Banks fall short in helping struggling homeowners

WASHINGTON — Homeowners trying to avoid foreclosure must wait too long for their loan modification applications to be reviewed by some of the nation’s top mortgage servicers, according to a report released Wednesday. Such delays can plunge borrowers deeper in debt.

Joseph A. Smith Jr., the independent monitor of last year’s national mortgage settlement, said that while the banks are doing a better job complying with new mortgage servicing rules, more needs to be done.

“It is clear to me that the servicers have additional work to do both in their efforts to fully comply with the (settlement) and to regain their customers’ trust,” Smith wrote in the report.

Smith, whose office conducted 29 performance tests on how five of the largest U.S. mortgage servicers are meeting the new rules, said the banks need to do a better job collecting customer records and notifying borrowers in a timely manner about decisions on their applications, including when there are any missing documents

The banks should also provide borrowers with a knowledgeable and helpful person as a single point of contact to make it easier for applicants to keep track of their request, Smith said. Most of the nearly 60,000 complaints Smith’s office had received in recent months were related to the lack of a single point of contact at the mortgage servicer for borrowers.

The banks are working to correct the problems and will be tested later on to check their progress, Smith said.

The settlement among 49 states, federal government agencies and lenders JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and ResCap Parties (formerly Ally Financial and GMAC) set new rules for how banks handle troubled home loans and provided for up to $25 billion in financial relief to homeowners.

The standards prohibit the lenders from pursuing foreclosure while negotiating a loan modification. They require the banks to acknowledge in writing a refinancing application within three business days, notify the borrower of any missing documents within five days and make a decision on a complete application within 30 days.

Department of Housing and Urban Development Secretary Shaun Donovan said Smith’s report showed four of the five banks tested “consistently failed to send notices and communicate decisions to homeowners in a timely manner.” ResCap Parties was the exception among the five banks, the report said.

ResCap Parties was subject to a February bankruptcy court order that split up and transferred the servicing rights and assets to Ocwen Financial Corporation, Green Tree Servicing, and Berkshire Hathaway Inc.

Donovan said delays by mortgage servicers can put homeowners at risk of either falling behind or losing their homes. They were the same kinds of lending practices that contributed to the foreclosure crisis, he added.

“This is unacceptable,” Donovan said. “The homeowners who have experience servicing abuse deserve justice and we won’t stop until that justice is served.”

Donovan said if the problems persist, fines and court action are possible remedies.

JPMorgan Chase, Bank of America and Citigroup each said in statements that they had either corrected problems cited in the report or were working with Smith to correct them.

The settlement helped close a difficult chapter of the financial crisis when home values sank and millions edged toward foreclosure. Many firms had processed foreclosures without verifying documents.

The agreement reduces mortgage debt for only a fraction of those whose mortgages are underwater. About 11 million U.S. households are underwater, and the settlement is expected to help about a million of them.

The servicers reported distributing $50.63 billion in direct relief, including loan modifications and principal reductions, to more than 620,000 homeowners through the settlement, according to a report by Smith last month.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

FILE — Boeing 737 MAX8 airplanes on the assembly line at the Boeing plant in Renton, Wash., on March 27, 2019. Boeing said on Wednesday, Feb. 21, 2024, that it was shaking up the leadership in its commercial airplanes unit after a harrowing incident last month during which a piece fell off a 737 Max 9 jet in flight. (Ruth Fremson/The New York Times)
Federal judge rejects Boeing’s guilty plea related to 737 Max crashes

The plea agreement included a fine of up to $487 million and three years of probation.

Neetha Hsu practices a command with Marley, left, and Andie Holsten practices with Oshie, right, during a puppy training class at The Everett Zoom Room in Everett, Washington on Wednesday, July 3, 2024. (Annie Barker / The Herald)
Tricks of the trade: New Everett dog training gym is a people-pleaser

Everett Zoom Room offers training for puppies, dogs and their owners: “We don’t train dogs, we train the people who love them.”

Andy Bronson/ The Herald 

Everett mayor Ray Stephenson looks over the city on Tuesday, Jan. 5, 2015 in Everett, Wa. Stephanson sees  Utah’s “housing first” model – dealing with homelessness first before tackling related issues – is one Everett and Snohomish County should adopt.

Local:issuesStephanson

Shot on: 1/5/16
Economic Alliance taps former Everett mayor as CEO

Ray Stephanson will serve as the interim leader of the Snohomish County group.

Molbak's Garden + Home in Woodinville, Washington will close on Jan. 28. (Photo courtesy of Molbak's)
After tumultuous year, Molbak’s is being demolished in Woodinville

The beloved garden store closed in January. And a fundraising initiative to revitalize the space fell short.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.