June 19, 2013; New York Times
Joseph A. Smith, Jr., the monitor for the dispersal of the $25 billion settlement through which the five largest mortgage lenders are to give recompense to homeowners after the housing meltdown, has stated that four of the five are still not yet living up to their agreement to simplify the loan modification process.
Although the most egregious offenses, like robo-signing and the charging of steep fees for loan modification requests, have largely ceased, state officials in places as disparate as Massachusetts, Illinois, New York and Florida say they continue to document serious problems with the process. The servicers sent almost 60,000 complaints received from elected officials on behalf of their constituents to the monitor. The most common complaints had to do with the banks’ failure to provide a single point of contact for modification and with starting the foreclosure process before a modification request had been resolved.
Prime among the continuing difficulties:
- applicants are still not being notified quickly about documents missing from their applications
- Banks are not meeting required timelines for approving applications
- “… there’s still a communication problem,” according to Smith. “If there’s a unifying feature, it’s that the servicers who failed these things are not yet communicating effectively.”
When violations of the agreements are found, the banks must file a corrective action plan and compensate the borrowers involved. The lenders are supposed to be assessed a fine of up to $5 million if they do not change course after failing to meet a requirement—but with “failure” defined as an error rate of greater than five percent, many avoid that fate.
Citibank, Bank of America, Wells Fargo, and JPMorgan Chase each failed on various metrics. Only ResCap, the mortgage subsidiary of Ally Financial, was not found wanting.—Ruth McCambridge