Business

Banks failing at foreclosure services: report

Six years into the foreclosure crisis, the big banks are still running roughshod over troubled homeowners, according to an administrator’s report.

In the first half of 2013, three of America’s biggest lenders made serious errors in foreclosures, from inaccurately stating the amounts owed by homeowners in bankruptcy, to failing to respond expeditiously on potential short sales or loan modifications.

These details were buried in a bombshell report released last week by Joseph Smith, monitor for the $25 billion national mortgage settlement.

The federal government and 49 state attorneys general reached this agreement last year with Wells Fargo, JPMorgan, ResCap Parties (formerly GMAC and Ally Financial), Bank of America and Citigroup in the wake of robosigning and other foreclosure fraud.

President Obama touted the deal as a win for homeowners. But critics blasted the penalty as too small, and warned that mortgage servicers, which are not set up to handle lots of delinquent loans, were likely to fail the new servicing mandates.

That’s exactly what’s happening, according to the report. Citi had an eye-popping fail rate of 25 percent on short-sale document collection timeline compliance. Chase failed a pre-foreclosure initiation metric and loan modification timeline. Bank of America failed three metrics, including the one regarding amounts owed bankrupt homeowners.

“It’s appalling,” said Liz Ryan Murray, policy director of National People’s Action. “The standards are common-sense customer-service issues, [like] don’t screw up the billing … and they can’t even get these right.”

The report also detailed fixes for banks’ mistakes, and Smith singled out Chase for its success in addressing problems and passing the next tests.

Asked whether Citi’s short-sale timeline failure could have resulted in borrowers losing their homes, Smith said: “We’re going to determine where there’s been borrower harm, and we’ll address remediation.”

But Smith admitted that bank foreclosures are still so rife with errors that he’s introducing two new metrics in January and two more in April. These will focus on single point of contact for homeowners at servicers, correctness of customer accounts, what’s needed in a homeowner application to stop the foreclosure clock and information on appeal rights.

“I think we’re making progress,” said Smith. “But the jury is out, and we’ll keep at it.”

A Chase spokeswoman said the bank addressed Smith’s findings and completed its corrective action plan.

A spokesman for Citi said the bank “remains committed to fulfilling the terms of the National Mortgage Settlement.”

Bank of America’s spokesman said its errors were not widespread, and did not result in any “inaccurate foreclosures or improper loan modification denials.”