Homeowners trying to avoid foreclosure must wait too long for their loan modification applications to be reviewed by some of the nation's top mortgage servicers, a report said Wednesday. Such delays can plunge borrowers deeper in debt.
Joseph A. Smith Jr., the independent monitor of last year's national mortgage settlement, said that while the banks are doing a better job complying with new mortgage servicing rules, more needs to be done.
"It is clear to me that the servicers have additional work to do both in their efforts to fully comply with the [settlement] and to regain their customers' trust," Smith said in the report.
Smith, whose office conducted 29 performance tests on how five of the largest U.S. mortgage servicers are meeting the new rules, said the banks need to do a better job collecting customer records and notifying borrowers in a timely manner about decisions on their applications, including when there are any missing documents. The banks should also provide borrowers with a knowledgeable and helpful person as a single point of contact to make it easier for applicants to keep track of their request, Smith said. Most of the nearly 60,000 complaints Smith's office had received in recent months were related to the lack of a single point of contact at the mortgage servicer for borrowers.
The settlement among 49 states, federal government agencies and lenders JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and ResCap Parties (formerly Ally Financial and GMAC) set new rules for how banks handle troubled home loans and provided for up to $25 billion in financial relief to homeowners.
The standards prohibit the lenders from pursuing foreclosure while negotiating a loan modification. They require the banks to acknowledge in writing a refinancing application within three business days, notify the borrower of any missing documents within five days and make a decision on a complete application within 30 days.