WASHINGTON -- The largest U.S. mortgage servicers, including Citigroup and Bank of America, haven't done enough to upgrade their treatment of customers in danger of foreclosure, according to a court-appointed monitor.
To meet the terms of a legal settlement with the U.S. Justice Department and 49 state attorneys general, the monitor said in a report released Wednesday, the banks must improve their response to loan-modification requests and their collection of records, and provide a single point of contact for borrowers. The settlement over botched foreclosures requires the banks to submit plans to the monitor for improving their performance.
"I want to send a simple message to these banks that it's time for them to live up to their end of the deal by complying with all aspects of the settlement," Shaun Donovan,
secretary of the Department of Housing and Urban Development, said on a conference call with reporters.
Donovan, who helped negotiate the February 2011 settlement, called the banks' performance "unacceptable" and said federal and state authorities would fine or "haul them back into court" if they failed to improve their treatment of borrowers seeking mortgage relief.
The banks were required to meet new servicing standards as part of the accord, which came about after disclosures that they used faulty documents to seize homes.
Banks fell short for a variety of reasons, including the difficulties managing their information technology systems and hiring and deploying enough trained staff, Joseph A. Smith Jr., the monitor, said today in a telephone interview.
"It is combination of factors," Smith said. "I don't think any of them excuse the fact that they haven't got this done."
Smith can take the servicers back to court for further sanctions if they repeatedly fail in the same area after an improvement plan is implemented.
The servicers, also including Wells Fargo, Ally Financial and JPMorgan Chase, were additionally required to provide $25 billion to consumers in the form of loan forgiveness or short sales, in which lenders agree to allow homes to be sold for less than the mortgages against them.
Smith filed a preliminary estimate in March saying that the banks reported providing about twice that -- $50.6 billion --for 621,712 borrowers.
For the servicing review, which includes measurements during the last two quarters of 2012 and preliminary data for the first quarter of 2013, 195 workers spent 37,900 hours testing the banks on 29 metrics, Smith said. The reviews will continue, and Smith said he's working on additional tests to ensure that banks improve.
Reviewers found that Ally was the only bank that didn't fail any metrics during the test period.
Citigroup in 53 percent of the cases tested failed to inform borrowers within the required five days that their requests for loan modifications were missing some documents, according to a filing Smith submitted to the U.S. district court. Smith described the failings, which exceeded the 5 percent maximum allowed, as "widespread."