The five largest mortgage servicers agreed to offer distressed borrowers additional time to gather their loan modification paperwork, while also accepting additional oversight of loan modifications.
Illinois Attorney General Lisa Madigan, a member of the National Mortgage Settlement Monitoring Committee, said the group overseeing the $25 billion national mortgage settlement stepped in after receiving a large number of complaints from borrowers, legal aid groups and housing counselors about the loan mod process.
In response, mega servicers – Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citibank (C) and Ally Bank – agreed to give homeowners 30 more days to respond to requests for additional documentation before referring a home to foreclosure or sale.
The five servicers also agreed to expand their oversight of representatives working with borrowers.
Bank of America and Wells Fargo went a step further, saying they would provide more customer support to address missing information, escalate the process for borrowers dealing with multiple document requests and establish a direct contact for housing agencies that work with homeowners.
Two of the mega banks, Bank of America and Wells Fargo, plan to use an electronic online portal to submit documents back and forth—a move that will streamline communications and increase transparency for servicers, advocates and homeowners.
So is it difficult for servicers to comply with the added oversight?
"This is not difficult for servicers to implement, but this will primarily increase foreclosure timelines in this jurisdiction leading to reduced home values," said Kevin Kanouff, president and CEO of specialty servicer Statebridge Co.
He added, "I do not know if this is needed at larger servicing shops, but what I find striking is that borrowers seem to have no difficulty producing timely documentation on purchase mortgages, but some have a hard time producing documentation when they want a mod.The documentation requested on a mod is less than on a purchase, but some borrowers feel that they are entitled to mods and therefore should not have to prove their financial condition to justify a mod."
Illinois AG Madigan has been aggressively watching mortgage servicers. Her office suggested back in May that 60% of loan modification files reviewed by her team showed servicers failing to comply with at least one requirement outlined in the national settlement. Forty-five percent of the files experienced multiple document requests.
The original national mortgage settlement involved the nation's five largest servicers, 48 state attorneys general and the Department of Justice.
