Big Banks Said to Improve Loan Servicing Under Mortgage Accord
The largest U.S. mortgage servicers, including Wells Fargo & Co. (WFC) and Bank of America Corp., are improving treatment of borrowers in danger of foreclosure, according to a court-appointed monitor.
The banks have fixed problems ranging from failing to notify customers when loan-modification documents are missing to failing to terminate force-placed insurance policies in a timely manner, Joseph A. Smith said in a report released today. Mortgage servicers are rated on dozens of metrics for how they treat customers as part of a 2012 legal settlement with the U.S. Justice Department and 49 state attorneys general.
“Certainly in our measurement of the servicers’ activities through the metrics, there has been an improvement,” Smith said in an interview. “Each of them had one or more fails and all of them have corrected the problems.”
There is still work to do, Smith said. He has just begun reviewing how well the banks are complying with additional requirements, including a prohibition on foreclosing while simultaneously offering borrowers a loan modification.
Green Tree, a subsidiary of Walter Investment Management (WAC) Corp., failed eight separate tests of servicing quality, Smith said. The company, which acquired loans subject to the settlement from Ally Financial Inc. (ALLY), failed to ascertain delinquencies before initiating foreclosure proceedings, accurately state how much borrowers owed during bankruptcy proceedings and provide timely foreclosure notifications, among other problems, he said.
“These results show that Green Tree must make significant changes,” Smith said.
The servicers, also including JPMorgan Chase & Co. (JPM) and Citigroup Inc., were additionally required to provide $25 billion to consumers in the form of loan forgiveness or short sales, in which lenders agree to allow homes to be sold for less than the mortgages against them.
Smith filed a report in March saying that the banks had completed that obligation, largely by forgiving debt and helping borrowers refinance into loans with lower interest rates.
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