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Final Settlement Test Finds Servicers to be in Full Compliance

ChecklistAn independent monitor has concluded his series of reports on four of the mortgage servicers originally included in the 2012 National Mortgage Settlement (NMS) and uncovered no failed metrics in his seventh and final report.

Joseph A. Smith Jr., monitor of the NMS, and his team reported in the Original Servicers’ Final Compliance Update issued on Thursday that four of the original parties in the settlement—Bank of America, Chase, Citi, and Wells Fargo—as well as Ditech, were in complete compliance with the rules of the settlement during the third quarter of 2015, after which the rules of the NMS sunset.

The compliance test includes a total of 33 metrics—29 originally set forth by the NMS and four more set forth by the Monitor in 2013—on which the servicers were tested during Q3 2015.

“The settlement has improved the way these servicers treat distressed borrowers,” Smith said. “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.”

The Original Servicers’ Final Compliance Update contains a summary of the reports that Smith and his team filed with the U.S. District Court for the District of Columbia on four of the original parties to the NMS. Ditech became subject to the terms of the NMS agreement when it acquired a portion of the portfolio from another servicer originally included in the settlement, ResCap Parties.

The mortgage servicers will remain in accountable to the Consumer Financial Protection Bureau (CFPB)’s mortgage servicing rules, according to Smith.

The report released Tuesday does not include the results of compliance tests for Ocwen or SunTrust for Q3 2015. Smith said their obligations to comply with the NMS servicing standards will continue under their individual settlements, and that he would report results on Ocwen’s and SunTrust’s performance for the third and fourth quarters of 2015 later this year.

In Smith’s last update on Ocwen’s compliance with the terms of the NMS, released in October 2015, the monitor revealed that the Atlanta-based servicer failed four metrics during the second half of 2014. Smith’s first report on SunTrust, which was issued in December, indicated that the Atlanta-based bank (as well as all the other servicers that were party to the settlement except for Ocwen) had no failed metrics during the first half of 2015.

The NMS was originally finalized in April 2012 between 49 states and the District of Columbia, the federal government, and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, Ally/GMAC, and Wells Fargo). As part of the agreement, the five servicers were required to provide $20 billion in consumer relief and $5 billion in other payments. Ocwen falls 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 NMS in June 2014 when it settled with the DOJ for $968 million to resolve claims that the Atlanta-based bank engaged in improper mortgage origination practices as well as servicing and foreclosure abuses.

Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau (CFPB) 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 NMS.

Click here to view the entire Original Servicers’ Final Compliance Update, which includes a description of the oversight process, a list of all the metrics for which the servicer tested, and each servicer’s score on each metric along with an explanation.

Click here to view past reports on Smith’s website.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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