Bank of America, Wells Fargo to improve mortgage servicing plans


By Aruna Viswanatha

WASHINGTON, Oct 2 (Reuters) - Bank of America andWells Fargo once again agreed to improve their mortgageservicing processes, after state and federal authorities saidthe banks were still not properly handling requests fromstruggling borrowers.

In commitments made public on Wednesday, the two bankspledged to improve communications with borrowers seeking tomodify their loans, after authorities found that last year's $25billion deal did not correct certain problems.

One state - New York - said Wells Fargo did not go farenough in its commitments, and accused the bank in federal courton Wednesday of breaching the terms of the earlier deal.

That earlier deal - between the U.S. Justice Department, theDepartment of Housing and Urban Development, and 49 states - wasdesigned to end mortgage servicing abuses.

But authorities found that problems have continued. Bankswere required to provide homeowners with a single representativewho would review their loan files and manage the process ofseeking a modification, for example.

Instead, those representatives often changed and sometimesdid not have the competence or capacity to solve problems, themonitor of the settlement, Joe Smith, said in an interview onWednesday.

Borrowers also continued to face problems with not knowingif an application to modify a loan was complete - a crucialcharacterization that would stop a foreclosure proceeding, Smithsaid.

In the wake of the 2007-2009 financial crisis, millions ofhomeowners, many of whom owed more than their house were worthafter home prices plummeted, struggled to avoid foreclosurethrough receiving a modification of their loan.

But many of those efforts stalled as homeowners complainedof servicers repeatedly losing paperwork, providing confusingrequirements, and generally being unresponsive.

To address lingering concerns, the two largest mortgageservicers agreed on Wednesday to improve communications withcustomers about missing information, provide an escalationprocess for customers who were repeatedly asked for information,and establish a direct contact for housing counselors advocatingfor the borrowers, among other changes.

"As part of our commitment to assist borrowers struggling tomeet their mortgage payments, Bank of America is continuing toinvest resources to refine its loss mitigation practices andprocedures," the bank said in a letter outlining its changes.

In court documents, New York's attorney general outlinedproblems faced by 97 New Yorkers whose loans were serviced byWells Fargo that the state said showed the bank had not compliedwith last year's settlement.

In a statement, Wells Fargo spokeswoman Vickee Adams saidthe bank had taken voluntary steps to put in place the customerservice changes that would have been in a formal agreement withNew York.

Also on Wednesday, monitor Joe Smith announced four newbenchmarks that all of the banks from the settlement - Bank ofAmerica, Wells Fargo, Citigroup, JPMorgan Chase,and ResCap - are required to meet.

One requires the banks to evaluate and remediate theperformance of the representatives who serve as the contacts forstruggling borrowers. Another tests whether monthly statementssent to borrowers accurately reflect what a borrower has paidand owes.

View Comments (6)