Joseph A. Smith, Monitor of the National
Mortgage Servicing Settlement issued a progress report on Wednesday. Smith, former North Carolina Banking
Commissioner, said the interim report was published to inform the public about
the nature of the settlement, the steps that have been taken to implement it,
and the results to date. Smith is not
required to issue his first report to the Federal Court until the second
quarter of 2013.
The report includes a summary of the
material terms of the various judgment and agreements comprising the
settlement, a review of actions taken to date to implement the settlement, and
information about the relief that has been extended to consumers under the
settlement during the second quarter of 2012.
Smith was authorized by the settlement
to employ a primary professional firm (PPF) to ensure the quality of servicers'
monitoring and has hired BDO USA, LLP.
Five servicer performance firms (SPF) have also been employed to monitor
the five individual servicers involved in the settlement. Smith said in picking the six companies he
placed great emphasis on the independence of each with regard to its assigned
Each servicer has an Internal Review
Group (IRG) comprised of employees and/or independent contractors and
consultants of the servicer that is responsible for performing reviews of the servicer's
compliance with the Settlement. IRG members
must be separate and independent from the line of business being reviewed.
Also assisting in the review are a law
firm, an accounting firm and a forensic accounting firm, and a communications
firm. These firms assisted in selecting
the PPF and negotiating work plans.
Smith has also sponsored a non-profit Office of Mortgage Settlement
Oversight (OMSO) to provide administrative support and enable the Monitor to
carry out his duties independently and transparently. This office will accept payment of money and maintain
books and records.
Under the settlement the Servicers will
provide specific dollar amounts of relief to borrowers over a three year
period. The servicers have the
flexibility to provide relief in a variety of forms including loan
modifications, transitional funds, short sale facilitation, deficiency waivers,
forbearance, and anti-blight activities and must report quarterly to the
Monitor on the relief given and their progress toward meeting payment
The Settlement is structured to provide
credits for relief given against Settlement commitments. To encourage servicers to make substantial
early progress they will be given an additional 25 percent credit for principal
reductions or credited refinancing activities that take place within the first
12 months of the program. If servicers
do not meet their total commitment within three years they will be penalized no
less than 125 percent of the unmet commitment amount.
While the amounts have not yet been
confirmed, scored, or credited, servicers have submitted documentation for the
following during the first quarter of the Settlement period.
total of $10.56 billion in relief was provided to 137,846 borrowers; an average
of $76,615 per borrower.
lien modifications were completed for 7,093 borrowers and resulted in loan
forgiveness of $749.4 million or $105,650 per borrower.
additional 5,500 borrowers received forgiveness of pre-March, 2012 forbearance
in the amount of $348.9 million.
modifications and extinguishments were provided to 4,213 borrowers; $231.4
million in relief.
23,000 home loans were refinanced with an average interest rate reduction of
sales or deeds in lieu were authorized for 74,614 borrowers at an average of
$116,200 per borrower.
various other consumer relief programs the servicers provided $458.8 million in
relief to 24,353 borrowers.
lien modification trials were extended to 21,104 borrowers and 28,047 borrowers
were in an active trial.
Settlement contains 304 actionable Servicing Standards and each servicer has
agreed to a timeline for phasing in implementation of these standards. By July 5, each of the servicers had
implemented between 35 and 72 percent of the standards. Among the standards that all servicers have
put into operation are standards relating to the integrity of documents, single
points of contact for borrowers, and a variety of customer service standards including
communicating with representatives from state attorneys general and regulatory
agencies who act upon a written complaint filed by a borrower. Servicers are also establishing reasonable
standards and training requirements for loss mitigation staff, eliminating compensation
arrangements favoring foreclosure over other alternatives, and having adequate
staffing and systems to track borrower documentation and information.
the area of loss mitigation servicers report that they have designed proprietary
first lien modification programs, eliminated any application or processing fees
for loan modifications, and are performing independent evaluations of denials
of requests for modifications. Servicers
are also complying with the Servicemembers Civil Relief Act and related state
laws and have engaged independent consultants to review all foreclosures in
which a military service member is known to have been on the loan.
also report ant they have developed and implemented anti-blight policies for
their owned real estate (REO) and are complying with state and federal laws
related to the rights of tenants in foreclosed properties.
Settlement establishes 29 metrics for servicing standards and the Monitor is
authorized to develop three more at his own discretion. He can also establish an unlimited number of
other new metrics to address any patterns of non-compliance that emerge. For that reason, Smith stresses that it is
important that consumers and their advocates report any negative experiences
through the OMSO website. The website, www.mortgageoversight.com, is
designed to inform the public about the settlement and invite comments. Smith said to date the website has received
about 1,300 distinct submissions from consumers about their experience and about
three-fourths of them report problems with their servicers.