Treasury official praises mortgage servicers

An Obama administration housing official on Wednesday praised the mortgage servicing companies, just one day after Treasury Secretary Timothy Geithner said the industry needs an overhaul.

Cindy Gertz, director of operations at the Treasury Department's Homeownership Preservation Office, said mortgage servicers--firms which collect loan payments--have hired tens of thousands of extra staff to work with a crush of struggling borrowers who are trying to renegotiate the terms of their mortgages.

"I think tremendous progress has been made," Gertz told a group of bankers at a conference organized by the Mortgage Bankers Association. Gertz, a former executive at mortgage finance giant Freddie Mac, did acknowledge that the process is not complete.

Other Obama administration officials have sharply criticized the mortgage servicing industry.

David Stevens, the Federal Housing Administration Commissioner, told the conference the industry has a "trust deficit" that threatens the future of the housing market.

On Tuesday, the Obama administration called for a revamp of the way companies that service home loans are paid, saying the current system offers little incentive to rewrite mortgages for distressed borrowers. Geithner and Housing and Urban Development Secretary Shaun Donovan said the compensation system is "broken and should be fixed."

Treasury spokeswoman Andrea Risotto stressed that Gertz was narrowly referring to the implementation of the Making Home Affordable (MHA) program, the Obama administration's comprehensive effort to stabilize the U.S. housing market and prevent avoidable foreclosures.

"While servicers have made progress and built up their infrastructure to implement the (MHA) program, we continue to reinforce that more work needs to be done to strengthen implementation and improve the homeowner experience," Risotto said in a statement provided to Reuters.

A little more than 500,000 borrowers have thus far received a permanent loan modification under the Home Affordable Modification Program (HAMP), the highest profile component of the MHA effort.

Also speaking at the conference on Wednesday, the head of the Federal Deposit Insurance Corp called on the industry to fund a new commission to compensate homeowners who may have wrongly been kicked out of their homes.

FDIC Chairman Sheila Bair said a claims commission could be modeled on those created to compensate victims of the BP oil spill and the September 11, 2001, attacks.

The biggest U.S. mortgage servicers, including Bank of America, Wells Fargo and JPMorgan Chase & Co, have been accused of using improper procedures in some foreclosures, such as using "robo-signers" to sign hundreds of documents without review in a single day and advancing foreclosures without proof they held the mortgages.

The companies, whose reputations have suffered under the allegations, are facing repurchase demands from investors in mortgage-backed securities and multiple probes from bank regulators and all 50 state attorneys general.

PROTESTERS INTERRUPT MORTGAGE BANKERS

The conference on Wednesday drew a raucous group of more than 100 union-backed protesters who interrupted a panel, demanding "Where are the jobs?"

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