Banks Are Failing To Comply With The Terms Of The Foreclosure Settlement

Four of the nation’s largest banks are still failing to play straight on mortgage modification applications, which violates the terms of a 2012 settlement over wrongful foreclosures, the independent monitor of the settlement reported Thursday. The results of the monitor’s tests to verify whether banks were complying with the settlement reinforce tens of thousands of consumer complaints and allegations of ongoing bank misdeeds from two state Attorneys General.

Of 29 separate compliance tests, CitiMortgage failed three, Bank of America and JP Morgan Chase each failed two, and Wells Fargo failed one. The report notes that JP Morgan tried to remedy one of its settlement violations, involving duplicate homeowner’s insurance, by refunding wrongfully charged premiums to more than 2,000 borrowers.

While the banks complied with between 26 and 28 of the monitor’s tests, the report summarizes about 60,000 individual borrower complaints over bank actions that violate the settlement in just a six month window. The report is based on complaints filed by elected officials on behalf of constituents, but the numbers may be much higher, as it doesn’t include complaints to the Consumer Financial Protection Bureau or any other misdeeds.

Those official complaints include 12,340 borrowers who said they were not given a single contact person to work on their case and 7,620 who said their designated bank contact was nonresponsive. In 4,587 official complaints, banks foreclosed on borrowers with pending loan modification applications, a process known as dual-tracking. There were also 3,050 instances of banks incorrectly applying payments or refusing to accept them.

This means that many of the abuses common in the foreclosure crisis, which the 2012 settlement sought to remedy, have continued. Dual-tracking, declined or misapplied payments, and shoddy staff work that complicates an already complex legal process for borrowers are common culprits in wrongful foreclosures. Deborah Castillo, one of the “Covington 7” homeowners arrested for a sit-in to protest the government’s failure to prosecute foreclosure fraud, is a victim of dual-tracking. So is Etienne Syldor, who was actually making payments in excess of what the bank asked for during a trial loan modification. Jo-Ann Seipp had her house sold in foreclosure despite being current on her mortgage due to Wells Fargo’s paperwork and staffing errors. These are not isolated incidents, as Thursday’s report makes clear.

All this comes within the parameters of a settlement critics say was insufficient and poorly designed. As if to reinforce those arguments, Thursday’s report includes a depressing note: If the failures it identifies are not corrected, the settlement monitor can pursue fines of up to $5 million per bank, an amount unlikely to mean much to institutions that count their profit in the billions.