Big Banks Meet Compliance Standards of Mortgage Settlement -- Update

By Saabira Chaudhuri 

Four of the largest U.S. mortgage servicers have rectified failures to comply with parts of a $25 billion landmark national mortgage settlement, the watchdog overseeing the process said Wednesday.

Bank of America Corp., J.P. Morgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. passed all tests reviewing their compliance with the National Mortgage Settlement during the third and fourth quarters of last year, said the monitor for the settlement, Joseph A. Smith.

In December, Mr. Smith had released a report saying Bank of America, J.P. Morgan and Citigroup had each failed at least two of 29 metrics that measure standards over how to provide relief to homeowners under threat of foreclosure. In total, the three banks failed on seven metrics in the first half of 2013. Meanwhile, Wells Fargo was deemed to have failed on one metric tied to its loan modification program in a report released in June of last year.

The latest report said mortgage servicer Ocwen Financial Corp. also fully implemented all the servicing standards for the portion of the portfolio it acquired from Residential Capital LLC, or ResCap.

"Bank of America continues to work hard to ensure that our customers in need of assistance know they are being treated fairly and receiving timely and accurate decisions," said a spokesman for Bank of America in an emailed statement.

"We've worked very hard to meet the servicing standards and have helped more than one million families avoid foreclosure over the last five years," said a spokeswoman for J.P. Morgan.

"We are very pleased that the Monitor has reported that Wells Fargo passed all of the metrics in place to assess our performance against the National Servicing Standards during the most recent testing period," said a spokesman for Wells Fargo. "The Monitor also has confirmed that we successfully resolved issues with one metric that we missed by a small margin during a single reporting period in 2012, which clearly demonstrates that effectiveness of the process established under the terms of the settlement."

"Citi remains committed to fulfilling the terms of the National Mortgage Settlement for the best interests of our clients, and we are pleased with the results announced in today's report. One of our top ongoing priorities is to help distressed borrowers in their efforts to avoid potential foreclosure or explore other appropriate solutions to assist them," said a spokesman for Citigroup.

A representative of Ocwen didn't immediately respond to an emailed request for comment.

The report said Green Tree Servicing LLC, a unit of Walter Investment Management Corp. , failed on eight metrics, including whether it accurately stated amounts due from borrowers and whether it gave borrowers sufficient time when sending them notifications about foreclosures. Green Tree, along with Ocwen, won an auction to buy ResCap's loan servicing unit in 2012. Green Tree was tested for the loans it acquired from ResCap.

"Green Tree is committed to maintaining a highly compliant environment that focuses on high standards of customer service. We are dedicated to addressing these issues in a timely manner and are confident that the implementation of our corrective action plans will result in a positive outcome during our next review cycle," said Walter Investment's Chief Executive Mark J. O'Brien in a company statement.

Walter Investment said in February that the Federal Trade Commission and Consumer Financial Protection Bureau had advised its Green Tree unit that the agencies sought authority to file an action against the company over "alleged violations of various federal consumer financial laws."

The company said in a filing earlier this month that it has had discussions with both agencies to determine if it can reach a settlement, which could include changes to its business practices and penalties.

Handling mortgages for consumers, once an attractive business for banks, in recent years has become more difficult as banks struggled to deal with the foreclosure surge that followed the financial crisis.

Federal agencies and 49 state attorneys general agreed to settle certain foreclosure processing abuses with the four banks and Ally Financial Inc. in March 2012, in a deal valued at $25 billion.

The settlement included a detailed list of hundreds of new standards governing various aspects of the loan modification and foreclosure process. Banks were required to pay $5 billion in fines and to provide consumer relief, including mortgage write-downs and refinancing, valued at $20 billion.

Separate to the settlement, Wells was hit with a federal lawsuit in 2012 that accused the bank of "reckless" lending through the FHA program. The bank has said it acted in good faith and it is fighting the lawsuit in federal court in Manhattan.

Andrew R. Johnson contributed to this article

Write to Saabira Chaudhuri at [e-mail]

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