WASHINGTON — Homeowners trying to avoid foreclosure must wait too long for their loan modification applications to be reviewed by some of the nation's top mortgage servicers, according to a report released Wednesday. Such delays can plunge borrowers deeper into debt.
Joseph A. Smith Jr., the independent monitor of last year's $25 billion national mortgage settlement, said that while the banks are doing a better job complying with new mortgage servicing rules, more needs to be done.
"It is clear to me that the servicers have additional work to do both in their efforts to fully comply with the (settlement) and to regain their customers' trust," Smith wrote in the report.
The banks — JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and ResCap Parties (formerly Ally Financial and GMAC) — should also provide borrowers with a knowledgeable and helpful person as a single point of contact to make it easier for applicants to keep track of their request, Smith said. Most of the nearly 60,000 complaints Smith's office had received in recent months were related to that issue.
The standards prohibit the lenders from pursuing foreclosure while negotiating a loan modification. They require the banks to acknowledge in writing a refinancing application within three business days, notify the borrower of any missing documents within five days and make a decision on a complete application within 30 days.
Department of Housing and Urban Development Secretary Shaun Donovan said Smith's report showed four of the five banks tested "consistently failed to send notices and communicate decisions to homeowners in a timely manner." ResCap Parties was the exception among the five banks, the report said.
Donovan said delays by mortgage servicers can put homeowners at risk of either falling behind or losing their homes. They were the same kinds of lending practices that contributed to the foreclosure crisis, he added.
"This is unacceptable," Donovan said. "The homeowners who have experienced servicing abuse deserve justice, and we won't stop until that justice is served."