From today's Chicago Tribune...
$25 billion national mortgage foreclosure settlement is getting tweaked, to address numerous complaints that mortgage servicers
are falling short in their dealings with struggling borrowers.
When it was announced in February
2012, the settlement sought to compensate borrowers for wrongs they experienced in the foreclosure process. Equally important
was the development of new mortgage servicing standards that applied to the nation’s five largest servicers, Bank of
America, Wells Fargo, JPMorgan Chase, Citigroup and Ally/GMAC.
But homeowners, housing counselors
and state attorneys general have complained that the banks are not complying with many of the 304 standards they agreed to
as part of the pact with the Justice Department, state attorneys general and the five companies.
standards "were supposed to eliminate headaches for borrowers, but homeowners continue to report problems," said
Illinois Attorney General Lisa Madigan, whose office is a member of the settlement's monitoring committee.
changes announced Tuesday night by the committee, many of which were agreed to only by Bank of America and Wells Fargo, seek
to correct those issues.
Under the new procedures announced Tuesday night, all five banks will give
homeowners 60 days, instead of 30, to submit additional documents that might help them secure a loan modification before the
home goes into foreclosure or moves toward a foreclosure-related sale. The banks also have promised to do a better job of
overseeing employees who work with borrowers.
Two servicers, Bank of America and Wells Fargo, also agreed
to adopt other policies, such as being more specific about what missing information they need from homeowners. Currently,
if a borrower sends in a document but forgets to sign it, the servicer may send a letter saying the document is missing, rather
than just telling the homeowner that they forgot to sign it.
Those two companies also agreed
to escalate loan modification applications when a customer is being asked repeatedly for more documents. And they will use
an online portal to submit documents and create a direct contact for the housing counseling agencies working with struggling
The committee continues to discuss additional service improvements with the three other
banks, according to Natalie Bauer, a Madigan spokeswoman.
In May, Madigan said she saw an
"alarming" pattern of potential violations of loan modification servicing standards. Among them: In 60 percent of
files reviewed by her office, servicers did not notify borrowers within the required five days that their applications for
a loan modification were missing documents. And in 45 percent of the files reviewed, servicers asked homeowners for
documents multiple times.
In his June report on the settlement's progress, independent monitor Joseph A. Smith Jr., said
four of the five banks were failing to comply with the servicing aspects of the settlement. At the time, Shaun Donovan, secretary
of the Department of Housing and Urban Development said the "deep and pervasive problems" in mortgage servicing