Several of the banks involved in the February 2012 $25 billion settlement with state and federal government agencies "still have additional work to do in their efforts to fully comply" with its terms, Joseph A. Smith, Jr., the settlement's monitor said today, "and to regain their customers' trust."
Smith released the results of compliance tests given to the banks during the first and second quarters of 2013 as part of five compliance reports he filed with the U.S. District Court. There were a total of 7 failures noted in the report, five of which were repeat infractions.
"My team and I tested the banks' compliance with the National Mortgage Settlement's original 29 metrics for the first half of this year," said Smith. "My testing confirmed six fails in the first quarter of 2013 and one in the second quarter of 2013. The banks are all taking action to address the failures through detailed corrective action plans.
"The results I've discovered, along with the discussions I've had with attorneys general, counselors, advocates and distressed borrowers over the past year, have shaped four additional metrics, or tests, I recently created to ensure the banks' compliance. These metrics address consumer concerns relating to the loan modification process, single points of contact and billing statement accuracy. I will begin testing these new metrics next year. Smith said he was hopeful that the corrective action plans and the new metrics will result in meaningful improvement in how the servicers treat their customers.
Bank of America failed to achieve a satisfactory error rate of 5 percent on each of three metrics; Motion for Relief from Stay, an 8.4 percent rate; Pre-Foreclosure initiation, 17.8 error; and Loan modification document collection timeline compliance, 10.16 percent. JP Morgan Chase failed on two metrics, Pre-Foreclosure initiation, 5.6 percent and Loan Modification Decision Notification Timeline Compliance, 19.3 percent. Citi also failed the Pre-Foreclosure Initiation with an error rate of 7.4 percent and Short sale Document Collection Timeline Compliance, 25.3 percent.
Wells Fargo had errors in the first two reporting periods but was in compliance in the most recent two period. Because of loans transfers Ally/GMAC (now Res-Cap) was excused from monitoring during the recent periods. One part of its portfolio which was transferred to Greentree will be subjected to testing in the future.
Smith continued, "My colleagues and I are currently working to verify four banks' consumer relief activities and I plan to file my final set of reports to the Court detailing my findings early next year. My compliance testing and reporting will continue, and I look forward to sharing my findings with the Court and the public as this important process moves forward." Auditors spent 37,900 testing the banks, Smith said.
Housing and Urban Development Secretary Shaun Donovan released the following statement regarding Smith's report:
"The Independent Monitor's on-going work is playing a vital role in our work to reform the servicing industry and hold it accountable for how they treat homeowners. While today's report shows the National Mortgage Settlement's compliance structure is identifying abuses and rectifying problems for consumers, it's clear that these financial institutions still need to improve in a number of areas. In particular, the banks must do a better job sending notices and communicating with struggling homeowners in a timely manner. In the next set of reports we expect that they will have rectified these problems or they will face severe penalties."
