Nevada Attorney General Catherine Cortez Masto said a report released Wednesday by the monitor of the National Mortgage Settlement shows that more work needs to be done by the largest U.S. mortgage servicers, who are failing to comply with several key aspects of the settlement designed to regulate how struggling homeowners are treated.
“Despite this fact, the portion of monetary consumer relief for Nevada has exceeded our original estimate with an amount in excess of $1.8 billion and is expected to continue upward as the relief portion of the settlement continues to be calculated,” Masto said.
Citigroup Inc., Bank of America Corp., J.P. Morgan Chase & Co, Wells Fargo & Co., and ResCap Parties, formerly Ally and GMAC, were required to meet new servicing standards as part of a February 2012 settlement with the U.S. Justice Department and attorneys general from 49 states. Borrowers from Oklahoma are not eligible for any of the relief to homeowners because the state elected not to join the settlement.
The five servicers 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.
“The banks need to do more to improve how they handle requests for loan modifications and collect customer records, as well as provide a single point of contact for borrowers,” said Joseph A. Smith Jr., monitor of the National Mortgage Settlement. “It is clear to me that the servicers have additional work to do both in their efforts to fully comply with the National Mortgage Settlement and to regain their customers’ trust.”
Each one of the banks will have to submit plans for improving their performance, according to the report.
Masto said prior to the settlement, “Nevadans suffered from a dysfunctional system and were hindered both in process and in relief.” She said while the system is still flawed “it is getting better and many Nevadans are receiving help.”
“Today, certain aspects of the loan modification process still continue to be an issue despite the fact that some relief appears to be reaching homeowners,” Masto said. “I will not tolerate the bank’s failures. These less than adequate marks ultimately hurt homeowners and our economy.”
There has been 157 complaint filed by consumers and professionals in Nevada that have been analyzed by the monitor for compliance under the terms of the settlement. As of March 31, consumers and professionals have filed 60,383 complaints nationwide.
Masto said her office will continue to independently monitor servicers to make sure they fully comply with the terms of the mortgage settlement.
The 21-page compliance report concluded that while servicing practices have improved in some respects, there remain areas of concern, including issues with the loan modification process, customer service, including single point contact, and billing and statement inaccuracies.
Bank of America failed to provide accurate information to homeowners in a letter that mortgages services are required to send to a homeowner before initiating foreclosure proceedings. The bank also did not pass a test that involved notifying borrowers within five days of receiving a loan application modification if there were missing documents.
JPMorgan Chase failed a test to follow the timeline for making a decision on a borrower’s loan modification application and telling a customer the application had been denied.
Smith said he is considering ordering Chase to provide some financial relief to affected borrowers. Chase already refunded premiums to 2,000 borrowers for an earlier error related to insurance coverage, according to the report.
CitiMortgage, a division of Citigroup, told the monitor that it failed to notify borrowers in a timely manner of any missing documents in the borrower’s loan modification application. Smith noted that the practice was “widespread,” and any borrower harmed will be “appropriately compensated.”
CitiMortgage also reported that it failed to a test related to the accuracy of information in a letter sent to borrowers before a foreclosure action is filed and also didn’t meet the requirement to notify borrowers within 30 days if there were missing documents connected with a short sale.
Wells Fargo reported that it might have fallen short of a requirement to notify borrowers of missing documents in a loan modification application within five days of receiving it. To date, the ResCap parties have not failed any of its 11 tests, according to the report.
Under the terms of the settlement, servicers who fail a test are required to devise a way to correct their practices. Smith said if they fail the same test he can take enforcement action through the courts and seek penalties of up to $5 million.
Contact reporter Chris Sieroty at email@example.com or 702-477-3893. Follow @sierotyfeatures on Twitter.