Settlement Monitor: Servicers Need to Address Loan Mod, SPOC Issues

After testing compliance among the five servicers part of the ""$25 billion national mortgage settlement"":http://dsnews.comarticles/robo-signing-settlement-finalized-2012-02-09, monitor Joseph A. Smith concluded more work needs to be done since issues with the loan modification process, providing a single point of contact, and customer records still persist.

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Under the settlement, the five servicers-Bank of America, JPMorgan Chase, Wells Fargo, Citi, and Ally Financial-agreed to adopt some 300 servicing standards. To verify compliance with the servicing standards, the monitor retained outside firms to test the servicers in 29 metrics.

The monitor's compliance report covered two earlier testing periods (third and fourth quarters in 2012) that did not cover all 29 metrics and touched on initial disclosures from tests conducted in the first quarter of this year that did include all the metrics.

Overall, testing for the first two periods resulted in three test fails, and Smith stated he can disclose five additional fails in the first quarter of this year.

The three failures during the first two periods were in metrics 29 and 19. Metric 19 was the most frequently failed metric and dealt with a servicer's compliance when notifying borrowers of missing documents within five days of receiving a loan modification application.

Wells Fargo and Citi both failed this metric during the first two periods, while Chase failed metric 29, which tests if the servicer terminates force-placed insurance coverage within 15 days of receiving evidence of existing coverage, according to the report.

During the third period, banks disclosed failures in four separate metrics: 19, 6, 23, and 20.

Bank of America revealed potential failures in metrics 19 and 6, which tests for accurate information in a letter the servicers are required to send to borrowers before initiating foreclosure.

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Citi also disclosed a potential violation of metric 6, as well as metric 23, which measures notification of missing documents within 30 days of a short sale request.

Chase reported a potential violation of metric 20. The metric assesses adherence to timelines when deciding on modification applications, as well as notification to borrowers when requests are denied.

Ally did not fail any metrics.

""These findings, combined with the complaints I have heard from attorneys general, counselors and distressed borrowers, tell me there is still work to be done. While I believe distressed servicing is better this year than it was last, it is not yet where it needs to be. My team and I will continue our efforts to improve it,"" Smith said.

To address these violations, the banks are required to implement a correction action plan (CAP).

According to the report, Chase prepared a CAP for the force-placed insurance termination metric that has been approved by the monitor. Chase has also provided remediation by refunding premiums to over 2,000 borrowers. Other banks that fell short in certain areas were reportedly working on proposed CAPs or implementing a CAP.

The settlement also requires servicers to submit complaints gathered by offices of elected officials on behalf of their constituents.

From October 2012 to March 2013, the monitor collected 59,586 complaints, of which 12,340 were because the single point of contact was either not provided, difficult to deal with, or difficult to reach.

Another 7,620 were because the single point of contact was not responsive, while 6,127 complaints were because the bank failed to update the borrower's contact information and/or account balance.

Over 4,500 borrowers also complained that the bank foreclosed on them after a loss mitigation application was submitted, while about 4,200 complained the bank did not take appropriate action to remediate inaccuracies in the borrower's account.

The monitor also reviewed complaints submitted directly to the Office of Mortgage Settlement Oversight's ""website"":https://www.mortgageoversight.com/ from May 2012 to May 2013.

The office received 797 complaints. Failure to offer a loan modification or loss mitigation opportunity received 199 hits and was the most frequent complaint. Second was failure to provide a single point of contact.