Bank of America Corp., plagued by complaints about customer service in its mortgage unit, said it hasn't yet refinanced a "significant number" of loans as part of the industry's $25 billion settlement of foreclosure abuses.

The lender blamed the "time required to underwrite" loans for why it hasn't completed many of its planned $1 billion in modifications, according to a filing earlier this month. By contrast, JPMorgan Chase & Co. said last week it has already finished a "significant portion" of its $500 million program and Wells Fargo & Co. said it expected to complete its $900 million requirement two years ahead of the 2015 deadline.

"The infrastructure Bank of America has to handle an issue of this magnitude isn't great, so they're last out of the gate," said Nancy Bush, an analyst and contributing editor at SNL Financial, a research firm in Charlottesville, Virginia. JPMorgan and Wells Fargo have better mortgage systems, she said.

Delays mean distressed Bank of America borrowers may miss out on record low interest rates that could ease their burden. The lender, overwhelmed in February by demand under an earlier federal refinancing program, could also forego incentives for early completions and face penalties if it doesn't help most borrowers within two years under the U.S. settlement.

The firm doesn't expect to pay any fines because it's "on a path" to meeting homeowner assistance pledges within a year, Jumana Bauwens, a Bank of America spokeswoman, said in an e- mail. The Charlotte, North Carolina-based company started to contact refinancing customers in May and will continue through year-end, she said.

Settlement Terms

Bank of America and other lenders are compelled to offer the modifications under a February accord with the Department of Justice and 49 state attorneys general after probes into shoddy mortgage servicing. Allegations included the use of "robo- signers" to speed home seizures by submitting foreclosure claims without checking their accuracy. Bank of America pledged almost half of the fines and assistance in the $25 billion deal.

Banks get credit toward reaching the targets set by the settlement when they assist homeowners by reducing interest payments and debt. Loans modified within the first year of the program are worth 25 percent more in credits, giving lenders motivation to act quickly.

Interest rates may be trimmed by an average of 2 percentage points for as many 25,000 borrowers, Bank of America said in an Aug. 2 filing. Only customers who owe more than their houses are worth and are current on payments are eligible. The moves are meant to earn $1 billion in credits under the accord.

Cutting Debt

Another $7.6 billion of assistance involves principal reductions and actions such as cash incentives to sell a borrower's home for less than the amount owed, known as a short sale. Bank of America said it will offer an average $150,000 reduction to more than 200,000 overdue customers by this month.

Response to that program has also trailed other firms in the settlement. Homeowners exhausted from fighting foreclosure may be skeptical of the offers, Ron Sturzenegger, head of Bank of America's Legacy Assets Servicing unit, said in June.

"Unfortunately, many customers may just be tired of the process and thinking about giving up," he said.

Housing advocates have said that the low response is because borrowers have already struggled with lost paperwork and unresponsive customer service. Bank of America, the second biggest U.S. lender by assets, had the lowest rating of any big bank in a December survey by Ann Arbor, Michigan-based American Customer Satisfaction Index LLC.

Bank of America is successfully reaching and assisting customers, said Dan Frahm, a spokesman for the lender. He declined to say if response rates had improved from June.

Demanding Results

"People clearly want to see results as quickly as possible, particularly given there's been a slight uptick in foreclosure rates," said Mike Calhoun, president of the Center for Responsible Lending. "Most people think interest rates are at or near the bottom, that they can only go up."

The bank, led by Chief Executive Officer Brian T. Moynihan, has committed about $43 billion to clean up defective mortgages and shoddy servicing since the start of 2007. Moynihan, 52, became CEO in 2010, telling staff when he was named that "our core businesses are the right ones, we just have to execute."

JPMorgan, run by CEO Jamie Dimon, 56, and the biggest U.S. lender by assets, has made "great progress" in reaching its required $500 million in refinancing assistance and expects to be done before year-end, said Amy Bonitatibus, a spokeswoman for the New York-based firm. Customers are saving an average of $300 per month, she said.

Beating Targets

Wells Fargo, which replaced Bank of America as the biggest mortgage servicer and lender, expects to earn $900 million in refinancing credits by March 2013, according to Tom Goyda, a spokesman for the San Francisco-based company.

Led by CEO John Stumpf, 58, the bank said Aug. 7 that a "higher-than-expected response" meant that it would likely go beyond the settlement's minimum requirements and help as many as 40,000 borrowers, double the number it said three months earlier. Refinancing will continue beyond March for those extra clients, Goyda said.

Citigroup Inc., which also participated in the accord, set a target of $378 million in refinancing credits. The bank said it started the work in June and hasn't disclosed its progress. The New York-based firm said it will cut customer's interest rates to 5.25 percent, or about 1.7 percentage points higher than the current 30-year rate according to Mclean Virginia-based Freddie Mac.

GMAC Mortgage, the bankrupt home-loan firm owned by Detroit-based Ally, hasn't disclosed how many modifications it has done. The company has reached out to more than half of eligible borrowers and the response has been "positive," said Susan Fitzpatrick, a spokeswoman for the business.

Facing Penalties

The five firms face penalties of 125 percent to 140 percent of the shortfall in assistance targets for deadlines that come in two and three years. The banks must finish 75 percent of the program by the first deadline and get another 12 months to complete it, according to settlement documents.

Joseph Smith, North Carolina's ex-commissioner of banks assigned to police the settlement, can help impose fines by working with state and federal officials. Lenders will send preliminary data on homeowner relief and servicing improvements to Smith this week, said Laura Brewer, his spokeswoman.

Bank of America has previously struggled to process applications after the U.S. Home Affordable Refinance Program was broadened so more people qualify. To cope, the lender used a reservation system asking some customers if they wanted to wait three months to attempt a refinance. Moynihan told analysts in April that the firm had cut back on mortgage capacity to focus on selling loans to existing customers.

"There's some noise about a reservation system," Moynihan said in the April 19 conference. "We underperformed, but we're doing exactly what we wanted, which is to focus on direct-to- retail."

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