Struggling to keep up with foreclosure complaints, JPMorgan Chase & Co., Bank of America Corp. and Citigroup have admitted to being understaffed during assessments released by the Federal Reserve (Fed). The banks were ordered to mend foreclosure and mortgage servicing due to large amounts of borrower complaints regarding lost paperwork, missed deadlines and unfulfilled assurances that ultimately cost homeowners their homes.
The Fed is demanding the implementation of new action plan documents that detail how the banks will strengthen staff training and communication with borrowers in order to limit foreclosures. After reviews concluded that a large number of their staff members had little to no experience in the home lending industry, JPMorgan, Bank of America and Citigroup are promising to require additional training of employees. Wells Fargo intends to hire a new chief compliance officer before further review of its staffing.
Although the Fed plans to closely monitor the implementation of the banks’ corrective policies, no concrete deadlines exist to mandate the bankers’ improvements.
first tuesday take: This public commentary on mortgage banking behavior with no mandate for corrections is old hat.
Since 2008, banks and everyone else have been more than aware of servicing inadequacies and the need for staffing to service delinquent loans and process foreclosures. With at least four years to improve delinquent loan processing, any increase in staffing desired by the lenders would have already taken place.
Instead, these banking institutions appear to be using their understaffed personnel as a deliberate ploy to not process loans that are not advantageous to their profit margins. Worse, reporting ever high levels of foreclosure would certainly result from better loan servicing. More foreclosures and disclosures of even more bad loans would instill fright in investors, further threatening the solvency of these banks. Thus, it is not in the best interest of banking institutions to process foreclosures quickly, much less efficiently through greater staffing and expenses.
There is no doubt the actions of these banks are detrimental to the nation’s economic recovery, no more so than the profitable but socially destructive lending techniques employed during the past decade. Still, for homeowners looking for optimism in a desperate part of their 25 billion dollar settlement over foreclosure practices, Bank of America is now offering cramdowns, somewhere at sometime for some loans. The sum California might get is less than 2% of the negative equity in all over-mortgaged homes in California.
In order to receive a cramdown, homeowners must first default on their mortgage by failing to make at least two monthly payments. Strategic defaults are now honored so the better informed may qualify for a cramdown, an alternative to a release from imprisonment by foreclosure – but only if the bankers hire staff to process the promised cramdown.
Re: “JPMorgan, BofA Strain for Qualified Staff to Clear Foreclosures” from Bloomberg News