The big U.S. mortgage servicers are still failing to completely hold up their end of the deal known as the National Mortgage Settlement, which aims to provide new protections for delinquent borrowers who may face foreclosure, according to a new report from the settlement’s court-appointed monitor.
The banks subject to the 2012 settlement, including JPMorgan Chase, Bank of America, Wells Fargo, Citi and Ally Financial, will have to meet new testing over the next several months after discussions with state attorneys general, counselors, advocates and distressed borrowers.
These new compliance testing will address consumer concerns relating to the loan modification process, single points of contact and billing statement accuracy, according to a summary released Wednesday by settlement monitor, Joseph A. Smith Jr. The document covers the banks’ activity during the first half of the year.
Banks failed seven compliance tests in the latest reviews.
“The banks still have additional work to do in their efforts to fully comply with the National Mortgage Settlement and to regain their customers’ trust; however, I am hopeful that the corrective action plans and the new metrics will result in meaningful improvement in how the servicers treat their customers,” Smith said.
Smith in October began additional monitoring to determine whether the banks are improperly foreclosing on borrowers while simultaneously considering them for loan modifications, the practice known as dual tracking, which is prohibited under the settlement terms.
“I have been extremely concerned to hear about ongoing dual-tracking issues,” Smith said in the report.
Mortgage servicers who violate the rules of the settlement could face sanctions including fines of $1 million per infraction.
The banks were required to meet new servicing standards as part of the settlement with the U.S. Justice Department and attorneys general from 49 states. Federal and state authorities uncovered foreclosure abuses after disclosures that banks used faulty documents to seize homes. The settlement followed revelations of the “robo-signing” of affidavits by contracted bank employers.
Smith can take the banks back to court for further sanctions if they repeatedly fail in the same area after an improvement plan is implemented.
The servicers were additionally required to provide $25 billion to consumers in the form of loan forgiveness, mortgage modifications 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 October that said the banks were almost finished meeting these obligations under the settlement.