For the moment, the job of ensuring that the nation's largest bank servicers comply with the terms of last week's mammoth mortgage settlement falls on just one man.
Joseph A. Smith, Jr., North Carolina's banking commissioner, is charged with ensuring that the five biggest mortgage servicers — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — implement new servicing standards and take other steps that are required by the settlement.
As the settlement's independent monitor, Smith will publish regular reports that will name banks that fail to meet those responsibilities. He will have the ability to impose fines of up to $1 million per violation, and up to $5 million for certain repeat violations, according to last week's announcement.
The appointment represents a second opportunity for Smith to make an impact on the national stage after Senate Republicans blocked his 2010 nomination to head the agency that oversees Fannie Mae and Freddie Mac.
Both industry and consumer advocates praised the former bank compliance lawyer, saying he is the perfect choice.
"In his heart and in his actions, he is a consumer advocate," said Thad Woodard, president of the North Carolina Bankers Association. "In his mind and in his actions, he is understanding of the banking industry and its importance, and is fair in his dealings with the banks."
"And he plays fairly and openly with all parties, no matter what side of the equation from which they come."
Michael Calhoun, president of the Center for Responsible Lending, said, "I think what makes Joe so well-suited for this position is he's got a rare combination of deep policy background and just also the operational expertise."
"He understands the cost and benefits from both the borrower and the financial institution side," Calhoun added. "And that kind of expertise and balance is just really rare out there."
Important questions remain about the details of Smith's duties and the resources he will have to carry them out. Officials have not established what his annual budget will be, though they say that the funds will not come out of the $25 billion settlement total.
Smith will monitor not only compliance with the new servicing standards, but also with other parts of the settlement agreement. It's an enormous job, one that involves monitoring how tens of billions of dollars are spent and enforcing a complex set of new standards for the mortgage servicing industry.
The standards promise an end to robo-signing, restrictions on the controversial practice of moving forward with foreclosure proceedings while an application for a loan modification is pending, and the establishment by banks of a single point of contact for homeowners, among a thicket of other rules.
