Almost two dozen firms that fed off the subprime lending frenzy that devastated the banking system are set to receive billions in taxpayer dollars through a federal government program designed to stem foreclosures, according to a nonprofit, investigative public policy group in D.C. Based on analysis of public records, the Center for Public Integrity says 21 of the top 25 participants in the Home Affordable Modification Program (HAMP) were “heavily involved” in the subprime lending and servicing industry. “As foreclosures continue to increase, the Obama administration is planning to spend up to $50 billion in federal bailout funds to help as many as four million homeowners stay current on their mortgages,” said Bill Buzenberg, Center for Public Integrity executive director. “Much of this money is going directly to the same financial institutions that helped create the subprime mortgage mess in the first place.” The center’s list of subprime lenders participating in HAMP are slated to receive more than $21 billion in taxpayer funded incentives. According to a recent study by the Center for Public Integrity, many of these subprime lenders were among the top originators of high-interest loans, which accounted for nearly $1 trillion during the peak of the subprime market. The list of HAMP recipients reads like a who’s who of major subprime lenders and loan servicers, the center says, including financial institutions that have already

received hundreds of billions of dollars from the federal government’s primary bank bailout program. Leading the pack is the once-subprime Goliath Countrywide, now owned by Bank of America. Bank of America, through its ownership of Countrywide, has been slated to receive up to $5.1 billion in incentive payments for the loans it modifies, to be paid out to the servicer, its borrowers, and mortgage investors for successful workouts. Including subsidiaries that came over from its purchase of Merrill Lynch, Bank of America’s incentive numbers go up to $6.9 billion. Next on the list, with up to $2.7 billion in incentives allocated, is JPMorgan Chase, which ranked No. 12 on the center’s subprime lender list. Including subsidiary EMC Mortgage Corp., JPMorgan, its investors, and borrowers, could collect as much as $3.4 billion. Wells Fargo, which ranked No. 8 on the center’s subprime list, is slated to get as much as $3.1 billion, including payments to its Wachovia subsidiaries. Under HAMP, servicers receive an upfront $1,000 incentive payment for each eligible modification performed, plus $1,000 each year for three years if the borrower stays in the program. The borrower may receive a $1,000 payment to be applied toward the principal for five years. As of mid-August, 44 entities had qualified to collect a maximum of $21.5 billion in incentives, the Treasury Department has reported. Among the top program participants, the Center for Public Integrity says at least two firms have settled charges of illegal collection practices brought by federal regulators — EMC Mortgage and Select Portfolio Servicing — and another, Ocwen Financial, was placed under federal supervision before voluntarily surrendering its bank charter. There’s also a subprime subsidiary of top-bailout recipient American International Group Inc. (AIG), as well as and two former subsidiaries of Merrill Lynch & Co. and one former subsidiary of Lehman Brothers, investment banks that helped underwrite the subprime boom, the center reports.