The $25 billion 'robo-signing' settlement with the five mega-servicers includes a new set of servicing standards – and a mortgagor's ‘Bill of Rights' – to prevent future processing and foreclosure abuses.
Under the bill of rights, residential servicers are restricted from foreclosing on borrowers while they are being considered for a loan modification, a process known as “dual tracking.”
The new standards also include procedures and timelines for reviewing loan modification applications while giving borrowers the right to appeal denials.
"We are using this opportunity to fix a broken system, and to lay the groundwork for a better future," said U.S. attorney general Eric Holder.
"Our nation's leading mortgage servicers will be required to follow a new set of standards, which will be overseen by an independent monitor – and will be enforceable in federal court.”
That monitor is North Carolina banking commissioner Joseph Smith who will have the ability to impose penalties of up to $1 million for violations and up to $5 million for repeated violations.
JPMorgan Chase, Bank of America, Citigroup, Ally Financial, and Wells Fargo & Co. have all agreed to these new standards.
The Mortgage Bankers Association and Financial Services Roundtable expect the new servicing requirements will become the standard for entire industry.
"We hope that the servicing standards in this settlement and those now being implemented through the [Comptroller of the Currency's] consent orders will be the basis of national uniform standards for the entire mortgage servicing industry. Borrowers, servicers and the economy itself will benefit from uniform national rules," the Roundtable said.
Iowa attorney general Tom Miller noted the robo-signings and loan modification problems are evidence of a "dysfunctional" servicing system.
The president of Wells Fargo Home Mortgage, Mike Heid, said his shop is well on its way in implementing the new servicing standards.
“We have already made significant investments in our systems and staffing and are fully committed to implementing the standards as defined. These investments have helped us provide refinance and foreclosure prevention options for our customers,” Heid said.
