May 20, 2014
Mortgage Servicer Accountability
Joseph A. Smith, Jr, the Monitor of the National Mortgage Settlement, issued his third set of compliance reports (I blogged about the second here). For those needing a recap,
As required by the National Mortgage Settlement (Settlement or NMS), I have filed compliance reports with the United States District Court for the District of Columbia (the Court) for each servicer that is a party to the Settlement. The servicers include four of the original parties – Bank of America, Chase, Citi and Wells Fargo. Essentially all of the servicing assets of the fifth original servicer party, ResCap, were sold to and divided between Ocwen and Green Tree pursuant to a February 5, 2013, bankruptcy court order. Accordingly, Ocwen and Green Tree are now subject to the NMS for the portions of their portfolios they acquired from ResCap.1 These reports provide the results of my testing regarding compliance with the NMS servicing standards during the third and fourth calendar quarters of 2013, or test periods five and six. They are the third set of reports for the original four bank servicers, the second report for Ocwen and the first report assessing Green Tree. (3)
The Monitor concludes that Bank of America, Citi, Chase, Ocwen and Wells Fargo “did not fail any metrics during the most recent testing periods.” (2) The Monitor also reports on “fourth-quarter compliance testing results for the loans Green Tree acquired from the ResCap Parties. Green Tree implemented the Settlement’s servicing standards after such acquisition. Green Tree failed a total of eight metrics during this time period.” (2) The metrics that Green Tree failed include a number of practices that have made the lives of borrowers miserable during the foreclosure crisis. They are,
- whether the servicer accurately stated amounts due from borrowers in proofs of claims filed in bankruptcy proceedings
- whether the servicer accurately stated amounts due from borrowers in affidavits filed in support for relief from stay in bankruptcy proceedings
- whether loans were delinquent at the time foreclosure was initiated and whether the servicer provided borrower with accurate information in a pre-foreclosure letter
- whether the servicer provided borrower with required notifications no later than 14 days prior to referral to foreclosure and whether required notification statements were accurate
- whether the servicer waived post-petition fees, charges or expenses when required by the Settlement
- whether the servicer has documented policies and procedures in place to oversee third party vendors
- whether the servicer responded to government submitted complaints and inquiries from borrowers within 10 business days and provided an update within 30 days
- whether the servicer notified the borrower of any missing documents in a loan modification application within five days of receipt (9, emphasis added)
These metrics seem pretty reasonable — one might even say they are a low bar for sophisticated financial institutions to exceed. Until the servicing industry can do such things as a matter of course, close government regulation seems appropriate. The monitor notes that “work still remains to ensure that the servicers treat their customers fairly.” (2) Amen to that, Monitor.
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