Report: Mortgage servicers violating settlement agreement

Smith said he has specifically heard problems about the loan modification process, single points of contact and billing and statement inaccuracies. 

{mosads}If necessary, he will create additional, and possibly, more stringent testing to ensure the banks are addressing these issues.

“While there is more work to be done, I remain confident that the settlement is helping to improve the mortgage finance system,” Smith said. 

“I hope this report will help contribute to the conversation on this topic, and I look forward to making additional information public as this process continues.”

Banks can be fined upward of $5 million for continued violations, or they can be brought back into court. 

While the practice of robo-signing — where banks signed off on foreclosures with little or no review — has ended and five banks have stopped charging distressed borrowers a fee just to process a loan modification request, there are still plenty of hurdles to improving the mortgage finance system. 

“Unfortunately, other abuses shamefully endure,” said HUD Secretary Shaun Donovan in a statement.

“Most notably, these financial institutions consistently fail to send notices and communicate decisions to stakeholders in a timely manner. This is unacceptable.”  

Donovan said the five financial institutions are officially on notice. 

“There is a little bit of leeway there but let’s be clear, these are demanding, tough standards,” he told Bloomberg TV on Wednesday. 

“They must correct these problems and pass the monitor’s tests or the Obama administration, along with the bipartisan group of 49 state attorneys general we partnered with on this effort, will fine them up to $5 million for each failure or haul them back into court.”

He said Smith will do progress reports every 90 days. 

While there are plenty of penalty options, Donovan said “let’s remember, the primary focus here is to fix the problem.” 

“What the report shows is we have made real progress. There are many of the practices that were widespread during the crisis that have been fixed, but we still have a ways to go and that’s why the settlement was a three year process and we are going to keep at it until we don’t have any failures at all across these metrics,” he told Bloomberg. 

They will become the standards that are going to be used by the Consumer Financial Protection Bureau across all mortgage servicers starting in January. 

“We believe these standards are tough but also strike a balance of saying we want to get it perfect just about all the time and make sure homeowners are getting what they deserve.”