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GAO Recommends Enhanced Oversight of HAMP Servicers' Fair Lending Compliance
On February 6, the GAO released a report of its review of Making Home Affordable (MHA)/Home Affordable Modification Program (HAMP) servicers’ compliance with fair lending laws. The GAO states that while the Treasury Department requires MHA servicers to develop internal control programs that monitor compliance with fair lending laws, Treasury has not assessed the extent to which servicers are meeting this requirement. Treasury noted that it shares HAMP loan-level data with the federal agencies responsible for fair lending enforcement. GAO states that its analysis of HAMP loan-level data from four large MHA servicers identified some statistically significant differences in the rate of denials and cancellations of trial modifications as well as in the potential for redefault between populations protected by fair lending laws and other populations. GAO acknowledges that its analysis alone cannot account for all factors that could explain these differences. It states that reviewing the fair lending internal controls of MHA servicers could give Treasury additional assurance that servicers are complying with fair lending laws. The report recommends that Treasury should (i) assess the extent to which servicers have established internal control programs to monitor compliance with fair lending laws, (ii) issue guidance to servicers on working effectively with limited English proficiency borrowers, and (iii) monitor servicers’ compliance with that guidance. Treasury noted that it was considering GAO’s recommendations and agreed that it should continue to strengthen its program.
Arkansas Amends Fair Mortgage Lending Act Regulations
On January 10, the Arkansas Securities Department finalized amendments to certain sections of the rules that implement the Fair Mortgage Lending Act. The regulations were adopted as proposed. The regulations were amended to expand disclosure requirements for new and transferred loans to include: (i) any notice required under federal law; (ii) a schedule of the ranges and categories of the servicer’s costs and fees for its servicing-related activities; and (iii) a notice that the servicer is licensed in the state and that complaints can be submitted to the Securities Department. The rule also prohibits advertising that indicates a consumer’s ability or likelihood to obtain any new mortgage credit product or term, or a refinancing or modification, has been preapproved or guaranteed. Finally, the rule, among other things, (i) expands payment processing requirements to include payments made via electronic transfer; and (ii) amends record keeping rules to require licensees to maintain records in a format compatible with electronic examination software, and to expand the types of documents servicers must maintain. The new rules take effect February 9, 2014.
Housing Advocacy Groups Press For National Mortgage Settlement Fair Servicing Data
On May 23, a group of 17 housing and advocacy organizations sent a letter to U.S. District Court Judge Rosemary Collyer – the judge presiding over the consent judgments that constitute the National Mortgage Settlement – questioning whether the homeowner relief activities of the mortgage servicers subject to that settlement are being conducted fairly with regard to borrowers in minority communities. The group urged Judge Collyer to require full public disclosure of the distribution of principal reduction and other loan modification benefits. In particular, the organizations are concerned that servicers may not be complying with state and federal fair housing laws in their distribution of loan modifications. The organizations ask that the servicers be required to report census tract and other data for each mortgage adjustment for which they seek credit under the settlement. In March, the group and other organizations sent a similar, more detailed request to National Mortgage Settlement Monitor Joseph Smith, pressing him to monitor and audit the fair lending compliance of the servicers involved in the settlement. To date, the Monitor has not publicly done so.
Housing Counselor Survey Alleges Banks Fail to Comply with National Mortgage Settlement.
On April 3, a California borrower advocacy organization published the results of its survey of housing counselors, which the organization claims reveals that problems persist with the implementation of the national servicing settlement’s servicing standards, including with regard to single points of contact, dual tracking, timelines, and documentation. The report also claims that borrowers of color and other groups face additional challenges to obtaining relief under the settlement. The report recommends that (i) the National Mortgage Settlement Monitor and state attorneys general collect, analyze and report the race, ethnicity, gender, and census tract of those who have received assistance and those who have not; (ii) the OCC and the Federal Reserve Board collect, analyze and make public the same data beyond the national settlement, and include all loss mitigation activity; (iii) the CFPB promptly issue a rule to establish new HMDA categories; (iv) the Monitor impose penalties on outliers; (v) the Monitor, the CFPB, and state AGs tighten rules around “complete loan mod app”, servicing transfers, and widows; (vi) regulators prioritize in the revamped Independent Foreclosure Review process principal reduction relief, keeping people in their homes, and restoring wrongful foreclosure victims to their homes by forcing servicers to go back through their files, rescind improper foreclosure sales, and fix mistakes; (vii) authorities provide more financial support for housing counseling and legal services; and (viii) regulators ensure that servicers have sufficient capacity and training to work with homeowners at risk of foreclosure.