Four of the largest U.S. mortgage servicers failed to comply
with parts of a $25 billion landmark national mortgage settlement,
according to the watchdog overseeing the process.
Joseph A. Smith said Wednesday that Bank of America Corp. (BAC),
J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C) and Wells
Fargo & Co. (WFC) each failed at least one of 29 metrics that
measure standards over how to provide relief to homeowners under
threat of foreclosure.
The compliance exams "confirms what I've been hearing from
people out in the field, which is that we still have work to do on
the loan modification process," he said in an interview. Mr. Smith
is the independent monitor named by federal and state officials to
oversee the mortgage-foreclosure deal.
Federal agencies and 49 state attorneys general agreed to settle
certain foreclosure-processing abuses with the four banks and Ally
Financial Inc. in March 2012, a deal valued at $25 billion.
The settlement included a detailed list of 304 new standards
governing various aspects of the loan modification and foreclosure
process. Banks were required to pay $5 billion in fines and to
provide consumer relief, including mortgage write-downs and
refinancing, worth $20 billion.
Wednesday's report, filed in federal court in Washington, D.C.,
examined banks' compliance with the mortgage-servicing
standards.
The report comes as some attorneys general involved in the
settlement have raised concerns over how the banks are handling
service to homeowners looking for relief.
In May, New York State Attorney General Eric Schneiderman
notified a committee monitoring the agreement that he intended to
sue Bank of America and Wells Fargo for violations of the servicing
standards.
A Bank of America spokesman said the bank took immediate action
to resolve failures. "We are working with the monitor to confirm
our corrective action plan for formally resolving these areas," he
added. A spokesman for Citi said when the monitor pointed out the
problems the bank took action to address them and is working on its
corrective action plan for areas that have not yet been fixed.
A J.P.Morgan spokeswoman said the bank quickly addressed the
failure after self reporting it. A Wells Fargo spokesperson didn't
immediately respond to a request for comment.
The most frequent failures were related to providing timely
service and identifying one single contact person at the bank for
each borrower.
The failures corroborate recurring complaints raised by
homeowners and their advocates that banks frequently change the
main point of contact on a case, requiring homeowners to resubmit
documents numerous times.
"It's a constant state of supplying missing documentation," said
Carol Yopp, director of counseling and foreclosure prevention at
the advocacy group Long Island Housing Partnership. "There are
still a lot of miscommunications."
Mr. Smith has yet to complete separate audits that will
determine how far along the banks are towards meeting their
consumer-relief requirements, which provide varying degrees of
"credits" depending on the type of loan-forgiveness and other
assistance that banks provide.
Bank of America and J.P. Morgan said last month that they had
recently completed doling out the required aid under the
settlement, and Wells Fargo had said it was 90% complete. Mr. Smith
said the first audit, which would examine all aid completed through
2012, would be done by next month. He had certified earlier this
year that Ally Financial Inc. had satisfied that portion of the
settlement.
Mr. Smith said it was likely that by the end of March, most or
all of the banks had finished their consumer-relief requirements.
An audit on aid provided through the first quarter wouldn't be
completed until this fall, he said.
The servicing standards remain in effect for three years, and
banks will still be tested on their compliance even after they've
satisfied the consumer-relief portions of the settlement. For
instance, banks will still be tested on how they process
foreclosures and loan modifications.
"We're better off today than we were a year ago, but we're not
where we need to be yet and we're keeping at it," said Mr.
Smith.
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