The verdict is out. Now, banks will need to gear themselves up
and follow the National Mortgage Settlement (NMS) deal servicing
standards more precisely.
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As per the report released by Joseph A. Smith, the independent
monitor overseeing the progress of NMS deal, all banks except for
one have failed to comply with the new servicing regulations.
Last year, five major mortgage servicers -
JPMorgan Chase & Co.
Bank of America Corp
), Ally Financial Inc.,
Wells Fargo & Company
) - signed an agreement with 49 state attorney generals to
improve their servicing standards and provide relief to
These banks were required to assess their performance under the
NMS deal, with the help of 29 different metrics. Only Ally
Financial, known as ResCap Parties, whose mortgage servicing is
now handled by
Ocwen Financial Corporation
), Green Tree Servicing and
Berkshire Hathaway Inc.
), fulfilled all the criteria.
JPMorgan had problems related to its failure to remove
forced-placed insurance and inability to notify borrowers about
mortgage modification decisions in time. Citigroup, on the other
hand, failed to clear three metrics - one requiring the dispatch
of letters enclosing correct information to borrowers prior to
foreclosure and the other two demanding borrowers to be informed
about missing documents in time.
BofA lagged two metrics - collection of mortgage modification
documents and sending of the pre-foreclosure letter. Wells Fargo
also failed with regard to collection of the loan modification
Further, roughly 60,000 complaints were received, the majority of
which criticized the absence of any single point of contact for
However, the banks are striving to make amends and compensate the
aggrieved borrowers. Notably, if the problems persist, the NMS
deal has provisions for penalties and court actions. The banks
will then be subject to penalties of up to $5 million for each
Moreover, lapses by the banks could prevent borrowers from making
timely payments, consequently causing them to lose their homes.
This in turn, could lead to higher foreclosure activity.
Though the banks have failed to conform to all servicing
standards, problems such as robo-signing and charging of high
fees to process mortgage modifications have significantly
disappeared. Additionally, the banks are providing more
transparency and accountability while dealing with distressed
Moreover, both homeowners and banks are expected to benefit from
the resurgence in home prices. At the same time, banks are
required to meet all the servicing standards and fulfill their
deal obligations. The stabilizing housing sector, increase in
jobs and low mortgage rates will likely make homeowners avoid