A government report said three of the nation’s biggest banks have again violated the terms of the $25 billion national mortgage settlement, a charge that mirrors an earlier study on the landmark agreement to clean up shoddy foreclosure practices.
On Wednesday, the court-appointed monitor of the settlement said in a report that Bank of America, JPMorgan Chase and Citigroup continued to mishandle homeowners’ requests for lower monthly loan payments through the first half of the year.
The report, filed in federal court, raised many of the same concerns that settlement monitor Joseph A. Smith Jr. made in his June report. It also illustrates that Americans still face hurdles in hanging onto their homes, despite government efforts to help them.
Of the 29 metrics that the monitor used to measure compliance with the 304 servicing standards outlined in the settlement, Bank of America failed three, and JPMorgan and Citigroup failed two.
All three institutions provided inaccurate information to borrowers before beginning a foreclosure, according to the monitor. Bank of America and Citigroup also were cited for failure to notify homeowners of missing documents in their modification requests within five days of receipt.
Bank of America spokesman Richard Simon noted that “none of the three failed metrics resulted in inaccurate foreclosures or improper loan modification denials.” He added that the “errors were not widespread.”
Officials at Citigroup and JPMorgan said the banks took immediate action to fix flaws once they were made aware of them.
“We proactively addressed the monitor’s findings and are pleased that he determined that our corrective action plan is complete,” said Amy Bonitatibus, a spokeswoman for JPMorgan.
Each institution cited in the report must put in place a plan approved by the monitor to correct the problems. The report said all of the banks are complying. If the problems recur within six months, the monitor can take legal action and seek fines of up to $5 million.
“The banks still have additional work to do in their efforts to fully comply and to regain their customers’ trust,” Smith said in a statement. “However, I am hopeful that the corrective action plans . . . will result in meaningful improvement in how the servicers treat their customers.”
An objective of the settlement was to improve the way servicers interact with struggling homeowners. In some respects, the banks have accomplished that goal. There were, for instance, no reports of servicers using forged paperwork to quickly foreclose on borrowers — one of the allegations that led to investigations and the eventual agreement in the first place.
Last year, five of the nation’s largest banks agreed to overhaul their mortgage-servicing operations and reduce loan balances for struggling homeowners. The deal involved the Justice Department and 49 state attorneys general — some of whom have since complained of banks violating the terms of the agreement.
New York Attorney General Eric Schneiderman filed a lawsuit in October against Wells Fargo for allegedly dragging its feet in processing loan modification requests from homeowners, a direct violation of the deal.
Days after Schneiderman filed the lawsuit, the settlement monitor added four tests to measure compliance amid mounting complaints from other attorneys general, housing counselors and homeowners. Smith said his office has received 112,419 complaints since October 2012.
The five servicers have provided $51.3 billion worth of loan modifications, short sales, refinancing and forbearance assistance to 643,726 borrowers across the country, according to a report released in August by the settlement monitor.