Non-Compliance by Major Banks Detected After Settlement Agreement

by 04 Oct 2012

(TheNicheReport) -- Monitors checking for lender compliance in the wake of the 2012 National Mortgage Foreclosure Agreement have detected patterns of non-compliance and abusive practices in California. The banks in question are Ally Financial, Bank of America, Citi, JP Morgan Chase, and Wells Fargo. It is important to remember that Ally Financial is the former GMAC and that Bank of America acquired Countrywide.

The five banks agreed to be monitored after allegations of dubious foreclosure practices led to a nationwide investigation by state attorney generals and the U.S. Department of Justice. One of the nefarious practices involved the arbitrary signing of foreclosure documents without even reviewing them. Another practice, known as "dual-tracking" involves leading borrowers to believe the lender is helping them, when in fact they are lining them up for foreclosure and eviction.

The banks eventually signed a landmark settlement agreement that involves monitoring and offering mortgage modifications, but according to a monitoring report by a law professor at the University of California, dual-tracking is still being practiced in the Golden State.

The Response by the Banks

According to a news report in the Huffington Post, a Bank of America spokesman stated that the financial institution is complying with the agreement and helping borrowers avoid foreclosure. Professor Katherine Porter, however, found 224 complaints from California homeowners who may have been the subject of dual-tracking. It has been only six months since the banks executed the agreement.

A statement by Wells Fargo echoed Bank of America's comments, but the statement by JP Morgan was more vigorous, as it claims that the bank has met all 320 reforms to their mortgage servicing. Ally Financial said it was working close with the Office of Mortgage Settlement Oversight in the matter.

Wrongful Foreclosures Averted

The pace of foreclosures this year has not been as hectic as it was from 2008 to 2011, but according to Professor Porter, a team made up of some of her law students has actually stepped in dozens of times to stop foreclosures that would have been wrongful. This is happening even as homeowners are receiving communications from their banks regarding mortgage modifications.

Not all borrowers will be able to avert foreclosure, but under some of the terms of the agreement, no foreclosure proceedings can take place in the midst of the modification attempt. October will be a crucial month for the major lenders as they are expected to have complied with hundreds of operational reforms, including the elimination of dual-tracking.

COMMENTS

  • by William Matz | 10/5/2012 2:53:45 PM

    Non-compliance, especially dual-tracking continues to be a huge problem. One of my clients was in a mod facing a sale date two days later before B of A finally postponed the sale. I have seen that at least half a dozen times just in the last two months. So I am sure there are way more than 224 violations in CA, probably tens of thousands. Unfortunately, the irresponsible condcut by the banks often forces borrowers to take otherwise unnecessary action, such as filing suit or bankruptcy when the lender is not responsive. The problem will grow next year when similar provisions will apply to all lenders under CA law. Any borrower experiencin these violations should be reporting them to the CFPB and the CA A.G.

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