Eight years after taxpayers rescued the U.S. financial system, some of the country’s largest banks, including JPMorgan Chase and Wells Fargo, continue to receive billions in bailout money, according to government data.
Wells Fargo is eligible for up to $1.5 billion in bailout funds over the next seven years. JPMorgan and Bank of America could receive $1.1 billion and $964 million respectively.
The continuous flow of funds is a remnant of the $700 billion bailout effort, known as the Troubled Asset Relief Program or TARP, put in place during the financial crisis. Some of that money, about $28 million, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments.
The program, the Home Affordable Modification Program, has undergone several revamps over the last few years and fallen short of helping the 3 million to 4 million homeowners the Obama administration initially hoped. But it continues to operate — HAMP will accept its last homeowner application at the end of this year — and big banks continue to be paid for helping.
The stream of cash for the big banks is worrisome to the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, the chief watchdog of the financial crisis-era bailouts. Many of the banks have repeatedly broken the rules of the program, including kicking homeowners out unfairly or making it too difficult to apply for the help.
“Why are we paying for nonperformance? … At what point is somebody is going to say enough is enough?” said Christy Goldsmith Romero, special inspector general with the Troubled Asset Relief Program, who investigates crime at companies that received taxpayer bailout funds.
“If a homeowner doesn’t follow the rules in HAMP, they get knocked out of the program. If a bank doesn’t follow, they still get paid by Treasury.”
The banks and the Treasury Department, which oversees HAMP, defend the program. The “error rates” have fallen significantly, Mark McArdle, deputy assistant secretary for financial stability, said in a statement.
The SIGTARP report is “inaccurate,” Wells Fargo said in a statement. “We respond quickly to correct any errors we identify or that are brought to our attention.” Bank of America said it has helped more than 2.1 million customers avoid foreclosure through HAMP and other programs. “These initiatives continue to help those who face financial difficulty today, even as the economy has recovered overall,” the bank said in a statement.
JPMorgan, which has more than $2 trillion in assets, says most of the money it receives through the program is passed on to investors and homeowners who receive incentives for paying their mortgages on time.
The biggest beneficiary of the housing program, by far, is little-known financial company Ocwen. The Atlanta company services millions of mortgages for investors, including collecting payments from homeowners. It has already received $2.9 billion from the HAMP program and over the next seven years, it could receive $2.6 billion more.
“We are extremely proud of our performance and our success in helping struggling borrowers remain in their homes,” Ocwen said in a statement.