Major Servicers Fail Seven Settlement Compliance Tests

The former banking regulator overseeing servicers’ compliance with the National Mortgage Settlement (NMS) has released a summary of the five compliance reports he

filed with a federal court in Washington, D.C.—one report for each of the servicers subject to the settlement agreement reached with 49 state attorneys general, HUD, and the U.S. Justice Department: Bank of AmericaChase,CitiResCap, and Wells Fargo.

As monitor, Joseph A. Smith and his team at the Office of Mortgage Settlement Oversight tested the servicers’ compliance with 29 metrics detailed in the NMS document itself. The examination period covered servicers’ performance from January 1 to June 30, 2013. Smith also analyzed actions taken by the servicers to address fail-scores received in 2012.

“My testing confirmed six fails in the first quarter of 2013 and one in the second quarter of 2013,” Smith said in a statement issued Wednesday, adding that the “banks are all taking action to address the failures through detailed corrective action plans.”

In response to Smith’s announcement of his office’s latest findings, HUD Secretary Shaun Donovan said, “While today’s report shows the National Mortgage Settlement’s compliance structure is identifying abuses and rectifying problems for consumers, it’s clear that these financial institutions still need to improve in a number of areas. In particular, the banks must do a better job sending notices and communicating with struggling homeowners in a timely manner.”

Donovan said he and the other parties of the settlement expect to see that the servicers have rectified these problems in the monitor’s next set of reports or they “will face severe penalties.”

Based on past testing results, as well as discussions with attorneys general, housing counselors, and distressed borrowers over the last 12 months, Smith created four additional testing metrics in October to add to the settlement’s original 29. The new metrics address consumer concerns relating to the loan modification process, single points of contact, and billing statement accuracy. Smith says he will begin testing these four metrics next year.

“The banks still have additional work to do in their efforts to fully comply with the National Mortgage Settlement and to regain their customers’ trust; however, I am hopeful that the corrective action plans and the new metrics will result in meaningful improvement in how the servicers treat their customers,” Smith said.

 

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