Tag Archives: Monitor

Final Accounting for National Mortgage Settlement

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Attributed to Jacopo de' Barbari

Luca Pacioli, A Founding Father of Accounting

Joseph Smith, the Monitor of the National Mortgage Settlement, has issued his Final Compliance Update. He writes,

I have filed a set of five compliance reports with the United States District Court for the District of Columbia as Monitor of the National Mortgage Settlement (NMS or Settlement). The following report summarizes these reports, which detail my review of each servicer’s performance on the Settlement’s servicing reforms. This report includes:

• An overview of the process through which my team and I have reviewed the servicers’ work.

• Summaries of each servicer’s performance for the third quarter 2015.

Pursuant to the Settlement, the requirement to comply with the servicing standards ended for Bank of America, Chase, Citi, Ditech and Wells Fargo as of the end of the third quarter 2015. Accordingly, this is my last report under the NMS for these servicers. Like all mortgage servicers, they are still required to follow servicing-related rules issued by the Consumer Financial Protection Bureau (CFPB). (2)

Smith concludes,

The Settlement has improved the way these servicers treat distressed borrowers, and, under its consumer relief requirements, the banks provided more than 640,000 borrowers with $51 billion in debt forgiveness, loan modifications, short sale assistance and refinancing at a time when families and the market were subject to distress and uncertainty.

I believe the Settlement has contributed towards the rebuilding of public trust and confidence in the mortgage market and hope that it will inform future regulation of financial institutions and markets. I look forward to further discussions on these topics among policymakers, consumer advocates and mortgage servicers. (13)

I have blogged about the Monitor’s earlier reports and have been somewhat unhappy with them. Of course, his primary audience is the District Court to which he is submitting these reports. But I do not believe that the the reports have “contributed towards the rebuilding of public trust and confidence in the mortgage market” all that much. The final accounting should be accurate, but it should also be understandable to more than a select few.

The reports have been opaque and have not give the public (even the pretty well-informed members of the public, like me) much information with which to contextualize their findings. I hope that future settlements like this take into account the need to explain the findings of decision makers and court-appointed monitors so that the public can have a better sense of whether justice was truly done.

Monday’s Adjudication Roundup

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Systemic Servicing Failure

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Joseph A. Smith, Jr.

Joseph A. Smith, Jr.

Joseph A. Smith, Jr., the Monitor of the National Mortgage Settlement, issued An Update on Ocwen’s Compliance. It opens,

I filed a compliance report with the United States District Court for the District of Columbia (the Court) today that provides the results of my tests on Ocwen’s compliance with the National Mortgage Settlement (Settlement or NMS) servicing standards during the third and fourth calendar quarters of 2014. (2)

The Monitor found that Ocwen (which has been subject to numerous complaints) failed at least four metrics and a total of ten metrics are subject to some type of corrective action plan. As with many of these reports, the prose is turgid, but the subject is of great concern to borrowers who have mortgages serviced by Ocwen.  Problems were found with

  1. the timeliness, accuracy and completeness of pre-foreclosure initiation notification letters
  2. the propriety of default-related fees
  3. compliance with short sale notification requirements regarding missing documents
  4. providing the reason and factual basis for various denials

The Monitor concludes, “The work involved to date has been extensive, but Ocwen still has more work to do. I will continue to report to the Court and to the public on Ocwen’s progress in an ongoing and transparent manner.” (5) This sounds like bureaucratic understatement to me.  Each of these failures has a major impact on the homeowners who are subject to it.

The Kafka-esque stories of homeowners dealing with servicers gone wild are graphic and frightening when a home is on the line. And when I read the corrective actions that the Monitor is implementing, it reads more like my 6th grader’s report card than like a plan for a massive corporation. One of them is “ensuring accuracy of dates used in letters.” (Appendix ii) Hard to imagine a grown up CEO needing to be told that.

I have wondered before how a company under court-ordered supervision could continue to behave like this. I remain perplexed — and even a bit disgusted.

Mortgage Servicer Accountability

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Joseph A. Smith, Jr, the Monitor of the National Mortgage Settlement, issued his third set of compliance reports (I blogged about the second here). For those needing a recap,

As required by the National Mortgage Settlement (Settlement or NMS), I have filed compliance reports with the United States District Court for the District of Columbia (the Court) for each servicer that is a party to the Settlement. The servicers include four of the original parties – Bank of America, Chase, Citi and Wells Fargo. Essentially all of the servicing assets of the fifth original servicer party, ResCap, were sold to and divided between Ocwen and Green Tree pursuant to a February 5, 2013, bankruptcy court order. Accordingly, Ocwen and Green Tree are now subject to the NMS for the portions of their portfolios they acquired from ResCap.1 These reports provide the results of my testing regarding compliance with the NMS servicing standards during the third and fourth calendar quarters of 2013, or test periods five and six. They are the third set of reports for the original four bank servicers, the second report for Ocwen and the first report assessing Green Tree. (3)

The Monitor concludes that Bank of America, Citi, Chase, Ocwen and Wells Fargo “did not fail any metrics during the most recent testing periods.” (2) The Monitor also reports on “fourth-quarter compliance testing results for the loans Green Tree acquired from the ResCap Parties. Green Tree implemented the Settlement’s servicing standards after such acquisition. Green Tree failed a total of eight metrics during this time period.” (2) The metrics that Green Tree failed include a number of practices that have made the lives of borrowers miserable during the foreclosure crisis. They are,

  • whether the servicer accurately stated amounts due from borrowers in proofs of claims filed in bankruptcy proceedings
  • whether the servicer accurately stated amounts due from borrowers in affidavits filed in support for relief from stay in bankruptcy proceedings
  • whether loans were delinquent at the time foreclosure was initiated and whether the servicer provided borrower with accurate information in a pre-foreclosure letter
  • whether the servicer provided borrower with required notifications no later than 14 days prior to referral to foreclosure and whether required notification statements were accurate
  • whether the servicer waived post-petition fees, charges or expenses when required by the Settlement
  • whether the servicer has documented policies and procedures in place to oversee third party vendors
  • whether the servicer responded to government submitted complaints and inquiries from borrowers within 10 business days and provided an update within 30 days
  • whether the servicer notified the borrower of any missing documents in a loan modification application within five days of receipt (9, emphasis added)

These metrics seem pretty reasonable — one might even say they are a low bar for sophisticated financial institutions to exceed. Until the servicing industry can do such things as a matter of course, close government regulation seems appropriate. The monitor notes that “work still remains to ensure that the servicers treat their customers fairly.” (2) Amen to that, Monitor.

Is $50 Billion of Mortgage Relief Enough?

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The National Mortgage Settlement Monitor issued his Final Crediting Report. The report states that

In total, the servicers have provided more than $50 billion of gross dollar relief, which translates into more than $20 billion in credited relief under the Settlement’s scoring system. More than 600,000 families received some form of relief under the Settlement. Aggregate credited relief includes:

• $7,589,277,740, or 37 percent of total credited relief, of first lien principal forgiveness.

• $3,105,152,359, or 15 percent of total credited relief, of second lien forgiveness.

• $3,587,672,814, or 17 percent of total credited relief, of refinancing assistance.

• $6,410,554,173, or 31 percent of total credited relief, of other forms of relief, including, but not  limited to, assistance related to short sales and deeds in lieu of foreclosure. (2)

I am not going to criticize the substance of the mortgage settlement. But I have a hard time translating these massive numbers into an understanding of how much help people got from the settlement. $20 Billion of credited relief divided by 600,000 households comes out to about $33,000 in relief per household. The Monitor gives us no sense as to whether that $33,000 made a difference to the affected families.

Perhaps going forward, massive settlements like this should include metrics that help to break down these large numbers into categories that make more intuitive sense:  for instance, did the mortgage relief reduce the monthly payment to a sustainable level?  What percent reduction was there in monthly mortgage payments? How many mortgages were converted from underwater mortgages into ones that were in the money as a result of the settlement? Metrics such as these would help give an understanding of how many people were helped (certainly more than one of the metrics often repeated by the monitor, “My team spent 36,000 hours reviewing and testing the consumer relief and refinancing activities reported by the banks.”

As counter-intuitive as the question may seem, do we have enough information to really know whether $50 Billion of mortgage relief made a meaningful difference for American households?

National Mortgage Settlement Update

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Joseph A. Smith, Jr., the Monitor of the National Mortgage Settlement (NMS), has issued his Second Compliance Report (I blogged about an earlier report here) which has been filed in the District Court for the District of Columbia. According to the Monitor, Ally Financial and Wells Fargo were not in violation of the settlement at all during 2013 and BoA’s and Chase’s deficiencies were not widespread. Citi had a widespread deficiency.

The Monitor’s conclusion echoes his earlier report although his tone is more optimistic than last time:

It is clear to me that the servicers have additional work to do both in their efforts to fully comply with the NMS and to regain their customers’ trust. The Monitor Reports that I have just filed with the Court show, however, that the Settlement is addressing shortcomings in the treatment of distressed borrowers.

CAPs [corrective action plans], including remediation efforts when required, have been implemented or are in process. If the CAPs are not successful, the Monitoring Committee and I will take additional action, as dictated by the Settlement. In addition, we have applied what we have learned to enhance our oversight of the servicers by creating four new metrics to address persistent issues in the marketplace. (16)

The big five banks appear to be improving their compliance with the settlement, which is obviously a good thing. But there is still work to be done to improve loan servicing. The monitor notes the top ten complaints about servicers that were submitted by elected officials on behalf of their constituents:

1 Single point of contact was not provided, was difficult to deal with or was difficult to reach.

2 Single point of contact was non-responsive.

3 Servicer did not take appropriate action to remediate inaccuracies in borrower’s account.

4 Servicer failed to update the borrower’s contact information and/or account balance.

5 Servicer failed to correct errors in the borrower’s account information.

6 The borrower was “dual-tracked.” In other words, the borrower submitted an application for loss mitigation, and although it was in process or pending, the borrower was foreclosed upon.

7 Servicer did not accept payments or incorrectly applied them.

8 Servicer did not follow appropriate loss mitigation procedures.

9 The borrower received requests for financial statements they already provided.

10 The completed first lien modification request was not responded to within 30 days.

Total Executive Office complaints for all servicers: 44,570 (n.p.)

Obviously not every complaint is valid, but these numbers suggest that the settlement is not being fully complied with.