Housing counselors in California who help guide struggling homeowners away from foreclosure say that banks are violating several consumer protections mandated by the $25 billion National Mortgage Settlement reached more than a year ago.
Among those protections: providing a “single point of contact” for consumers and avoiding “dual tracking” — the practice by a mortgage servicer of pursuing foreclosure while simultaneously working with a homeowner on a mortgage reduction plan.
These nonprofit counselors and legal service providers also say the big lenders are violating provisions of the California Homeowners Bill of Rights.
Moreover, the survey found that bank practices continue to disproportionately affect disadvantaged and hard-hit communities, including limited English proficient (LEP) borrowers, widows, and people with disabilities.
“Despite new laws and settlement agreements that clarify servicing procedures, servicers continue to harm California families and neighborhoods, and aggravate the state’s economic recovery,” said Kevin Stein of the California Reinvestment Coalition. “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 five mortgage servicers that are parties to the settlement are Ally/GMAC, Bank of America, Citibank, JPMorgan Chase, and Wells Fargo.
The results of the survey were released April 3, in the report, “Chasm Between Words and Deeds IX: Bank Violations Hurt Hardest Hit Communities.”
This is the ninth survey of nonprofit housing counselors and legal service providers conducted by the California Reinvestment Coalition. Eighty-four counselors and lawyers who represent hundreds of thousands of homeowners responded to this survey in February and March 2013. The California Homeowners Bill of Rights went into effect on January 1, 2013, and all NMS servicing guidelines were effective on October 1, 2012.
Here are the mandates that are at issue:
1. Single Points of Contact are not accessible, consistent, and knowledgeable. Over 70 percent of responding counselors reported that SPOC’s were “never,” “rarely,” or only “sometimes,” accessible, consistent or knowledgeable.
“When my clients call their servicer, they are automatically transferred to their assigned SPOC who does not pick up the phone and never returns phone calls. Because the clients are auto transferred, they cannot speak to anyone else at the banks. Client’s requests are denied for missing documentation that has already been provided, and sometimes referred back to foreclosure without ever getting a return call from their SPOC,” said Cheyenne Martinez- Boyette of MEDA in San Francisco. “The SPOC has been completely ineffective in creating a basic and fundamental avenue of communication between the servicer and their customer.”
2. Dual track problems persist. Over 60 percent of counselors reported that Bank of America, Citibank, JPMorgan Chase and Wells Fargo still dual track “sometimes,” “often,” or “always,” even though this practice should have ended months ago under the NMS.
3. Timelines outlined in the National Mortgage Settlement for responding to, and deciding upon, borrower applications for loan modifications are rarely honored. Sixty percent or more of counselors said each of the Big 5 Banks “rarely” or “never” made loan modification decisions within 30 days of a complete loan modification application having been submitted.
4. Banks continue to lose documents and improperly deny borrowers the assistance they seek to stay in their homes. Over 60 percent of responding counselors felt that each of the Big 5 servicers denied loan modifications to seemingly qualified homeowners, “sometimes,” “often,” or “always.”
5. Borrowers of color, Limited English Proficient (LEP) homeowners, widows, and disabled borrowers may face additional challenges to accessing relief. Over 60 percent of counselors said their LEP clients were “never” or only “sometimes” able to speak to their servicer in their native language, or through a translator provided by the servicer. Fort-four percent of counselors noted servicers “always” or “almost always” refuse to discuss loan modifications with widowed clients who are not on the original loan. Finally, over 25 percent of responding counselors noted clients with disabilities “always” or “almost always” report difficulties receiving reasonable accommodations.
“One of our main challenges is that our LEP clients have a difficult time understanding and communicating with their servicers,” said Bo Sivanunsakul of Thai CDC in Los Angeles. “Our foreclosure prevention counselors have to translate all letters and call their servicers to follow up on their phone conversations with our clients because our clients are not able to read their letters and fully understand their servicers.”