Mortgage settlement monitor reports eight 'fails' in testing results

By Jessica M. Karmasek | Jun 19, 2013

RALEIGH, N.C. (Legal Newsline) -- The monitor of the nationwide mortgage settlement says, in a summary of the five compliance reports he submitted to a federal court, that a test of the five banks' compliance have resulted in eight "fails."

Joseph A. Smith Jr., head of the Office of Mortgage Settlement Oversight, released his summary Wednesday.

The summary includes information about the banks' -- Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., Ally Financial Inc. and Bank of America Corp. -- compliance with the settlement's servicing rules.

Under the terms of the settlement, Smith was appointed by the U.S. District Court for the District of Columbia to monitor and determine if the servicers are, indeed, compliant with the terms of the deal.

Smith works with a monitoring committee comprised of representatives of state attorneys general.

The committee meets to address the issues involved in the implementation and monitoring of the settlement, and holds regular discussions with Smith and his staff.

"Over the past six months my team and I have tested the banks' compliance," Smith said in a statement Wednesday. "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."

Smith said his findings, combined with complaints from some state attorneys general, counselors and distressed borrowers, tell him there is more 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," he said. "My team and I will continue our efforts to improve it."

Specifically, Smith said he has heard "regularly" in the last year about issues with the loan modification process, single points of contact, and billing and statement inaccuracies.

"The settlement anticipated that there may be a need for additional tests, and, as such, allows me to create more," he said. "Accordingly, I am negotiating more stringent testing with the banks now to better address these issues."

Though more work needs to be done, Smith said he is "confident" that the settlement is helping to improve the mortgage finance system.

In February 2012, 49 state attorneys general and federal officials reached a deal with Wells Fargo, JPMorgan Chase, Citigroup, Ally and Bank of America worth $25 billion.

The agreement, which institutes new protections for homeowners and nationwide reforms to mortgage servicing standards, only covers those mortgages held by the five banks, not Fannie Mae or Freddie Mac.

Some attorneys general, most notably New York's Eric Schneiderman and Michigan's Bill Schuette, have said they are concerned that certain terms of the settlement are not being met by the five banks.

In fact, Schneiderman has gone as far as saying he plans to sue Wells Fargo and Bank of America for allegedly engaging in repeated violations of the terms of the settlement.

The Attorney General's Office said last month it has documented 339 alleged violations of new mortgage servicing rules, known as the servicing standards, by the two banks since October.

To view Wells Fargo's compliance report, click here.

To view JPMorgan Chase's compliance report, click here.

To view Citigroup's compliance report, click here.

To view Ally's compliance report, click here.

To view Bank of America's compliance report, click here.

From Legal Newsline: Reach Jessica Karmasek by email at

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