CHARLOTTE, NC —
How to get help at the end of this article
A year ago, a $25 billion settlement ordered banks to do a better job helping troubled homeowners and end the stories of borrowers trapped in a confusing web of mortgage negotiations leading to foreclosure.
The stories, however, keep coming, even as banks take their required steps to improve how they handle homeowners in distress.
One of the most widely criticized practices was dual-tracking, in which banks pressed ahead with foreclosure proceedings while borrowers scrambled to get their loans modified.
The settlement was supposed to change that. The architects of the deal with Bank of America, Wells Fargo and three other major banks said the agreement would give troubled borrowers every opportunity to modify their loans before facing foreclosure.
But the rules spelled out in the settlement give banks the latitude in many cases to move toward a foreclosure sale even as they work with borrowers trying to save their homes.
Banks can send foreclosure notices and schedule court hearings and eviction dates all while a homeowner is filing paperwork for a loan modification.
The settlement did force some improvements: Banks cant actually sell the home while a modification is pending. And they cant start foreclosures against borrowers who seek help soon after becoming delinquent.
Still, the rules mean homeowners around the country can end up planning for foreclosure hearings while trying to work with their banks. Advocates and lawyers tell of borrowers having to juggle legal notices, loan modification applications and a search for a new place to live at the same time.
They think their loan is going to be modified. Theyre told not to worry about the pending foreclosure action, said Mal Maynard of the Wilmington-based Financial Protection Law Center. At the last possible minute, they learn that they will not get a modification and are thrown off the cliff into foreclosure.
The thought behind the provision is to give a borrower full and fair consideration for a loan modification before beginning the foreclosure proceeding. They are often deprived of that opportunity.
Both Bank of America and Wells Fargo say they are doing everything the settlement requires. Executives at both banks say their mortgage servicers repeatedly try to reach out to delinquent borrowers before referring a loan to foreclosure.
Randy Bockenstedt, senior vice president in customer contact and collections at Wells Fargo Home Mortgage, said he still believes borrowers have every opportunity to get a loan modification before facing foreclosure. He said many complaints about dual-tracking come from confusion about what the settlement requires and does not.
We dont stop working with a borrower just because theyve been referred to foreclosure, he said.
Janet Menetrier was surprised to be served a foreclosure notice on her Charlotte home in early December, just three months after Bank of America promised her a loan modification over the phone. The next month, she found three letters from the Charlotte bank in her mailbox.
The first said she was being considered for a loan modification on the home shed been battling for nearly six months to save from foreclosure.
The second said the bank needed more information to process her application.
The third said shed been denied for all loan modifications.
Each letter bore the same date, Jan. 12. And her foreclosure hearing had already been set for just three weeks away.
I thought they were supposed to make things better and easier, Menetrier said as she spread reams of paperwork across her kitchen table. What theyre doing is just wrong.
North Carolina Attorney General Roy Cooper, one of the chief negotiators of the settlement, said complaints to his office on servicing standards have gone down over the past year, but his office was unable to provide specific numbers.
We think things are significantly better, and it makes sense that they are, he said in an interview. But he said he was surprised to hear complaints like Menetriers.
If that is going on, Cooper said, that is a real problem.
Hundreds of complaints on the topic have been funneled to Joseph Smith, the former N.C. commissioner of banks who now serves as the settlements monitor. He confirmed to the Observer that the lingering examples of dual-tracking have been an area of discussion between him and the five banks in the settlement, but declined to elaborate.
I have heard from the consumers and consumer professionals who are concerned about dual-tracking, he said in an emailed statement. I will use the enforcement powers I have under the settlement to address those concerns.
State attorneys general negotiating the settlement originally wanted strict rules that banned all forms of dual-tracking. But after negotiations with banks and investors, the less stringent rules were agreed to as a compromise, said Iowa Attorney General Tom Miller.
Investors such as Fannie Mae and Freddie Mac, the government-sponsored entities that own nearly half of U.S. mortgages, were concerned that a tight ban on dual-tracking would cause foreclosures to drag on too long.
The public will know more about the banks servicing performance in late spring, when Smith files his first report on compliance with the federal court overseeing the settlement. If a bank is in violation of one of the terms of the settlement, Smith can ultimately impose fines. He does not have the ability to write new rules but can create new ways to measure compliance if Smith believes a provision, such as dual-tracking standards, is being violated.
Percentage of homes with a mortgage with negative equity, or underwater homes, in which borrowers owe more than the home is worth.
Dec. 31, 2012: 16.2%
Dec. 31, 2011: 15.7%
Dec. 31, 2012: 21.5%
Dec. 31, 2011: 22.8%
Completed foreclosures, past 12 months
January 2013: 10,464
January 2012: 8,230
January 2013: 760,632
January 2012: 860,128
If youre falling behind on your payments and need help:
• Call your lender:
Bank of America: 877-488-7814
JPMorgan Chase: 866-372-6901
Wells Fargo: 800-288-3212
• Call a housing counselor: 1-800-569-4287
If you feel your lender has treated you unfairly:
• Report a complaint at www.consumerfinance.gov/complaint/ • Report a complaint by calling 855-411-2372