Thursday, September 12, 2013

Regulators Warn Banks Not to Flout $25 Billion Foreclosure Deal - Businessweek

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Regulators Warn Banks Not to Flout $25 Billion Foreclosure Deal

September 12, 2013

Consumer Financial Protection Bureau Richard Cordray
Consumer Financial Protection Bureau Richard Cordray said in an interview that he has personally met with the heads of the top 25 mortgage servicers - banks and non-banks alike - “to tell them face to face that this is a major priority for the bureau and that it’s something they need to focus on.” Photographer: Andrew Harrer/Bloomberg

When the largest U.S. banks agreed to pay $25 billion last year to settle claims of abusive foreclosure practices, they promised to stop seizing homes from borrowers who had completed applications for mortgage help. 

Now regulators say lenders may be flouting the spirit of the deal by repeatedly asking for additional paperwork from borrowers seeking loan modifications and then foreclosing while treating the applications as incomplete.

The Consumer Financial Protection Bureau and the court-appointed monitor of the 2012 foreclosure settlement are among those moving to tighten oversight of the process known as dual-tracking, when borrowers facing the loss of their homes are simultaneously negotiating changes in their loans. Mortgage servicers who violate the rules or the terms of the deal could face sanctions including fines of $1 million per infraction.

“It is an important outstanding issue of unfinished business,” Joseph A. Smith, the monitor, said in an interview.

Smith, who is responsible for ensuring Bank of America Corp. (BAC:US), JPMorgan Chase & Co. (JPM:US), Wells Fargo & Co. (WFC:US), Ally Financial Inc. (ALLY:US) and Citigroup Inc. (C:US) live up to their promises, said he is preparing to start measuring how well banks are communicating with borrowers about loan-workout applications. That could determine whether the servicers or homeowners are at fault for incomplete files.

Separately, the consumer bureau this week plans to complete proposed changes to pending mortgage-servicing rules aimed at tightening restrictions on dual-tracking, according to a person briefed on its work. The rules, to take effect in January, would cover all lenders, including those who aren’t parties to the settlement such as Ocwen Financial Corp. and Nationstar Mortgage Holdings. (NSM:US)

 READ MORE AT:     Regulators Warn Banks Not to Flout $25 Billion Foreclosure Deal - Businessweek

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