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National Mortgage Settlement Compliance Report Cites Need for Improvement

The Monitor of the National Mortgage Settlement reported there were three "fails" of testing metrics in 2012 and five more thus far this year of the five bank servicers involved in the settlement.

The five banks, Bank of America, JP Morgan Chase, Citi, ResCap Parties, and Wells Fargo, appear to have complied with all of the financial terms of the settlement reached in 2012 between the banks and 49 of the states' attorneys general as well as several federal agencies. However, their compliance with agreed-upon measures to improve their handling of delinquent mortgages and customer service still need improvement.

In a press release about the compliance reports Smith said, "Over the past six months my team and I have tested the banks' compliance. My testing through the end of last year resulted in three testing fails, and I can disclose five additional fails in 2013. These results demonstrate that the Settlement is allowing us to uncover areas in which more work needs to be done. The banks are now working to correct these errors and will be tested again to determine their level of improvement.

"These findings, combined with the complaints I have heard from attorneys general, counselors and distressed borrowers, tell me there is still work to be done. While I believe distressed servicing is better this year than it was last, it is not yet where it needs to be. My team and I will continue our efforts to improve it.

The headlines about the report in most media indicated major failures. However each failure was of a single metric such as failure to remove forced placed insurance in a timely manner or continuing to charge a modification fee. The failures flagged by the monitor appear to be principally with the single source of contact servicers are supposed to provide to distressed borrowers, bill and statement inaccuracies, and issues with the loan modification process such as failure to meet deadlines to informing customers about missing documentation.

In addition to $26 billion in relief to customers wronged by so-called, "robo-signing" foreclosure document fraud and other abuses, the five lenders, Bank of America, JPMorgan Chase,CitiMortgage, ResCap (formerly Ally/GMAC) and Wells Fargo, are required to comply with 304 servicing standards.

In addition to the 29 servicer test results, Smith also reported receiving 59,586 consumer complaints as well as 797 from mortgage professionals between October and the end of March 2013.

Smith said, "While there is more work to be done, I remain confident that the Settlement is helping to improve the mortgage finance system. I hope this report will help contribute to the conversation on this topic, and I look forward to making additional information public as this process continues."

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