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Bank of America, Citigroup faulted over mortgage servicing

People walk past a Citibank branch in New York October 15, 2013.REUTERS/Andrew Kelly

By Aruna Viswanatha

WASHINGTON (Reuters) - Top U.S. banks including Bank of America (NYS:BAC) and Citigroup Inc (NYS:C) failed to comply with some provisions of a government settlement to improve mortgage servicing practices, a monitor of the settlement said on Wednesday.

Bank of America failed to file accurate documents in bankruptcy proceedings and Citi's mortgage unit, CitiMortgage Inc., failed to notify borrowers about missing documents within 30 days of a request for a short sale, the monitor, Joseph Smith Jr., said.

The two banks have submitted plans to fix those problems, and are in the process of fixing earlier failures, he said.

The problems stem from a $25 billion (15 billion pounds) deal between federal and state authorities and five top mortgage servicers, designed to end foreclosure abuses, in 2012.

Under the settlement, Bank of America, Citi, JPMorgan Chase, Wells Fargo and ResCap were required to improve their processes to deal with struggling borrowers and submit to dozens of tests that measure their improvement.

One bank, Wells Fargo, did not fail any tests in 2013, according to Smith's report.

While Smith said in a statement that the banks still have additional work to do, he said he was hopeful the fixes would improve how the servicers treat their customers.

JPMorgan failed in some instances in 2013 to make decisions on borrower applications to modify loans within a timetable required, and it failed a test that measures whether loans were delinquent at the time a foreclosure was initiated, according to the report.

But Smith said both problems were not widespread, and JPMorgan had since fixed the problems and compensated harmed borrowers.

In October, Bank of America and Wells Fargo pledged to improve communications with borrowers seeking to modify their loans, after authorities found additional problems not covered by the 2012 deal.

One state - New York - accused Wells Fargo in federal court of breaching the terms of the $25 billion deal and said the bank did not go far enough in its commitments. That dispute is pending.

(Reporting by Aruna Viswanatha; Editing by Krista Hughes)