Wall Street banks violating national mortgage settlement
A new report by the agency overseeing a national home mortgage settlement finds the nation’s biggest banks are still in violation of that settlement, which targeted shady and illegal mortgage lending practices.
The report listed Bank of America, Citigroup, JPMorgan Chase and Wells Fargo as failing to process customer’s paperwork and notify them of missing paperwork, and providing them with inaccurate information about foreclosure procedure — practices that result in high monthly mortgage payments and foreclosure.
The Office of Mortgage Settlement Oversight provided the report to the federal district court in Washington, D.C. Wednesday. The report said all of the banks were in violation of the $25 billion national mortgage settlement forbidding the practices, which were rampant in the fallout of the 2008 housing and financial crisis.
The rules of the settlement were designed to protect homeowners from falsified communication and lengthy purposeful paperwork delays that often resulted in foreclosures. This allowed banks to collect money from failed mortgages in a single sum from insurance premiums taken out against sub-prime mortgages — those the banks know will likely end in foreclosure before the lending even began.
“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,” attorney Joseph A. Smith, Jr., said in a statement released Wednesday. Smith has been appointed monitor of the National Mortgage Settlement.
“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,” Smith said.
The study confirmed allegations made Monday by New York Attorney General Eric Schneiderman that two of the banks have violated the settlement by delaying and refusing to process 339 New Yorker’s applications for lending modifications and lower monthly payments.
Schneiderman, one of the 49 attorneys general from across the nation responsible for negotiating the settlement, said his office would sue Bank of America and Wells Fargo for noncompliance.
“Today’s report … affirms that the pattern of violations by Wells Fargo that my office documented in New York is harming homeowners nationwide,” Schneiderman said in a statement released Wednesday.
“Recent reports from Bank of America whistleblowers that the bank actually encouraged improper delays of modification applications are also deeply disturbing, and reinforce our concern that these banks are flouting their legal obligations under the settlement.”
The report gives banks in violation six months to correct the problems — a deadline extension for issues they were already required to be in compliance with — after which the court-appointed settlement monitor will conduct another evaluation. After that, Smith can legally drag them all back into court.
“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,” Smith said.