Regulators Warn Banks Not to Flout $25B Foreclosure Deal

On September 12, National Mortgage News published an article titled Regulators Warn Banks Not to Flout $25B Foreclosure Deal.

Regulators Warn Banks Not to Flout $25B Foreclosure Deal

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 Jr., the monitor, said in an interview.

Smith, who is responsible for ensuring Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Ally Financial Inc. and Citigroup Inc. 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.

Richard Cordray, director of the consumer bureau, 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.”

Other U.S. and state agencies also have vowed to pursue banks that violate the settlement terms. U.S. Housing and Urban Development secretary Shaun Donovan has said that authorities would fine banks or “haul them back into court” if they failed to improve treatment of borrowers. New York attorney general Eric Schneiderman said he is preparing to sue Bank of America and Wells Fargo for breaching the terms of the settlement.

Paul Leonard, a senior vice president at the Housing Policy Council, a group representing mortgage servicers, said complaints about dual-tracking partly reflect a “misunderstanding” of what the settlement requires.

“Some people think that if there is any contact from the servicer to the borrower that any part of the foreclosure process stops,” Leonard said in an interview. “That is not the case.”

Bank of America “is in compliance with all standards related to dual-tracking,” spokesman Rick Simon said in an emailed statement.

Even as foreclosures decline and the housing market turns around, nearly 2.9 million borrowers have missed at least three mortgage payments and remain in danger of losing their homes, according to data compiled by the housing department. Loan modifications, which reduce monthly payments, are meant to help delinquent borrowers become current again.

Lenders have completed nearly five million mortgage workouts since 2009, about 1.2 million of them through the Home Affordable Modification Program, in which the U.S. Treasury offers incentive payments to lenders for each loan modified for a delinquent borrower. The median HAMP workout reduced borrowers’ monthly mortgage payments by nearly 40%, or $547, according to Treasury data.

During the same time period, servicers repossessed about 3.7 million homes, according to data compiled by RealtyTrac Inc.

While no national data has been published that measures the scope of dual-tracking, housing lawyers and advocates said that they continue to see homeowners who were wronged in the workout process.

“We’re hearing complaints from customers of every major servicer,” said Gary Klein, a Massachusetts attorney whose clients have sued Bank of America for failing to modify their mortgages.

U.S. District Judge Rya Zobel in Boston last week denied the request of homeowners in 26 states, including Klein’s clients, to be considered for class-action status because their claims were not similar enough. Still, Zobel said that Bank of America had a “Kafkaesque bureaucracy” that determined which documents homeowners had to submit and said the borrowers’ claims “may well be meritorious.”

John Bartholomew, an attorney with the Atlanta Legal Aid Society, said an example of the pattern is how Citigroup dealt with one of his clients, Gwendolyn Green, a drugstore employee in Loganville, Ga.

Green said in an interview that she fell behind on her mortgage payments after her former husband’s truck-parts business went bankrupt and they divorced. She first applied to Citigroup for a loan modification in October 2012. On July 1, the bank notified her she’d have one. Then came the bad news: Her monthly payment would be reduced by only $1.01, to $984.49.

Even though she began making the payments under the program, Green said, Citigroup notified her it still plans to seize the ranch home, which has an assessed value of $115,000, on Oct. 2.

Green said Citigroup repeatedly demanded paperwork she had already faxed multiple times, notably a document confirming her sole ownership of the home. She said she kept records to prove it.

“They keep asking for the same things over and over and over again,” Green said. “They change people who handle the case, and each time a new person comes on, they ask for the same things.”

Citigroup spokesman Mark Rodgers declined to discuss Green’s case other than to say that the bank “correctly followed strict guidelines set forth by governmental agencies” when dealing with her loan modification.

The HAMP program, under which Green applied for help, also bars dual-tracking. Still, the HAMP rulebook “does not say that foreclosure sales cannot be scheduled and postponed,” Rodgers said.

“There is no universe where Citi is allowed to schedule homeowners like Ms. Green for three consecutive foreclosures after they’ve accepted and are current on a trial modification,” Bartholomew said.

Like the national settlement, the consumer bureau’s rules, which were first published in January, will bar foreclosure when a homeowner has submitted a complete application for a loan modification. The new language to be inserted this week could also bar foreclosure if a servicer has told a borrower that an application is complete and subsequently discovers that more documentation is required.

The agency also has been soliciting public feedback about whether it needs to be even more prescriptive in defining what constitutes a finished application so that isn’t left up to the banks. Commenters including Massachusetts Attorney General Martha Coakley responded that there should be a more uniform definition of when the paperwork is complete.

Cordray said the regulations will be “very specific” about the requirements.

“I would have been glad to be able to think that we could oversee the industry with looser rules, but I just don’t think we can,” Cordray said.

Katherine Porter, who monitors the mortgage settlement on behalf of California attorney general Kamala Harris, identified the lack of a concrete definition of a complete loan-assistance application as a “serious problem” in a June report.

Porter said she has received more than 3,300 complaints from homeowners that banks aren’t following the rules. The breakdowns usually involve communication failures between departments of the same bank or the incompatibility of computer systems containing different pieces of information about a loan file, she said in an interview.

The banks “do make calls. They do send letters,” Porter said. “And I think many of the consumers are really desperately trying to get their documents in. There’s a mismatch in the way that they’re communicating with each other.”

Porter said that if she had one wish, “I would wish for deep investment in better technology.”

Technology woes were at the root of Smith’s findings in a June report that monitored the settlement banks’ servicing practices. The report showed that Citigroup, Bank of America and Wells Fargo had failed to meet deadlines for notifying borrowers that their workout applications were incomplete.

“Areas in which our performance has temporarily fallen outside of the allowable thresholds did not result in inaccurate foreclosures or improper loan-modification denials, and corrective action plans for those areas are being submitted to the monitor and implemented,” Simon, the Bank of America spokesman, said.

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties