Although they have likely paid their monetary penalties in full by now, four of the five U.S. banks involved in last year's National Mortgage Settlement have reportedly failed to abide by one or more of the 304 loan-servicing criteria they agreed to meet.
A report by the settlement monitor assigned to the case, former North Carolina Banking Commissioner Joseph Smith, found that of the five banks – including Bank of America, Chase, Citi, Wells Fargo and ResCap Partners (formerly Ally/GMAC) – four failed to meet one or more of 29 metrics which the Office of Mortgage Settlement Oversight developed to test compliancy with the criteria.
Many of the new criteria are designed to protect consumers by providing greater transparency into how banks handle requests for loan modifications. Lenders and servicers must now provide customers with access to all documentation – further, they must proactively notify homeowners when required documentation is missing.
Banks must also provide borrowers with a single point of contact to handle all mortgage-related questions or transactions. In addition, they must ensure that all customer data is accurate – and further, must quickly correct any errors in account or personal information.
One of the primary goals of the settlement criteria is to give the banks greater incentive to keep homeowners out of foreclosure.
Between October and March, Smith's office reportedly received nearly 60,000 complaints regarding servicers – most pertaining to problems with the loan modification process and the accuracy of account information. Of those, about 12,000 reported that they had not been provided with a single point of contact – or that the contact was difficult to deal with or reach – while another 7,600 said their contact was unresponsive.
ResCap Partners was reportedly the only bank found to be in full compliance, according to Smith's report.
Bank of America and Wells Fargo failed with regard to document collection, according to the report, while Chase had problems with loan modification decisions. Several of the banks were also found to have problems communicating effectively with customers.
While many of the failed criteria are customer service-related, the banks have improved with regard to how they process paperwork. For example, Smith's report finds that they no longer engage in the practice of ‘robo signing,’ where bank officials sign off on foreclosure paperwork with little or no review.
In addition, the five banks no longer charge borrowers a fee to process a loan modification request.
The four banks found to be in violation are working to correct the problems, according to Smith's report.
Last month, New York Attorney General Eric Schneiderman announced his intention to sue five U.S. banks for violating the terms of the settlement, after uncovering evidence that some of them continued to violate the terms of the settlement after it was signed.
"Today's report by the National Mortgage Settlement Monitor affirms that the pattern of violations by Wells Fargo that my office documented in New York is harming homeowners nationwide,’ Schneiderman said in a statement on Wednesday. ‘Recent reports from Bank of America whistleblowers that the bank actually encouraged improper delays of modification applications are also deeply disturbing, and reinforce our concern that these banks are flouting their legal obligations under the settlement."
The $25 billion settlement brokered last year between the banks and 49 state attorneys general in effect forces the banks to comply with new servicing standards to atone for their misconduct or face additional lawsuits
Smith will continue to work with the banks to correct any compliancy violations. In addition his office will continue to issue quarterly reports tracking their progress.