As of October 2, the servicing standards included in the National Mortgage
Settlement went into effect. This means that the five largest banks in
the U.S. are no longer able to dual-track loan modifications and foreclosures.
If your lender is not Bank of America, GMAC, Citigroup, Chase, or Wells
Fargo, then it would appear that this practice may continue. Dual-tracking
is when a bank considers a borrower for a loan modification while simultaneously
pushing forward on the foreclosure process. I've seen an uncountable
number of people fall prey to this practice since the foreclosure crisis began.
Even since the National Mortgage Settlement was announced, there have been
complaints about dual tracking. Katie Porter provides some useful data at
Credit Slips. Although her data demonstrates a decline in the practice during September
of this year, the fact that many people do not file reports means the
number is likely higher. Moreover, her data is specific to California.
It would be interesting to see just how high the figures are for the whole nation.
The new servicing standards are not just concerned with dual-tracking.
Lenders are also required to have a single point of contact for borrowers
seeking assistance. As I mentioned
back in August, some lenders have already been implementing systems to assist with settlement
compliance. If your lender is violating the servicing standards, and your
lender is one of the banks that is a party to the settlement, then you
should contact your state Attorney General.
The settlement itself allows for a wide margin of error that allows the
participating servicers to get away with abuses that are otherwise prohibited.
If nobody reports bad behavior, then those limits will never be reached.
This is a major flaw with the settlement, but then again, the settlement
itself is full of major flaws. In order for this settlement to be even
marginally effective at deterring bad servicing practices, borrowers must
file complaints when problems arise.
I look forward to seeing more data come from the various settlement monitors.
The first reports are out, but I suspect that we'll see more useful
information now that servicers must comply with the servicing standards.