage, rather than foreclose on it. But since the program began, it has fallen far short of expectations, in part because mortgage servicers have done a poor job of processing applications from homeowners.