The $25 billion national mortgage foreclosure settlement is getting tweaked, to address numerous complaints that mortgage servicers are falling short in their dealings with struggling borrowers.
When it was announced in February 2012, the settlement sought to compensate borrowers for wrongs they experienced in the foreclosure process. Equally important was the development of new mortgage servicing standards that applied to the nation's five largest servicers, Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally/GMAC.
But homeowners, housing counselors and state attorneys general have complained that the banks are not complying with many of the 304 standards they agreed to as part of the pact with the Justice Department, state attorneys general and the five companies.
The changes announced Tuesday night by the committee, many of which were agreed to only by Bank of America and Wells Fargo, seek to correct those issues.
Under the new procedures announced Tuesday night, all five banks will give homeowners 60 days, instead of 30, to submit additional documents that might help them secure a loan modification before the home goes into foreclosure or moves toward a foreclosure-related sale. The banks also have promised to do a better job of overseeing employees who work with borrowers.
Two servicers, Bank of America and Wells Fargo, also agreed to adopt other policies, such as being more specific about what missing information they need from homeowners. Currently, if a borrower sends in a document but forgets to sign it, the servicer may send a letter saying the document is missing, rather than just telling the homeowner that they forgot to sign it.
Those two companies also agreed to escalate loan modification applications when a customer is being asked repeatedly for more documents. And they will use an online portal to submit documents and create a direct contact for the housing counseling agencies working with struggling homeowners.
The committee continues to discuss additional service improvements with the three other banks.
In his June report on the settlement's progress, independent monitor Joseph A. Smith Jr., said four of the five banks were failing to comply with the servicing aspects of the settlement. At the time, Shaun Donovan, secretary of the Department of Housing and Urban Development said the “deep and pervasive problems” in mortgage servicing were unacceptable.