With home values continuing a steep decline, little change in the unemployment rate, and 26 percent of Illinoisans owing more than their home is worth, little has been done to buoy confidence that an economic recovery is at hand. A settlement of the investigations surrounding last year’s robo-signing scandal that, among other things, achieves widespread principal reduction commitments from major servicers, could change that–but only if done carefully.

“In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.”--Backlog of Cases Gives a Reprieve on Foreclosures (David Streitfeld, New York Times)

We recently reported that three banks—Bank of America, Chase, and Wells Fargo—received punitive action from Treasury for failing to meet the standards of the Home Affordable Modification Program. The three servicers had their incentive payments for successful permanent modifications and short sales suspended for one quarter—and possibly longer, if they don’t shape up. We know that homeowners are facing difficulties working with many more servicers than only those three, however. How are the rest of them doing according to HAMP’s auditors? Take a look at these charts below the jump.

The latest report on the Obama Administration’s foreclosure prevention program includes the news that Treasury has, for the first time, taken punitive action against servicers who exhibit poor performance on the Home Affordable Modification Program (see our previous analyses). HAMP has been beset by difficulties, most notably that the 608,615 permanent modifications active today fall far short of the 3-4 million homeowners that Treasury aimed to reach. Consumer advocates have called for Treasury to take action against servicers who lose borrowers’ documents, give them conflicting or counterproductive advice, and erroneously reject borrowers from the program. We are pleased to see that Treasury is withholding incentive payments from three servicers in need of substantial improvement: Bank of America, Chase, and Wells Fargo.

The Financial Times reported yesterday that the New York Fed is investigating a whistleblower letter from Goldman Sachs’ servicing unit, Litton Loan. The charge? Litton failed to review borrowers’ HAMP modifications in a “denial sweep” strategy meant to quickly work through a backlog of applications. FT reports:

The latest data on the Obama Administration’s foreclosure prevention program show that it continues to reach Chicago area homeowners, albeit slowly. There are a few bright lights that could signal a more efficient program, but it still has a long way to go to reach a meaningful fraction of homeowners facing foreclosure.