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From Banking and Finance Law Daily, June 19, 2013

Banks Fail Compliance with Mortgage Settlement

By John M. Pachkowski, J.D.

Joseph A. Smith Jr., Monitor of the National Mortgage Settlement (Settlement), has released five compliance reports that he submitted to the United States District Court for the District of Columbia for Bank of America N.A., J.P. Morgan Chase & Company and J.P. Morgan Chase Bank. N.A., Citigroup, Inc., Citibank, N.A., and CitiMortgage, Inc., Residential Capital LLC, GMAC Mortgage LLC, and Ally Financial Inc., and Wells Fargo & Company and Wells Fargo Bank, N.A. in connection with their compliance with the National Mortgage Settlement.

He also released a summary of the compliance reports which provided:

  1. An overview of the process used to review the servicers’ work.
  2. Summaries of each servicer’s results and scorecards regarding their compliance for the first and second test periods (the third and fourth calendar quarters of 2012), as well as initial disclosure from testing conducted during the third test period (the first calendar quarter of 2013).
  3. Information about consequences set forth in the Settlement for servicers after a potential violation is reported or discovered.
  4. An analysis of complaints received from consumers and during meetings with distressed borrowers and the professionals who represent them.
  5. A discussion of additional testing measures that could be used in the future
  6. An update on the monitor’ progress on complete the consumer relief reports.

“Over the past six months my team and I have tested the banks’ compliance,” said Smith. “My testing through the end of last year resulted in three testing fails, and I can disclose five additional fails in 2013. These results demonstrate that the Settlement is allowing us to uncover areas in which more work needs to be done. The banks are now working to correct these errors and will be tested again to determine their level of improvement.” He added, “I have heard regularly in the last year about issues with the loan modification process, single points of contact and billing and statement inaccuracies. The Settlement anticipated that there may be a need for additional tests, and, as such, allows me to create more. Accordingly, I am negotiating more stringent testing with the banks now to better address these issues.”

Commenting on the reports, New York Attorney General Eric T. Schneiderman stated, “Today’s report by the National Mortgage Settlement Monitor affirms that the pattern of violations by Wells Fargo that my office documented in New York is harming homeowners nationwide. Recent reports from Bank of America whistleblowers that the bank actually encouraged improper delays of modification applications are also deeply disturbing, and reinforce our concern that these banks are flouting their legal obligations under the settlement. These flagrant violations put homeowners in New York and across the nation at greater risk of foreclosure. I intend to use every tool available to my office to hold these banks accountable under the terms of the National Mortgage Settlement.”

In May 2013, Schneiderman announced plans to pursue enforcement actions against Wells Fargo and Bank of America for violating several Servicing Standards governing timelines for processing loan modification applications.

Companies: Ally Financial Inc.; Bank of America N.A.; Citibank, N.A.; Citigroup, Inc.; CitiMortgage, Inc.; GMAC Mortgage LLC; J.P. Morgan Chase & Company; J.P. Morgan Chase Bank. N.A.; Residential Capital LLC; Wells Fargo & Company; Wells Fargo Bank, N.A.

IndustryNews: EnforcementActions Mortgages

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