Consumer advocates already knew banks were failing to comply with provisions of the $25 billion National Mortgage Settlement, an agreement between mortgage lenders, states and the federal government to end foreclosure abuses.
Long before the settlement’s overseer today released a report that verifies consumer advocates’ criticisms, advocates were hammering away at how lenders’ failures to fully comply with the settlement has continued to prolong the housing crisis that was initially deepened by those same actions.
The Mortgage Bankers Association denounced a recent California Reinvestment Coalition (CRC) report of continuing foreclosure servicing failures as, “based on a small sample of nonverified anecdotal information and … not representative of the servicing environment.”
No more National Mortgage Settlement lies
Today “Summary of Compliance: A Report from the Monitor of the National Mortgage Settlement” by the Office of Mortgage Settlement Oversight (OMSO), makes reports of continued foreclosure abuses a matter of facts in the federal public record.
“As more fully discussed in this summary report, there were three metric fails in 2012 and five metric fails in the first quarter of 2013, confirming much of what I have heard during the last year from state attorneys general, housing counselors, advocates and distressed borrowers,” said Joseph A. Smith, Jr. monitor of the oversight office.
The National Mortgage Settlement compliance report also includes nearly 60,000 consumer complaints related to foreclosure servicing failures.
CRC says the problems go deeper than the OMSO report reveals.
“There remains a large gap between this report’s findings … and the widespread evidence of noncompliance reported in our survey earlier this year of over 80 housing counselors and legal aid attorneys, who report ongoing issues with dual tracking, single points of contact, and concerns about whether or not the most vulnerable homeowners are receiving equal access to the benefits and protections of this settlement,” said CRC director Kevin Stein.
Stein added, “While we are encouraged that the monitor reportedly is discussing with the banks their obligations not to discriminate against borrowers of color and other protected classes of borrowers, we remain deeply concerned that the lack of demographic data on people receiving (and not receiving) assistance makes it impossible to know if the relief is reaching limited English speakers, widows, borrowers with disabilities, and the communities that were hit hardest by the mortgage meltdown.”
The National Mortgage Settlement compliance report spans servicers’ settlement-related activity from the third quarter 2012 to the first calendar quarter of 2013, with more details from the third and fourth quarters of 2012.
The $25 billion National Mortgage Settlement between the federal government, states attorneys general and five of the nation’s largest mortgage servicers, came after a year-long investigation into an institutionalized culture of foreclosure abuse. It is the largest ever federal-state civil settlement.
The National Mortgage Settlement targets an abusive, in-house, culture of foreclosure servicing including “robo-signed” (falsely signed or recorded) foreclosure documents; “dual tracking” (simultaneously working on a mortgage modification while foreclosing on a homeowner), failures to offer non-foreclosure alternatives before foreclosing; filing improper federal bankruptcy court documentation, losing and misplacing crucial homeowner documents and generally giving distressed homeowners the runaround, rather than a single point of contact.
Provisions of the National Mortgage Settlement have been codified as federal law under the Consumer Financial Protection Bureau’s (CFPB) regulatory overhaul of the mortgage industry, by California’s Homeowner Bill of Rights among other laws.
Servicers’ National Mortgage Settlement failures
According to the National Mortgage Settlement oversight office’s measures of the success or failure of lenders’ compliance with the NMS lenders appear to be complying with the vast majority of the settlements requirements.
Here’s where they aren’t in compliance.
• Bank of America failed to provide accurate information in a letter servicers are required to send to borrowers before starting foreclosure.
It also failed to quickly notify borrowers of missing documents in the borrower’s loan modification application. Lenders must make that notification within five days of receiving the applications.
• J.P. Morgan Chase failed to follow timelines for making a decision on loan modification applications and for notifying the customer of its denial decision.
Chase also corrected earlier problems with initially failing to terminate force-placed homeowners insurance within 15 days of receipt of evidence of existing coverage.
• CitiMortgage failed to provide accurate information in a letter services must send to borrowers before starting foreclosure. It also failed, in a timely matter, to notify borrowers about missing documents in a short sale application.
Citi is also correcting earlier problems with timely notifications of missing documents borrowers need in a modification application.
• ResCap Parties (formerly Ally/GMAC) are involved in a bankruptcy that split up and transferred servicing rights and assets to Ocwen Financial Corp. (80 percent), Green Tree Services (18.5 percent) and Berkshire Hathaway (1.5 percent).
Initially there have been no reports of failures, but the breakup has caused delays in reviewing the companies.
• Wells Fargo is also working on a failure to comply with timely notifications of missing documents in modification applications.
“While it is still early in the compliance monitoring process, it is clear to me the settlement has allowed us to uncover issues with the servicers’ activities that need to be rectified. My job is to hold the servicers accountable to the commitments they made under the settlement. I intend to continue to do just that,” Smith said.
Lenders say they are cleaning up their act, but they’ve been saying that since before the National Mortgage Settlement was filed.
If the servicer repeatedly fails in an area, it could face injunctive relief and civil penalties up to $1 million or, in certain circumstances, $5 million, according to Smith’s report.
60,000 consumer complaints
Between October 1, 2012 and March 31, 2013, the settlement office also analyzed 59,586 consumer complaints.
The most frequent complaints (now accepted by the CFPB) were related to single points of contact, dual tracking, the loan modification process, and accuracy of customers’ account information.
“In addition to the testing activities described above, I have had regular meetings with state attorneys general, housing counselors, advocates, and distressed borrowers. As a result of these meetings, I am certain that more work needs to be done to improve the way the servicers are treating their customers,” Smith said.