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Report: Bank of America, Wells Fargo Received Incentives But Mortgages Redefaulted

Bank of America and Wells Fargo serviced home loans that received more than $200 million in taxpayer funds as an incentive to modify them, only to have those mortgages go into redefault, according to a report slated for release Wednesday by a federal watchdog.

“It’s lost taxpayer money,” Christy Romero, the special inspector general for the federal bailout of the financial system, said Tuesday in an interview with the Observer.

The report, which heads to Congress, details how much in taxpayer incentives has been awarded to reduce mortgage payments through the federal Home Affordable Modification Program. The report also gives examples of homeowner complaints – some from as recently as this month – about their HAMP servicers.

According to the report, $102 million in incentive payments went to loans that were serviced by Charlotte-based Bank of America and that ended up back in default. The amount is equal to 16 percent of all the incentive payments awarded for loans that Bank of America has serviced under HAMP.

Loans serviced by San Francisco-based Wells Fargo and that went into redefault received $99.7 million in incentives, or 15 percent of the total incentives awarded for HAMP mortgages the bank has serviced.

Bank of America and Wells Fargo said Tuesday that it was difficult to respond to the report without having seen it.

Borrowers working with other HAMP servicers, not just Bank of America and Wells Fargo, also have redefaulted, according to Romero’s report. All told, taxpayers have lost $815 million in incentives awarded for 163,811 homeowners who later redefaulted.

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