Four of the five mortgage servicers subject to the National Mortgage Settlement are now basically off the hook.
Last week, Joseph A. Smith, monitor of the settlement, issued reports showing that four of the mortgage servicers subject to the agreement – Bank of America, Chase, Citi and Wells Fargo, as well as Ditech, which became part of the settlement through acquisition – were in complete compliance with the rules of the settlement during the third quarter of 2015, after which the rules of the settlement sunset.
The settlement was reached in 2012 when the five largest mortgage servicers, also including JP Morgan, agreed to settle with the federal government and 49 states (Oklahoma agreed to settle separately) over the alleged mishandling of foreclosures leading up to, and following, the mortgage crisis of 2008. As part of the $25 billion settlement, the five servicers were required to provide $20 billion in relief to distressed homeowners as well as pay $5 billion in fines to the states and the federal government.
It was one of the largest civil settlements in U.S. history, second only to the Tobacco Master Settlement Agreement of 1998.
“The settlement has improved the way these servicers treat distressed borrowers,” Smith says in a statement. “The banks undertook more than 630,000 transactions and provided borrowers with more than $50 billion in consumer relief, and I believe the settlement contributed towards the rebuilding of public trust and confidence in the mortgage market. I hope that it will inform future regulation of financial institutions and markets.”
This was Smith’s seventh and final report regarding the performance of the settlement parties. His office also released a final report summarizing all of the servicers’ assistance to homeowners as well as their other efforts in meeting compliance.
Ditech became subject to the settlement when it acquired a portion of the portfolio of another servicer originally included in the settlement, ResCap Parties.
Smith’s final report does not include the results of compliance tests for Ocwen or SunTrust for the third quarter, as their obligations to comply with the servicing standards will continue under their individual settlements. Smith says he will report their performance for the third and fourth quarters of 2015 later this year.
Ocwen will continue to be under Smith’s supervision due to the servicer’s acquisition of mortgage servicing rights from a unit of Ally Financial, one of the original banks included in the settlement.
SunTrust became party to the agreement in June 2014, when it settled with the U.S. Department of Justice for $968 million.
Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau in February 2014 that requires the servicer to provide $2.1 billion in consumer relief and to comply with the servicing standards set forth by the settlement.