February 7, 2023

Monitor Finds Lenders Failing Terms of Settlement

The nation’s five biggest mortgage lenders have likely already satisfied their financial obligations under last year’s $25 billion settlement over mortgage abuses, helping hundreds of thousands of families keep their homes. But four of the five have yet to meet the settlement’s second goal: ending the maze of frustrations that borrowers must navigate in order to modify their loans, according to a report Wednesday by the settlement’s independent monitor.

Four of the banks failed to meet at least one of the 29 loan-servicing criteria they agreed to meet, like a requirement that borrowers be notified of any documents missing from their applications in a timely manner. The settlement requires that borrowers be notified within five days and given 30 days to supply the missing paperwork.

“I think what you see is there’s still a communication problem,” said Joseph A. Smith Jr., the monitor. “If there’s a unifying feature, it’s that the servicers who failed these things are not yet communicating effectively.” The banks report their own performance on the 29 criteria, and their findings are then tested in a random sampling by outside groups.

Citibank failed three metrics, two of which involve notifying borrowers of missing documents in a timely fashion and one that requires a letter containing accurate information be sent to a homeowner before foreclosure.

Bank of America failed two metrics, one regarding missing documents and the other regarding the pre-foreclosure letter. Wells Fargo also flunked on the missing documents.

JPMorgan Chase failed to adhere to the prescribed timeline for reviewing loan modification requests and notifying customers of its decision. It also failed to remove home insurance policies, known as forced-place insurance, within two weeks of a homeowner’s submitting proof that he or she had insurance.

The fifth lender, Ally Financial, whose mortgage servicing is now handled by other companies, was not found to have failed on any of the metrics.

was not found to have failed on any of the metrics.

The banks are required to submit a corrective action plan and compensate affected borrowers. Chase, for example, has already refunded insurance premiums charged to 2,000 borrowers. “We quickly fixed the issue,” said Amy Bonitatibus, a spokeswoman for Chase, adding that the timeline problem had been remedied as well.

Wells Fargo said that its internal reviews showed that it had already fixed its problem. Citi said it had already fixed one of its issues and was working on the other two.

Dan Frahm, a spokesman for Bank of America, which is responsible for about 60 percent of the total financial obligation under the settlement, said, “While neither area of noncompliance resulted in inaccurate foreclosures or improper loan modification denials, we took immediate action and resolved one area and will soon return to compliance in the other.”

The servicers also submitted to the monitor almost 60,000 complaints received from elected officials on behalf of their constituents. The most common complaints, the monitor’s report said, were related to the bank’s obligation to provide a single point of contact to borrowers seeking modification of their loans. There were also complaints about “dual tracking,” in which the foreclosure process is begun before a borrower’s request for a loan modification is resolved.

Despite the volume of complaints, none of the banks failed the requirement to provide a single point of contact, leading Mr. Smith to conclude that he needed to add more criteria in that area. He said at least three new metrics would be added.

The settlement came after the housing crash led to a wave of foreclosures across the country, and after widespread improprieties in mortgage lending and in the foreclosure process were uncovered.

Banks are subject to fines of up to $5 million if they do not improve their performance on a failed metric. But they are allowed a certain number of errors, usually 5 percent, before they are considered to have failed. Critics of the settlement point out that in contrast, homeowners seeking help are required to submit virtually perfect paperwork to prevent the loss of their homes.

Article source: http://www.nytimes.com/2013/06/20/business/economy/monitor-finds-lenders-failing-terms-of-settlement.html?partner=rss&emc=rss

DealBook: Doubt Is Cast on Consultants Hired to Fix Banks’ Abuses

Furniture is removed from a foreclosed house in Richmond, Calif.Justin Sullivan/Getty ImagesFurniture is removed from a foreclosed house in Richmond, Calif.

Federal authorities are scrutinizing private consultants hired to clean up financial misdeeds like money laundering and foreclosure abuses, taking aim at an industry that is paid billions of dollars by the same banks it is expected to police.

The consultants operate with scant supervision and produce mixed results, according to government documents and interviews with prosecutors and regulators. In one case, the consulting firms enabled the wrongdoing. The deficiencies, officials say, can leave consumers vulnerable and allow tainted money to flow through the financial system.

“How can you be independent if you’re hired by the entity you’re reviewing?” Senator Jack Reed, Democrat of Rhode Island, who sits on the Senate Banking Committee, said.

The pitfalls were exposed last month when federal regulators halted a broad effort to help millions of homeowners in foreclosure. The regulators reached an $8.5 billion settlement with banks, scuttling a flawed foreclosure review run by eight consulting firms. In the end, borrowers hurt by shoddy practices are likely to receive less money than they deserve, regulators said.

On Thursday, Senator Elizabeth Warren, Democrat of Massachusetts, and Representative Elijah Cummings, Democrat of Maryland, announced that they would open an investigation into the foreclosure review, seeking “additional information about the scope of the harms found.”

Critics concede that regulators have little choice but to hire outsiders for certain responsibilities after they find problems at the banks. The government does not have the resources to ensure that banks follow the rules. Still, consultants like Deloitte Touche and the Promontory Financial Group can add to regulators’ headaches, the government documents and interviews indicate. Some banks that work with consultants continue to run afoul of the law. At other times, consultants underestimate the extent of the misdeeds or facilitate them, preventing regulators from holding institutions accountable.

Now, regulators and lawmakers are rethinking their relationship with the consultants. Officials at the Federal Reserve, which oversees many large banks, are questioning the prudence of relying on consultants so heavily, said two people with direct knowledge of the matter.

When the Office of the Comptroller of the Currency penalized JPMorgan Chase last month for breakdowns in money-laundering controls, it imposed stricter requirements, ordering the bank to hire a consultant with “specialized experience” in money laundering and to ensure that the firm “not be subject to any conflict of interest.” In a separate action against the bank related to a $6 billion trading loss last year, the agency opted not to mandate an outside consultant at all.

While the comptroller’s office will continue requiring consultants in certain cases, some agency officials are worried about the quality of the work, as well as the consultants’ independence, according to three government officials briefed on the matter.

Since the financial crisis, regulators have increasingly relied on consultants. The comptroller’s office ordered banks to hire consultants in more than 130 enforcement actions since 2008, or nearly 15 percent of the cases.

It can be a lucrative business. In 2011, regulators mandated that 14 banks employ consultants to determine whether homeowners were wrongfully evicted. Over 14 months, the consultants collected about $2 billion in fees, according to regulators and bank officials.

Those fees amounted to more than half of what homeowners will receive under the $8.5 billion settlement that ended the review. As part of the deal, officials will disburse $3.3 billion to 3.8 million borrowers in foreclosure.

According to consultants and regulators, the broad review was plagued with inefficiencies. For example, Promontory initially instructed employees to calculate lawyers’ fees for each loan, to assess if borrowers were overcharged. Later, it scrapped the original procedure, only to reverse the policy again two weeks later, according to two reviewers who worked for Promontory.

“From Day 1, Promontory strove to conduct its review work as thoroughly and independently as possible,” a spokesman for the firm, Christopher Winans, said in a statement. “Our overarching concern at all times was to serve the best interests of borrowers.”

Some lawmakers question whether a consultant’s regulatory connections helped it secure contracts. PricewaterhouseCoopers, which has a stable of former Securities and Exchange Commission officials, won much of the foreclosure review work, signing deals with four banks, including Citigroup. Promontory, the firm examining loans for Wells Fargo, Bank of America and PNC, was founded in 2000 by the former head of the comptroller’s office, Eugene A. Ludwig.

When the contracts were initially awarded, some housing advocates complained that consulting firms could not objectively evaluate banks with which they had pre-existing business relationships. The comptroller’s office said it vetted the firms to spot such potential conflicts, and argued that the process provided swifter relief for homeowners than if the government had hired the companies directly through a lengthy contracting process.

But concerns persisted. Deloitte, which won the contract to review JPMorgan’s loans, had previously audited Washington Mutual and Bear Stearns, two firms JPMorgan acquired during the financial crisis. In May, the comptroller’s office replaced Allonhill, the consultant for Aurora Bank, after the firm disclosed that it had already reviewed some “of the same pool of loans” as part of an earlier contract.

“It’s clear from the foreclosure settlement that oversight over consultants was inadequate and the review process was deeply flawed,” said Representative Carolyn B. Maloney, Democrat of New York, who recently pressed regulators to detail how consultants were paid. People close to the review say consultants relied on a process that the comptroller’s office designed in 2011, under previous leadership.

“This was a very complex process,” a spokesman for the comptroller said. “Throughout the process, regulators provided continuous oversight, guidance and were available to discuss issues.” The agency also performs spot checks on the consultants.

Still, the foreclosure review highlighted broader concerns about the role consultants play.

Since the financial crisis, the comptroller’s office has issued nearly 20 enforcement actions against banks that had already hired consultants to help iron out problems, according to government documents. While consultants cannot be expected to remedy every last issue at the banks, the actions raise questions about the effectiveness of their work.

When HSBC, the British bank, was sanctioned in 2003 over porous money-laundering controls, the bank turned to Deloitte to review its compliance, an official briefed on the matter said. Deloitte also worked for HSBC from 2006 to 2008, the person said, building a system to monitor money flows more effectively. But the bank ran into trouble in 2010 over similar issues, as highlighted in a recent scathing report by the Senate’s Permanent Subcommittee on Investigations.

As part of a regulatory order, HSBC again hired Deloitte, this time to assess the number of times the bank failed to report suspicious transactions. Deloitte, three officials said, generously bundled hundreds of missed transfers into a single report. That helped save the bank from some government fines.

Despite the undercounting, HSBC still paid a record $1.9 billion last year to settle accusations that it enabled drug cartels to move money through its American subsidiaries.

In a statement, a spokesman for the firm said, “Deloitte fully stands behind the quality and integrity of its work on behalf of regulatory authorities.”

Deloitte has also been suspected of helping institutions cloak illicit transfers of money to rogue nations around the globe. In August, New York’s top banking regulator, Benjamin M. Lawsky, accused Deloitte of helping the British bank Standard Chartered flout American sanctions.

The consulting firm was hired to flag suspicious transfers routed through Standard Chartered’s New York branches. Instead, it instructed bankers on how to escape regulatory scrutiny, according to state court documents.

Deloitte turned over “highly confidential information” from which the bank gleaned insight into “regulators’ concerns and strategies,” the court documents said. The firm later doctored its report to regulators, Mr. Lawsky said, deliberately removing some illegal transfers on behalf of Iranian clients. In an e-mail, a Deloitte partner admitted that a report on the transactions was a “watered-down version.”

The authorities never took legal action against Deloitte, and federal officials noted in a separate settlement agreement that Standard Chartered employees withheld critical information from the consulting firm.

Despite these concerns, regulators are turning to a familiar source to help Standard Chartered. As part of a $327 million settlement last year, the bank is required to hire “an independent consultant.”

Article source: http://dealbook.nytimes.com/2013/01/31/doubt-is-cast-on-firms-hired-to-help-banks/?partner=rss&emc=rss

In a New York Village, the Bank Around the Corner

AS winter approached, a retired secretary here named Carol Bonner was putting snow tires on her car when she noticed that her back-right rim was bent. Ms. Bonner took the car to Otto’s Auto Body Shop and got bad news: the work was going to run her $244 — more than half of her $417 monthly pension check.

Without a credit card or enough saved up to replace the rim herself, Ms. Bonner, who is 61 and cares for her sister Jane, who is disabled, did the only thing she could do: she went down to the Bank of Cattaraugus and took out a $300 loan. The bank, in a reversal of the usual process, had bailed her out before. A few years ago, when Ms. Bonner fell behind on her property taxes and was forced to sell her home, the bank’s president, Patrick J. Cullen, who held the mortgage on the house, had his son Thomas buy it. Thomas Cullen, who lives in Chicago, never intended to live there. Ms. Bonner and her sister were able to stay as renters.

“The whole thing was incredible,” Ms. Bonner said the other day, a single pine branch hanging in her living room in lieu of a full Christmas tree, which she could not afford. “I just didn’t realize there were people like that in the world, people who would help you.

“Especially,” she said, “a banker.”

This has not exactly been a time of great love for bankers. Amid the continuing foreclosure crisis and Occupy Wall Street’s campaign against “the 1 percent,” it is easy to forget that not all banks are complicated giants, trading in derivatives and re-hypothecating valueless collateral. The Bank of Cattaraugus, for example, is by asset size the state’s smallest bank (one branch, eight employees, no credit default swaps) and yet it plays an outsize role in this hilly village an hour south of Buffalo: housing its deposits, lending to its neediest inhabitants and recently granting forbearance on a mortgage when the borrower, a bus mechanic, temporarily lost his job after shooting off his finger while holstering his gun.

If it sounds old-fashioned, it is. It’s not the kind of bank you’ll find anymore in New York City, where multiple branches and capitalizations counted in 10 figures are the norm. With $12 million in total assets, the Bank of Cattaraugus is a microbank, well below the $10 billion ceiling that defines small banks. It exists in a seemingly different universe from the mammoth banks-turned-financial-services-conglomerates, like Citigroup ($1.9 trillion in assets) or JPMorgan Chase ($2.25 trillion).

With obvious exceptions, business at the Bank of Cattaraugus hasn’t changed much since 1882, when 20 prominent residents — among them a Civil War surgeon and a cousin of Davy Crockett — established the bank to safeguard townsfolk’s money and to finance local commerce.

In its 130-year history, the bank has rarely booked a profit for itself in excess of $50,000. Last year, Mr. Cullen said, it made $5,000. He and his officers are industry anomalies: bankers who avoid high-risk and high-growth tactics in order to reinvest in their community’s economy.

“My examiners always ask me, ‘When are you going to grow?’ ” said Mr. Cullen, a Cattaraugus native who is 64 and has the prosperous stoutness of a storybook banker. “But where is it written I have to grow? We take care of our customers. The truth is we probably couldn’t grow too much in a town like this.”

While it faces many of the same regulations that govern larger banks, it operates according to an antiquated theory of the business: that a bank should be a utility, like the power company, and serve as a broker between savers and borrowers in its community.

Cattaraugus, nestled in the woods of the misleadingly named Rich Valley, is a town of limited prospects. (“We’re not on the way to anywhere,” Mr. Cullen said.) Manufacturing, which once thrived here, has more or less died — except for the Setterstix factory on South Main Street, which produces paper lollipop handles. The largest employer in the village is the school district, and many village residents survive, like Ms. Bonner, on pensions or government subsidies, in homes that have an average mortgage of $30,000.

Mr. Cullen’s bank is the only one in town — the next-closest is in Little Valley, seven miles away.

In this difficult environment, Mr. Cullen — like the bank’s former president, his father, L. E. Cullen — occupies a paternal, if not quite paternalistic, position: a well-to-do man who is sufficiently familiar with the local economy that he does not use credit scores when handing out a loan.

“Numbers don’t tell the story here,” he said one day, relating the tale of an Amish customer who wanted $85,000 to consolidate his debts. Even though the man earned only $2,300 a year — from selling greenhouse starter kits — Mr. Cullen gave him the loan.

Article source: http://feeds.nytimes.com/click.phdo?i=d7ddeab99e51ce04790b6c57d83401c2

Bucks Blog: Consumer Bureau Is Taking Your Mortgage Complaints

Associated Press

The Consumer Financial Protection Bureau is now taking complaints about mortgages on its Web site.

The online form lets consumers choose a category from a drop-down menu, like problems in the application process or encountering difficulty making payments. It asks them to describe their problem in their own words, and to specify what they are seeking as a solution. Borrowers can also upload supporting electronic documents and submit them with the form. Once the complaint is submitted, the agency forwards it to the lender and gives borrowers a tracking number so they can monitor the progress of filing.

If you need help filling out the form, you can get help through an online chat function from 8 a.m. to 8 p.m. Eastern Time, Monday through Friday.

Home loans are likely to provide ample fodder for complaints.  A recent analysis suggested the country is not even halfway through resolving the foreclosure crisis.

The agency is moving ahead with this initiative even as its proposed director, Richard Cordray, a former attorney general of Ohio, is the subject of a contentious confirmation battle in Congress.

Mortgages are the latest category of complaints to be fielded by the agency, which opened for business in July. It first began accepting credit-card related complaints and handled roughly 5,000 submissions in its first three months, according to an update published last week. Companies reported resolving more than 3,100 of the complaints, with about 400 consumers, or 13 percent, disputing the adequacy of the response.

By the end of next year, the agency expects to handle complaints about all financial products and services.

Do you have a complaint about your mortgage? Let us know what you think of the bureau’s online form.

Article source: http://feeds.nytimes.com/click.phdo?i=62fbe15f6a102de8dcdf639bb296f822

In North Las Vegas, New City Hall Is a Reminder of Flush Days

It is not hard to spot the vacant strip malls; several were never occupied at all.

For more than a year, the city has teetered on the brink of insolvency. But last week, officials began moving into the gleaming new City Hall, a building that cost roughly $130 million to build. There are marble floors and granite tabletops, solar panels and scores of televisions, in addition to an outdoor concert plaza.

Officials have grand dreams about the grand first floor’s serving as a one-stop shop for people paying their taxes or getting permits for new homes and businesses. But nobody is quite certain when the lines will start to form. Ask the city manager, Timothy Hacker, if North Las Vegas has hit bottom yet and he answers cautiously: “We’re darn near close.”

As cities across the West grapple with huge numbers of foreclosures and dwindling populations, the North Las Vegas City Hall stands as an odd symbol of the shimmery golden past’s contrasting with the murky gray present.

This was once one of the fastest growing cities in the country. It was just two years ago when the Police Department would complain that it did not know of all the new streets (with sunny names like Pink Petticoat and Carefree Beauty). But now the city is perhaps among the most brutally pummeled places.

Nearly a third of all homes are in foreclosure. The houses that are occupied are worth less than half of what they were two years ago. But people here still focus on what it could have been and maybe, just maybe, what it could still be.

This year, the city was facing a $9 million deficit and the prospect that it might not be able to make payroll. State officials began murmuring that they could move to take over the municipality if it became fiscally insolvent. One official said that unless the city “hit the jackpot,” bankruptcy was imminent. This fall, the city reached a deal with unions to delay cost-of-living raises, averting a crisis for now.

But the future is still grim — the city’s bond rating was downgraded again last month, and officials acknowledge that they could be in the same precarious position next year, when the city faces a $15.5 million budget gap. They hope that a new veterans’ hospital and an outpost of the University of Nevada, Las Vegas, will help the economy, but they know those additions will not provide the same kind of quick cash that property taxes once did.

“It will take us 20 years to get to where we were three years ago in terms of collecting tax revenue,” said Al Noyola, the city’s interim finance director. “We have to get to a point where we aren’t relying on housing to drive our engine.”

When North Las Vegas started to draw up plans for the new City Hall some five years ago, cash flow was no problem. The city was hiring more and more workers to deal with the population influx, and workers were jammed up against one another in several gray, squat, 1960s-era municipal buildings. At the time, the plan was to tear down the existing City Hall and build a new police station.

During the good times, the city created parks filled with features that would make even the wealthiest towns envious — a life-size stegosaurus in one, fully lighted tennis courts in another. It created recreation centers with top-of-the-line equipment and built new libraries in rapidly expanding corners of the community. And it drew up plans for City Hall, with a wellness center where bureaucrats could work out between their civic tasks.

Article source: http://feeds.nytimes.com/click.phdo?i=88cbe77df93fa4fe2d9d27b81a48fe78

Economix: Is Another Housing Crash Coming?

Mark Zandi, chief economist at Moody's Analytics.Mark Zandi, chief economist at Moody’s Analytics.

Looking at the relative prices of buying and renting homes in Silicon Valley, Manhattan and a few other places is enough to make you wonder whether parts of the housing market are still due for a crash. To consider that question in more detail, I had a conversation with Mark Zandi, the chief economist at Moody’s Analytics, which provided much of the data for my column:

Q. I’m struck at how much higher the rent ratio still is in many places, relative to its average from 1990 to 2010. It’s about 18 in Washington (relative to a 1990-2010 average of 13), about 17 in Boston (relative to 15) and 15 across all metropolitan areas (relative to 11). Is there any reason to think the ratio should remain higher in the future than it was in the not-too-distant past? Or should we expect the ratio to continue falling in coming years, either through further house-price declines or through rent increases?

Mr. Zandi: I expect the house-price-to-rent ratio to continue falling at least through the remainder of this year and next. National house prices are set to decline by 5 percent this year, and apartment rents are on track to rise by about 5 percent. I do expect house prices to stabilize in 2012, but rents will continue to rise strongly.

Supporting the strong rent growth is declining apartment vacancy rates. Apartment demand is healthy given the better job market and accelerating household formation, particularly among younger households that generally rent, and the ongoing foreclosure crisis which is forcing families from home ownership into renting. Apartment construction is also especially low by historical standards. If this script roughly holds, the house-price-to-rent ratio will be back close to its long-run average in most areas of the country by 2013.

Q. What about the Bay Area? The ratio is still an astronomical 35 in the East Bay, 31 in San Jose and 27 in San Francisco. Given what the national housing market has been through in the past several years, how are we supposed to believe that Northern California is not suffering from a major housing bubble right now?

Mr. Zandi: No, I don’t think the Bay Area of California is currently suffering a housing bubble, despite the region’s still historically high house-price-to-rent ratios. Supporting the region’s higher price-to-rent ratio is mounting demand from overseas investors given the region’s very significant global economic links. The rapid growth of Asian economies over the past 20 years, with strong links to the Bay Area’s economy via international trade, immigration and investment, is especially important.

Californians have also been conditioned to buy homes during housing busts. The California housing market has been through many ups and downs, and if history is any guide, people who buy on the downs are rewarded in the long run. The Bay Area housing market is very supply-constrained, which means that house prices rise quickly once housing demand picks up even a little bit.

Having said this, I wouldn’t be surprised in Bay Area house prices take longer to rev up than in times past given the current very debilitating housing crash, allowing rents to catch up, at least partially.

Q. When we were talking earlier, you mentioned that a straight comparison of rents and prices argues for renting in most places — but that once you consider other factors, the issue becomes a closer call. Can you explain what you meant?

Mr. Zandi: A literal interpretation of the current house-price-to-rent ratio argues that it is still better for most households to rent rather than buy. This suggests that a prospective home buyer might want to wait until house prices fall even more before buying, but there are several important things to consider.

Most of the coming house price declines will be for distressed properties — foreclosures and short sales. In fact, prices for nondistressed homes are holding up well and may very well have hit bottom. And timing the precise bottom of house prices is an intrepid affair, and may not the best strategy if the homeowner plans to live in their home for more than a couple of years, as most homeowners do.

It is also important to keep in mind that mortgage rates are extraordinarily low, with the rate on a 30-year fixed rate mortgage currently well below 5 percent. Rates could go lower, but it is unlikely. As the economy continues to gain traction and the Federal Reserve ends its zero interest rate policy, mortgage rates will move higher. Indeed, in a well-functioning economy fixed mortgage rates will be closer to 6 percent.

The still high price-to-rent ratio means that home buyers shouldn’t be in a rush to buy a home, but owning is quickly looking more attractive, and it won’t be long before owning is once again more financially attractive than renting.

Article source: http://feeds.nytimes.com/click.phdo?i=20804468a9515ca0a3167ca99149ab9d