Who will break the National Bank Settlement rules first?

Do you think the Homeowner Bill of Rights will definitively improve the California real estate market?

No. (50%, 7 Votes)
Yes. (29%, 4 Votes)
Only modestly. (21%, 3 Votes)

Total Voters: 14

The National Mortgage Settlement monitor, Joseph A. Smith, is beginning to exercise his powers by implementing new rules over the Big Banks included in the $25 billion settlement. These banks include Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial and Citigroup.

Having failed to previously adhere to many of the standards, 300 new rules for servicers will go into effect next month, including:

providing a single point of contact for homeowners seeking a loan modification;
no more than 30 days for banks to review a loan modification application; and
prohibiting dual-tracking, pursuing foreclosure while a modification is pending.

All of the banks, except Citigroup, have stated they will begin following the new rules by October 2nd. Citgroup has remained mute on the matter.

Homeowners can lodge complaints against their non-compliant bank if it was included under the settlement at the mortgage oversight website.

first tuesday insight

Smith has made a laudable effort at policing the untamable Big Banks involved in the National Settlement completed early this year (Smith was President Obama’s original pick for DeMarco “The Arrogant’s” job as head of the Federal Housing Finance Agency (FHFA)).

However, what power does he actually have to enforce the new settlement rules if the banks don’t cooperate?

Can he fine Citigroup if they allow several points of contact with a distressed homeowner? Or, if Bank of America takes two years to respond to a loan modification application (as they have been known to do), will the settlement monitor have any recourse?

No! Smith has zero power to discipline banks involved in the settlement. His authority is limited to making recommendations on further action to the United States District Court. Thus, it appears it is left up to the banks to decide if they want to follow the rules or not. If history is any indication, we’re thinking the banks aren’t going to play along unless their arms are twisted. But by who? The court.

On the brighter side, Californians have little to fear: the California Homeowner Bill of Rights, championed by the California Attorney General (AG), Kamala Harris, extends the key portions of the settlement beyond their nationwide term of three years, and offers these protections to all California homeowners regardless of which bank (including those not involved in the settlement) services the loan.

The portions of the Homeowners Bill of Rights passed thus far prohibit:

dual-tracking;
robo-signing (improperly processing foreclosure documents without conducting the proper due diligence); and
assigning distressed homeowners more than one point of contact.

The Homeowner Bill of Rights also:

allows buyers of blighted property up to 60 days to begin repairs before being fined by local government agencies; and
extends the requirement for buyers of foreclosed homes to honor the terms of existing leases, giving tenants at least 90 days notice before beginning the eviction process. [See first tuesday Form 573]

The California AG, district generals and city attorneys have the power to fine rule breakers – a big step up from the settlement monitor’s diminutive “powers,” which lack teeth. Setting an excellent example of how more regulation can lead to greater end user demand, California has become a more desirable place to own a home as a result of the AG’s efforts. As always, California continues to lead the way.