If you're not in trouble on a mortgage and didn't lose your home to foreclosure in the last few years, you might think the national settlement between state attorneys general and big mortgage servicers has nothing to do with you.

But the settlement includes a 42-page directive intended to broadly improve mortgage-servicing practices, which critics contend are the pits.

Though the settlement applies only to the big players that signed on (Wells Fargo, Bank of America, Citigroup, JPMorgan Chase and Ally Financial/GMAC), the Maryland attorney general's office says the federal government could eventually make all federal institutions play by these servicing rules.

Here's a taste of what they require:

o Better handling of borrowers' payments. Servicers must "promptly" record payments and post them within two days. If a borrower makes almost all of a scheduled payment -- within $50 of the amount due -- then the servicer must apply it and at least one more such payment to the mortgage, rather than shunting it to a "suspense account" and letting interest and late fees mount.

Continue reading "What the robo-signing settlement means for all borrowers" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (5)
Categories: Mortgage servicing, Mortgages, The foreclosure mess
        

What's causing mortgage-servicing errors, from misapplied payments to double-charging for homeowners' insurance?

At least part of the reason seems to be that the records aren't managed in a way that allows servicers to see everything about a loan's history in one place.

Maryland's Department of Labor, Licensing and Regulation saw this type of record-keeping problem again and again after launching an examination of servicers in the wake of robo-signing last fall.  That inquiry is still in the works.

Anne Balcer Norton, deputy commissioner of financial regulation at the labor department, said the state found that piecing together the pre- and post-default story of even one borrower requires servicers to pull information from multiple databases, including some outsourced to other firms.

State examiners went back and forth with servicers for months to get documentation that could provide a full picture, she said. Some material was never provided, despite multiple requests, and "you have to assume it’s because it does not exist," Norton said.

She said the experience has been "very eye-opening."

"It really does call into question the accuracy of the record-keeping in general," said Norton, who emphasized that she was speaking specifically about the state's inquiry, not the overall effort by state attorneys general across the country. (That nationwide inquiry/settlement is still in the works, but you can see the leaked settlement proposal from March right here.)

Continue reading "State inquiry into mortgage servicers finds "eye-opening" problems" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (0)
Categories: Mortgage servicing, Mortgages, The foreclosure mess
        

Mortgage servicers and servicing critics agree on at least one point: The industry has made mistakes, and things should change. What's in dispute is the scope and type of problems -- and how often misbehavior plays a role.

David H. Stevens, president and chief executive of the Mortgage Bankers Association, a trade group whose members include servicers, talked with me for this week's story on the state of servicing and said he's supportive of the idea of nationwide mortgage servicing standards -- which seems likely to happen under the guidance of the new Consumer Financial Protection Bureau.

"Coming out with a common set of standards that applies to everybody, ideally applies to all states, would create a system in this country that would have integrity and protect consumers and be enforceable, and that's what we're lacking right now," said Stevens, former commissioner of the Federal Housing Administration. (He expressed concern about competing sets of rules, some in place, some in the works.)

On the subject of servicing problems, he said "mistakes were made, and they were made in a variety of different ways." He said servicers were caught off guard and overwhelmed by the extent of the housing crisis, though he said some companies were more adept than others.

The problems Stevens is talking about are the ones struggling borrowers are well acquainted with by now. He rattled off a list "from lack of trained resources, to being able to properly explain these new [assistance] programs that had been created, to operational challenges of handing off a borrower who calls a call center to someone knowledgeable about underwriting guidelines."

That all falls into the broad category of foreclosure-prevention assistance -- loan modifications, short sales and the like. Situations such as Lutherville doctor Anca Safta's -- where a servicer sent an intent-to-foreclose notice because it wasn't properly recognizing her on-time payments -- "would be an extreme rarity in the process," Stevens said. Loan-modification issues are "the more common challenges we have heard," he said.

Homeowner advocates say problems such as foreclosing on the wrong people, locking people out of their homes and throwing away their possessions when they weren't behind on any mortgage or weren't yet to the point of foreclosure auction, and charging inappropriate fees are more common than the industry acknowledges.

Continue reading "Mistakes were made, servicers' trade group says (and Justice Dept. arm offers examples)" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (7)
Categories: Mortgage servicing, Mortgages, The foreclosure mess
        

Angela Cottrell regrets ever calling her mortgage servicer to ask about refinancing options. What Wells Fargo suggested she do ultimately increased her loan balance and ruined her credit, she said.

Cottrell, who bought a Charles County home with her husband in 2005, couldn’t take advantage of lower interest rates with a traditional refinance in 2009 because their home’s value had dropped below the mortgage balance. When she heard about an Obama administration program allowing certain “underwater” borrowers to refinance, she said, she contacted Wells Fargo.

She said staffers there looked over her financial documents and told her she qualified for lower payments — but through a modification, not a refinance. The company enrolled her in a trial plan, only to declare months later that she wasn’t eligible because she made too much money.

Continue reading "For Md. homeowner, a refinance request gone wrong" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (5)
Categories: Mortgage servicing, Mortgages, The foreclosure mess
        

When the brouhaha over foreclosure "robo-signing" hit last fall, mortgage servicers said the bogus court documents were just minor deviations from the rules and didn't change the fact that borrowers were way behind on their payments.

But it's increasingly clear now that servicing problems aren't limited to foreclosure documentation or to people who aren't paying.

Consider, for instance, Lutherville doctor Anca Safta, whose servicer threatened to start foreclosure proceedings this spring even though she'd never missed a payment. The company wasn't crediting her account because of an error in its records.

Or consider the Massachusetts couple whose Florida retirement home -- paid for in cash -- was broken into and cleaned out by a servicer's contractor last year in a case of mixed-up addresses.

You can read more in Sunday's story about mistakes and misbehavior. But there was lots of interesting stuff I couldn't fit in the story, and it seemed a shame not to share. For instance:

Borrowers (and some number of mortgage-less victims of the foreclosure crisis) aren't the only ones with complaints. Increasingly the pension plans, investment funds and other investors that bought loans as mortgage-backed securities are making it clear that they're unhappy with their servicers, too.

"As difficult as it may be to believe, many of the most sophisticated investors were as victimized and abused by the servicers and their affiliates as were many consumers," said Chris J. Katopis, executive director of the Association of Mortgage Investors, in May testimony to a Senate banking subcommittee.

Continue reading "Mortgage servicing woes" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (3)
Categories: Mortgage servicing, Mortgages, The foreclosure mess