Five of the nation’s largest mortgage servicers have failed eight of the servicing standards in the National Mortgage Settlement, according to a report released today.
The reports submitted by Joseph A. Smith, Jr., monitor of the National Mortgage Settlement, includes information about banks’ compliance with the Settlement’s servicing rules.
Bank of America, Chase, Citi, ResCap Parties and Wells Fargo were among the five banking institutions called into question for failing eight of the servicing standards in the Settlement.
The Monitor’s testing through the end of last year resulted in three testing fails, with an additional five fails in 2013.
“These results demonstrate that the Settement is allowing us to uncover areas in which more work needs to be done,” said Smith. “The banks are now working to correct these errors and will be tested again to determine their level of improvement.”
Specifically, Smith observes he has head regularly in the last year about issues with the loan modification process, single points of contact and billing and statement inaccuracies.
Some good news is that gains have been made, according to Shaun Donovan, secretary of the Department of Housing and Urban Development (HUD), such as the practice of robo-signing has come to an end.
Additionally, HUD has also confirmed that the five banks have stopped charging distressed borrowers a fee just to process a loan modification request.
Unfortunately, other abuses “shamefully endure,” notes Donovan, as these institutions “consistently fail” to send notices and communicate decisions to stakeholders in a timely manner.
“This is unacceptable,” said Donovan. “So the five financial institutions are officially on notice.”
If these institutions in question fail to correct these problems and pass the Monitor’s test, or the Obama Administration, along with a bipartisan group of 49 state attorneys general partnered with HUD on this effort, will fine them up to $5 million for each failure, or face further litigation.
Smith is hopeful the report will continue to raise awareness on how banks are treating homeowners.
“While there is more work to be done, I remain confident that the Settlement is helping to improve the mortgage finance system,” said Smith. “I hope this report will help contribute to the conversation on this topic, and I look forward to making additional information public as this process continues.”
In February 2012, housing officials announced the details of a historic mortgage servicing settlement totaling $25 billion, after months of gathering evidence with regard to servicers foreclosing on homeowners without going through legal processes that would enable homeowners to refinance their loans or become current on mortgage payments.
As of February 2013, the landmark servicing settlement has distributed more than $50 billion to homeowners impacted by loan serving and foreclosure abuse.
Written by Jason Oliva