Joseph A. Smith Jr., Monitor of the National Mortgage Settlement, has released "Summary of Compliance: A Report From the Monitor of the National Mortgage Settlement," a summary of the five compliance reports he submitted to the United States District Court for the District of Columbia. This summary includes information about the banks’ (Bank of America, Chase, Citi, ResCap Parties and Wells Fargo) compliance with the Settlement’s servicing rules.
“Over the past six months, my team and I have tested the banks’ compliance,” said Smith. “My testing through the end of last year resulted in three testing fails, and I can disclose five additional fails in 2013. These results demonstrate that the Settlement is allowing us to uncover areas in which more work needs to be done. The banks are now working to correct these errors and will be tested again to determine their level of improvement."
According to "Summary of Compliance: A Report From the Monitor of the National Mortgage Settlement," findings against several of the servicers, including finding that Wells Fargo failed to comply with the Servicing Standard governing the timeline for notifying borrowers of deficiencies in applications for mortgage modifications.
“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," said Smith. "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."
Last year, 48 states, the U.S. Department of Justice and the five largest mortgage servicers negotiated the Settlement. The Agreement includes $25 billion for 49 states and mandated forms of consumer relief, such as mortgage modifications for at-risk homeowners, which could include lower-interest rates, forbearance agreements, and principal reductions.
“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.
The Settlement also includes 304 Servicing Standards that participating servicers are required to adhere to, and which are intended to smooth the process for homeowners to seek loan modifications.
“The Independent Monitor’s report is a landmark moment in our efforts to reform the servicing industry," said HUD Secretary Shaun Donovan. "For too long, banks have been operating behind closed doors. This report provides the public with a new and transparent look into how banks are treating homeowners. The good news is that gains have been made. The practice of robo-signing—where banks sign off on foreclosures with little or no review—has come to an end. We've 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."
The Servicing Standards were incorporated into the National Mortgage Settlement to address long standing complaints from consumers and advocates that servicers subject to the Settlement–Ally Financial/GMAC, JP Morgan Chase, Citibank, Bank of America and Wells Fargo—persistently failed to provide fair and timely services to their customers. Among these Standards are five that dictate the timeline for banks to process loan modification applications and to make loan modifications permanent.
“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.”