WASHINGTON – As part of its continuing effort to help families find decent housing and to prevent future foreclosures, the U.S. Department of Housing and Urban Development (HUD) today announced more than $42 million in housing counseling grants to 468 national, regional and local organizations. As a result of this funding, hundreds of thousands of households will have a greater opportunity to find housing or keep their current homes. See list of all counseling agencies awarded funding today.
The Center for Responsible Lending (CRL)
has published a summary of the National Mortgage Settlement Agreement which
makes it easy to review the details of the agreement between 49 of the states’
attorneys general (AGs), the federal government and five major financial
institutions and their servicing subsidiaries.
While there has been a lot of publicity surrounding the settlement
agreement under which the banks agreed to pay $25 billion to settle claims
against them, the summary provides a thorough analysis of where the moneys are to
be disbursed and the standards for servicing that have been agreed to going
The settlement was occasioned by
wide-spread abuses surrounding foreclosure processes used by the servicers. These were detailed in five audit reports
from the Office of the Inspector General for the Department of Housing and
As summarized by CRL, the settlement has
both cash and non-cash components. Five
billion of the settlement funds will be paid in cash to the state AGs of which
$1.5 billion is to be used for payments to foreclosed borrowers and for other
uses to be determined by each state’s AG.
The summary notes that there is an intention but no requirement that
those funds be used for foreclosure prevention activities such as housing
counseling and legal services. Two
governors, with the cooperation of their states’ AGs have already announced
they are diverting these funds to cover general budget shortfalls.
Individual borrowers who lost homes to
foreclosure from 2008 through 2011 will be eligible for cash payments of $1,800
to $2,000. The Center describes this as
one of the weakest parts of the settlement as borrowers might have to meet some
difficult criteria to qualify for even this small benefit.
The remaining $20 billion is to be
credited directly to borrowers by way of formula reimbursements to servicers against
the costs of activities that servicers provide.
At least $10 billion of this total must be used for principal reductions
in loan modifications; at least $3 billion is designated for refinancing
borrowers who are current on mortgages that are underwater. The remaining money, up to $7 billion will go
toward other forms of relief such as forbearance for unemployed borrowers,
anti-blight programs, short sales, benefits for servicemembers who are forced
to sell homes at a loss due to military obligations and other programs. Servicers will not necessarily be fully reimbursed
for some of these services so benefits to borrowers are expected to exceed $20
billion. The principal reduction portion
might actually provide as much as $35 billion in financial relief to borrowers
according to CRL.
Non-cash components include a release of
claims by the AGs and some bank regulators.
However, these releases are only for claims regarding servicing
practices, robo-signing, and foreclosure processing and origination
practices. It also releases federal
civil claims based on servicing of mortgage loans and loans in bankruptcy and
origination. It does not release claims
of individual borrowers against servicers, criminal claims, securitization
claims, and some other government claims.
The remainder of the settlement deals
with reforms to the future activities of the servicers and the monitoring and
enforcement of those reforms. Some of the key reforms under the agreement are:
evidence of standing or right to foreclose
outreach to all borrowers potentially eligible for loss mitigation options
(except those in bankruptcy) with a minimum standard for phone calls and
written notices both pre-and post referral for foreclosure;
specific requirements for loss mitigation activities including restrictions on
dual track processes, prompt conversion of trial modifications to permanent
status, requires an offer of modification if the loan is NPV positive, and insures
borrowers a right to rebut a loan modification denial.
sale requests must be acknowledged within 10 days and specific offers responded
to within 30 days.
must be provided with a single point of contact that will explain options, coordinate
documents, and keep the borrower informed.
This contact must have access to those with ability to stop foreclosure
fees during default, foreclosure, and bankruptcy must be bona fide, reasonable,
some limits on forced-placed insurance including placing at a commercially
There are also reforms dealing with
military personnel protections, blight, and tenant rights.
Enforcement of the agreement will be the
responsibility of a Monitoring Committee made up of representatives from the
state AGs and the Departments of Justice and Housing and Urban Development. Compliance will be overseen by Joseph A.
Smith, former North Carolina Banking Commissioner, former Chair of the
Conference of State Banks Supervisors and the President’s nominee as Director
of the Federal Housing Finance Agency.
Mechanisms for enforcement will include:
quality control groups established within each servicing company;
metrics to assess servicer compliance, loan modifications, and other borrower
from each servicer on Quarterly Compliance Reviews;
from the monitor on each servicer at least annually and only after conferring with
will have the right to cure any potential violations identified by the monitor;
Consent Judgment will be filed with the District Court and enforceable therein;
enforcement action that can be brought if a servicer exceeds the threshold
error rate for a metric. Relief for such
actions may be equitable relief or civil penalties of not more than $1 million
per uncured potential violation or an amount not more than $5 million for a
second uncured potential violation.
The Department of Housing and Urban
Development released five reports from its Office of Inspector General on Tuesday
based on reviews of the foreclosure and claims processes of the five largest
Federal Housing Administration (FHA) mortgage servicers. OIG conducted the audit of Bank of America, Wells Fargo Bank,
CitiMortgage, JPMorgan Chase, and Ally Financial, Inc, after allegations were made
in the fall of 2010 that national mortgage servicers were engaged in questionable
foreclosure practices involving foreclosure mills and robo-signing of sworn
documents in thousands of foreclosures.
For each of the five servicers OIG
conducted a review of a wide variety of documents such as personnel files,
servicing and foreclosure processes, Congressional testimony and court
documents regarding those processes, FHA claims documents, and foreclosure
affidavits. They also interviewed
servicer management and staff and those of vendors involved in foreclosures and
The five separate reports generally
reached the same conclusions. First, the
servicers did not establish effective control over their foreclosure
processes. The affiants (a person who
signs an affidavit and attests to its truthfulness before a notary public) routinely
certified that they had personal knowledge of the documents they signed without
actually referring to source documents or verifying the accuracy of the foreclosure
information. Affiants admitted to having
signed large numbers of documents each day. One Ally employee, for example, claimed to
have signed up to 400 documents a day and 10,000 per month. The affiants had neither the work histories
nor training to hold the titles they held.
Notaries did not always witness the actually signing of documents and
routinely notarized hundreds of documents each day.
The servicers also did not follow HUD
requirements for properties foreclosed on in judicial states and may have
conveyed improper titles to HUD because it did not establish control
environments which followed the requirements.
It was discovered that Citi did not have
written processes in place for signing documents prior to November 2009 nor did
it track documents during the period of the OIG review. OIG said its investigation of Citi was
hampered by this lack of records and it had to rely on personnel interviews for
much of its information.
OIG found that in many instances
supervisors at each servicer were aware of the violations of procedures while
they were happening. The Chase report
for example states “During Interviews, Chase’s operations supervisors
acknowledged that they routinely signed and certified that they had personal
knowledge of the contents of documents … without reviewing the source
documents referred to in the affidavits.”
Chase also outsourced its document execution process to First American.
A Bank of America employee said her
direct supervisor, a vice president, was aware and approved of the industry
standard (to have documents notarized outside the presence of the signer) being
followed. She assumed her supervisor’s
boss would have approved and been aware of the same. A Bank of America manager
said she read the first paragraph of a document, and then located the place she
needed to sign. She spent 1-1/2 to 2
hours per day on signing documents and two to three minutes on each.
OIG provided the shipping log kept by
one Bank of America manager showing that she had signed 67,908 documents (93 documents per day) and
notarized 1,390 during a two year period.
Records show she had notarized her own signature on two of the
OIG also found that some affidavits it
reviewed contained errors in the mathematics required in judicial foreclosure
states. Bank of America was found to
have calculated per diem charges inconsistently even within the same document
and there were instances of incorrect legal descriptions of properties conveyed
to HUD. Out of 36 affidavits for
foreclosures that were reviewed for the Chase inquiry, the bank was unable to
provide documentation for the amount of the borrowers’ indebtedness listed on
the affidavits for 32 and of the remaining four, OIG found the amounts to be
inaccurate in three.
The findings of OIG in their reviews
were used by the Department of Justice in reaching the recent $25 billion
settlement with the servicers.
The five full audits can be found here.
WASHINGTON – The U.S. Department of Housing and Urban Development today announced the availability of up to $25 million to help convert multifamily apartment complexes into assisted living facilities or service-enriched housing for low-income senior citizens. The funding offered through HUD’s Assisted Living Conversion Program will provide grants for the physical conversion of eligible multifamily assisted housing projects (or portions of projects) to assisted living facilities or service-enriched housing.