Report: Banks aren’t complying with mortgage settlement terms

Banks aren’t living up to pledges they made as part of a $26-billion settlement of government investigations into mortgage servicing and foreclosure abuses, according to an advocacy group’s survey of California housing counselors and lawyers.

The survey, the ninth in a series conducted by the California Reinvestment Coalition, also found that providers of mortgage customer service are violating consumer-protection provisions in the California Homeowner Bill of Rights, the package of foreclosure-prevention laws sponsored last year by state Atty. Gen. Kamala Harris.

“Servicers continue to harm California families and neighborhoods, and aggravate the state’s economic recovery,” Kevin Stein, the CRC’s associate director, said in releasing the survey Wednesday.

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“Regulators need to hold servicers accountable for these violations, strengthen rules to protect disadvantaged communities, and require banks to be transparent about which borrowers and neighborhoods are receiving foreclosure prevention assistance.”

The national mortgage settlement was struck last year by 49 state attorneys general, several federal agencies and the nation’s five largest mortgage servicers -- Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc..

Most big servicers are national banks regulated by the Office of the Comptroller of the Currency. An OCC spokesman said he hadn’t seen the survey and couldn’t comment.

John Mechem, a spokesman for the Mortgage Bankers Assn., questioned the CRC survey’s methodology and called it unreliable.

“This report is based on a small sample of nonverified anecdotal information, and is not representative of the servicing environment where more than 5 million homeowners have received a loan modification in the last five years,” Mechem said.

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The CRC survey interviewed 84 housing counselors and lawyers. Findings included problems in some key areas:

-- Single points of contact. In response to complaints that troubled borrowers were bounced from one mortgage employee to another, servicers were required to provide a single contact. More than 70% of responding counselors reported that the contacts were “never,” “rarely,” or only “sometimes” accessible, consistent or knowledgeable.

• Dual tracking, the practice of pursuing a foreclosure against a troubled borrowers’ home while the borrower is being considered for a loan modification. More than 60% of counselors reported that the largest mortgage servicers still dual-track “sometimes,” “often,” or “always,” even though this practice should have ended months ago under the national mortgage settlement.
• Timelines. Servicers are rarely honoring guidelines for responses and decisions on borrower applications for loan modifications, the CRC said. At least 60% of the counselors said each of the five biggest mortgage-servicing banks “rarely” or “never” made loan modification decisions within 30 days of a complete loan modification application having been submitted.
• The CRC survey also said banks continue to lose documents provided by borrowers seeking loan modifications, provide inadequate help for non-English speakers, and refuse to deal with widows whose names are not on loans taken out by their deceased husbands.

[Updated at 1:10 p.m.]

[Scott Talbott, chief lobbyist for the Financial Services Roundtable, said mortgage servicers that are members of his industry group “are working hard to assist their customers who are in difficulty. They are implementing all the new standards such as continuity of contact for borrowers.”]

[The efforts are under review by the Office of the Comptroller, the Consumer Financial Protection Bureau and Joseph A. Smith Jr., the government-appointed monitor for the national mortgage settlement, Talbott said.]

[Smith, a former North Carolina banking commissioner, said he wasn’t surprised by what the housing counselors had told the California Reinvestment Coalition.]

[“Unfortunately,” he said, “the survey’s findings are consistent with much of what I’ve heard as I’ve traveled the nation in the past year talking with housing counselors and other professionals. There are still problems around single points of contact and dual tracking.”]

[Smith said he’s reviewing the banks’ compliance with the settlement and will report his findings early this summer.]

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