As consumers face the stress of foreclosure, Fifth Third Bancorp (FITB) has recently reported that their government modification conversion rate was above 70 percent – more than double the national average.
At the same time, the bank is projecting a $20 million reduction in quarterly deposit fee revenue as a result of recent legislation that will make it more difficult to collect fees for such things as overdraft protection.
The economic collapse of 2008 and subsequent steps taken by the Obama administration and Congress seem to be most sharply defined by two issues: housing and consumer protection.
Of the 89 percent of Fifth Third Mortgage Company’s portfolio eligible for Home Affordable Modification Program (HAMP) consideration, more than 70 percent of trial plans started have been converted to permanent modifications.
According to U.S. Treasury data recently released for June, that percentage is more than double the national average of more than 30 percent.
The Bank continues to use its “You Have Options” program for bank-owned mortgages instead of the government’s HAMP program. While HAMP does have benefits to the customer, Fifth Third’s “You Have Options” program is tailored, through a menu of options, to each customer’s specific financial situation – not just the customer’s mortgage payment-to-income as in GSE and HUD modification programs.
The program allows the Bank to offer flexible-term and rate concessions to bank-owned mortgages.
“Fifth Third Bank is determined to keep customers in their homes,” said Steve Alonso, executive vice president of Consumer Lending, Mortgage and Business Banking for Fifth Third Bank. “We are working tirelessly to convert eligible customers in the government’s Home Affordable Modification Program.”
With a success rate of 70%, it seems clear that Fifth Third is making a genuine effort to help consumers deleverage themselves from the housing and credit bubbles of the last decade.
What’s less clear is how long this good will may last considering the affect of the recently passed U.S. financial regulation.
The law is designed to protect consumers against what have been considered predatory practices such as overdraft protection that can turn a $3.00 latte into a $38 nightmare.
The Cincinnati-based bank said it expects deposit fees to be reduced about $20 million each quarter, not including any steps it might take to offset that lower fee revenue.
Fifth Third received $149 million in deposit service charges and it had about $82 billion in total deposits in the second quarter, according to a quarterly filing.
Fifth Third said it expects only a minimal impact from other rules affecting banks’ use of over-the-counter derivatives and trading for their own accounts.
Larger banks such as Bank of America Corp (BAC) and JPMorgan Chase & Co (JPM) have also said they will be affected by rules that limit overdraft fees for bank customers. The banks broadly have said they are looking for other ways to make up for the lost fee revenue.
