Improvement, But More Needed, Among Mortgage Servicers, Monitor Says
The nation’s largest mortgage servicers have improved their performance but most are failing to comply with parts of a national settlement that was designed to improve how they treat financially stressed borrowers, according to an independent monitor.
Four of the five firms are failing to fully comply with the settlement terms, according to compliance reports by Joseph A. Smith, who was appointed to oversee the settlement. Smith said Bank of America Corp., J.P. Morgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. each failed to meet at least one of 29 measures of their performance in providing relief to homeowners under threat of foreclosure. The fifth mortgage service, Ally Financial Inc., was not cited.
The settlement was agreed to in February 2012 after negotiations among the Obama administration, 49 state attorneys general and the five largest mortgage service firms.
Housing and Urban Development Secretary Shaun Donovan and four state attorney's general -- John Suthers (Colorado), Pam Bondi (Florida), Tom Miller (Iowa), and Roy Cooper (North Carolina) -- held a press conference call in response to Smith’s report. They were largely encouraged.
‘Now There are Rules’
"Foreclosures were the Wild West before the settlement," said Cooper. "Now there is a new sheriff and we have specific rules and special ways to monitor how well they perform against those rules."
Iowa’s Miller also said “progress is clearly being made.”
But HUD’s Donovan expressed concern that “harmful practices endure” and said the improvements are not enough.
In a statement issued with his report, Smith said: “These findings, combined with the complaints I have heard from attorneys general, counselors and distressed borrowers, tell me there is still work to be done. While I believe distressed servicing is better this year than it was last, it is not yet where it needs to be. My team and I will continue our efforts to improve it.
“Specifically, I have heard regularly in the last year about issues with the loan modification process, single points of contact and billing and statement inaccuracies. The settlement anticipated that there may be a need for additional tests, and, as such, allows me to create more. Accordingly, I am negotiating more stringent testing with the banks now to better address these issues.”
Billions in Relief
The settlement includes approximately $25 billion in relief:
- At least $17 billion in principal reduction and loan modification for homeowners who need help to avoid foreclosure.
- Up to $3 billion in refinancing for “underwater” homeowners who are current on their mortgages but owe more than their homes’ current market value.
- $1.5 billion in payments to homeowners who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011.
- Payments to the 49 signing states for foreclosure prevention, consumer protection and education programs, and for civil penalties.
“Summary of Compliance,” Joseph A. Smith, Office of Mortgage Settlement Oversight: http://heartland.org/policy-documents/summary-compliance-report-monitor-national-mortgage-settlement