Four of the nation’s biggest mortgage servicers failed to fully comply with new mortgage standards and each will face fines if they do not correct the problems, according to a report from Joseph Smith, the monitor for the $25 billion settlement between banks and state and federal regulators, USA Today reported June 19.
Under the February 2012 deal with 49 states and federal agencies, banks are required to implement new servicing rules and stricter oversight of foreclosure processing, provide some consumers cash payments and promise mortgage relief to help borrowers.
The National Mortgage Settlement report examined Bank of America, JP Morgan Chase, CitiGroup, Wells Fargo and ResCap Partners (formerly Ally/GMAC). Only ResCap Partners passed the review, USA Today reported.
Smith’s report, his first major account of how banks are complying with 304 servicing standards meant to protect consumers, revealed that Bank of America and Wells Fargo failed in two areas — loan modification and document collection. Citi failed in timelines for collecting documents on short sales and loan modifications. Chase failed in loan-modification decisions.
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, told USA Today that the banks have improved their performance in accordance with the new mortgage servicing standards. For example, they no longer sign off on foreclosure paperwork with little or no review of documents nor do they charge distressed borrowers a fee to process loan modification requests.
However, Donovan noted that the banks repeatedly failed to send notices and communicate decisions to borrowers in a timely fashion. In May, New York Attorney General Eric Schneiderman threatened to sue both Bank of America and Wells Fargo for these same servicing deficiencies.
Smith reported that between October 2012 and March 31, 2013, his office received nearly 60,000 borrower complaints about servicing. Of those, 19,000 were related to the banks’ failure to provide the required single point of contact for distressed borrowers with servicers being difficult to reach or completely unresponsive, USA Today reported.
JP Morgan Chase and Wells Fargo reported that they have corrected their issues; Bank of America and Citi said they are working on them.
If servicers fail to correct problems, they could face up to $5 million in fines for each continuing problem, USA Today reported.