Five of the largest U.S. mortgage servicers are falling short when it comes to meeting the new rules of last year’s $25-billion national mortgage settlement. According to the settlement’s official monitor, Joseph A. Smith Jr., an investigation revealed insufficient compliance with updated mortgage servicing rules. A new report describes the results of 29 performance tests that show banks consistently failed to send notices and communicate decisions to homeowners in a timely manner.
- The settlement established new rules for how banks handle troubled home loans and provided up to $25 billion in financial relief to homeowners. Lenders JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and ResCap Parties (formerly Ally Financial and GMAC) were part of the settlement with 49 states and federal government agencies.
- The single-point-of-contact rule was among the changes implemented by the settlement. This rule required banks to assign a single employee to each borrower seeking a loan modification so that borrowers were not bounced from employee to employee. However, a third of the 60,000 serious complaints from the investigation involved single points of contact because borrowers found them hard to reach or unhelpful.
- The report also indicates that dual tracking persists after the settlement. This means banks continue to pursue foreclosures against borrowers seeking modifications even though banks are supposed to cease foreclosure proceedings as soon as a troubled borrower’s application for a modification is complete.
- New metrics may be implemented to address problems with single-point-of-contact and dual-tracking practices. Reportedly the banks and an attorney general monitoring committee are already in advanced discussions. Under current rules, banks are supposed to acknowledge in writing a refinancing application within three business days, notify the borrower of any missing documents within five days and make a decision on a complete application within 30 days.
- Department of Housing and Urban Development Secretary Shaun Donovan called the results of the performance tests “unacceptable.” He added that if issues remain unresolved, then fines and court action are possible remedies.
