Recent Mortgage Developments Validate Homeowner and Housing Counselor Concerns

San Francisco, CA, October 3, 2013–Three important developments this week confirmed concerns about mortgage servicing expressed by housing counselors throughout California in a state-wide survey earlier this year. A federal judge ruled in favor of surviving spouses trying to avoid foreclosure, New York’s Attorney General sued Wells Fargo and announced improved agreements with Bank of America over foreclosure prevention efforts, and Joe Smith announced new loan servicing metrics under the National Mortgage Settlement. The developments, along with reported settlement talks between Chase Bank and the Department of Justice, provide hope that more homeowners will receive appropriate help when they seek help from their banks or servicers.

Kevin Stein, Assistant Director of the California Reinvestment Coalition,released this statement in response to this week’s news:

“Sadly, it’s the same story we’ve heard for the past five years on the question of whether servicers are meeting their obligations to help families stay in their homes. We applaud recent movement towards better monitoring of these violations and enforcement when violations occur. The court ruling for surviving spouses trying to avoid foreclosure on reverse mortgage loans, a settlement and lawsuit from New York’s Attorney General holding banks accountable for noncompliance, and additional metrics coming from the Office of National Mortgage Settlement Oversight are all positive steps forward.That being said, more aggressive action is clearly needed to force banks and servicers to follow the rules, with the overarching goal of stabilizing families and their communities.”

Reverse Mortgages: On Monday, a federal court issued a ruling about reverse mortgages and surviving spouses.The court invalidated HUD policy that required a surviving spouse who wasn’t on a reverse mortgage to pay off the loan in full or face foreclosure.

Maeve Elise Brown, Executive Director of Housing and Economic Rights Advocates, explained the importance of the ruling: “Protection for the surviving spouse, whether connected to a reverse mortgage or other type of loan, is essential for stabilizing seniors and their largest asset.”

In CRC’s April 2013 survey of 84 housing counselors and legal service lawyers in California, 44% of responding housing counselors said servicers “always” or “almost always” refuse to discuss loan modifications with “widow” clients because they are not on the loan. An additional 25% of respondents (for a total of 69% of all counselors responding) reported seeing this problem, at least “sometimes.” (Note: CRC did not make a distinction between reverse and regular mortgages in its survey, however, this issue affects surviving spouses for both types of mortgages).

California Reinvestment Coalition, Housing and Economic Rights Advocates, and other advocates have prioritized solving this problem and worked to promote rule changes at Fannie Mae, Freddie Mac, the Consumer Financial Protection Bureau, and the Treasury Department so that surviving spouses are able to work with their bank/servicer, and when appropriate, obtain a loan modification to stay in their homes.

Mortgage Servicing Standards: New York Attorney General Eric Schneiderman sued Wells Fargo yesterday for violations of its obligations under the National Mortgage Settlement. The NY AG documented hundreds of violations of the timeline servicing standards, leaving homeowners more vulnerable to foreclosure.

The NY AG settled a similar case against Bank of America, which agreed to take certain, specific steps including creating more accessible contacts for NY’s housing counseling agencies, making certain borrower communications more clear, and restricting the transfer of loans to other servicers while the Bank is negotiating with a borrower.

In CRC’s April 2013 survey, counselors identified widespread violations of timeline servicing standards, as well as concerns about mortgage servicing transfers. Responding counselors rated Wells Fargo the most difficult servicer to work with for denying seemingly qualified borrowers a modification.

New Servicing Metrics: National Mortgage Settlement Monitor Joe Smith announced new metrics yesterday to ensure that the Big 5 Loan Servicers are complying with the servicing standards in the settlement agreement.The new metrics will measure Bank compliance with dual track, Single Point of Contact, and timeline obligations.

These issues were highlighted in the April 2013 counselor survey, including concerns about servicers not fairly considering loan applications “complete” for the purpose of stopping the foreclosure process. Over 60% of responding counselors reported that Bank of America, Citibank, JPMorgan Chase and Wells Fargo dual tracked“sometimes,” “often,” or “always.” Over 70% of counselors reported that each of the banks provided SPOCs that were “sometimes,” “rarely,” or “never” accessible, consistent or knowledgeable about relevant program rules.

Over one-third of counselors said each of the Big 5 Banks “rarely” or “never” gave borrowers 30 days to respond to a request for additional documentation. Over 60% of counselors reported that Bank of America,Citibank, JPMorgan Chase, and Wells Fargo lose documents at least “sometimes.”

To view a copy of the April 2013 survey, visit this link: “Chasm Between Words and Deeds IX: Bank Violations Hurt Hardest Hit Communities”

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