The National Mortgage Settlement with five of the largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) set new standards for the servicing of loans, particularly loans in foreclosure. These new standards are designed to provide homeowners (both those in good standing and those in foreclosure) with more information, limit servicing abuses related to fees, prohibit dual-tracking, and more.
Read on to learn about the servicing requirements under the National Mortgage Settlement and what to do if your servicer does not comply.
(If you are struggling to pay your mortgage or facing imminent foreclosure, visit our Foreclosure section for help.)
In February 2012, 49 state attorneys general and the federal government reached a historic settlement with five of the nation’s largest banks. As part of the settlement, the banks must (among other things):
(Learn more about the National Mortgage Settlement, who is eligible for relief under the settlement, and the types of relief provided by the settlement in National Mortgage Settlement: Can You Benefit?)
The settlement applies to the following five major loan servicers:
To find out who your mortgage servicer is, look at your mortgage payment coupon. (A loan servicer is the company that you make your monthly mortgage payment to, which may be different than the owner of your loan).
Fannie Mae and Freddie Mac loans. Loans serviced by one of the servicers above, but owned by Fannie Mae or Freddie Mac, are not covered by the consumer relief part of the settlement. However, servicers must service Fannie and Freddie loans in compliance with the settlement’s servicing guidelines. (To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.knowyouroptions.com/loanlookupand www.freddiemac.com/mymortgage.)
The National Mortgage Settlement's servicing guidelines primarily address the most egregious servicing abuses that occurred in the past, such as robosigning and faulty loan ownership documentation. These servicing standards are in effect until the latter part of 2015.
Under the settlement, servicers must adhere to the following standards in the areas of general servicing requirements, pre-foreclosure notices, foreclosure documentation, and dual tracking.
Servicers are required to do certain things for all loans including:
(Learn about errors that servicers make when it comes to managing homeowners’ accounts in Nolo’s article Abuses by the Mortgage Servicing Industry).
At least 14 days before referring a case to foreclosure, the servicer must provide a notice to the homeowner that includes information such as:
(To learn more about loss mitigation and find out about options to avoid foreclosure, see our Alternatives to Foreclosure area.)
The notice must also include statements that the borrower may receive upon written request:
Pleadings, affidavits and default notices must be accurate, complete, and supported by competent and reliable evidence. This means that servicers must ensure that these documents are:
Additionally, servicers must act in accordance with state law notarization requirements, including signing in the presence of a notary.
The National Mortgage Settlement prohibits dual tracking and provides specific time frames in which a borrower must apply for a loan modification in order to stop the foreclosure process. (Dual tracking occurs when the mortgage servicer proceeds with foreclosure while simultaneously working with the borrower on a loan modification.)
Prior to foreclosure referral. If a borrower submits a complete loan modification application within 120 days of the delinquency, then the lender must review the borrower's package and make a decision before referring the loan to foreclosure. (If the borrower submits a substantially complete package, then the lender must give the borrower ten days to submit the remaining necessary documents.)
Once a complete application is received, the foreclosure cannot proceed until:
If the servicer issues a denial that gives rise to an appeal right, the servicer cannot proceed to a foreclosure sale until the appeals process is concluded.
After referral to foreclosure. If the borrower submits a complete loan modification application after the case is referred for foreclosure, the timelines are as follows.
Homeowners cannot directly enforce the terms of the settlement with their servicers. The Office of Mortgage Settlement Oversight (the entity overseeing the settlement) is tasked with ensuring that the banks comply with the servicing standards and consumer relief requirements outlined in the national mortgage settlement.
If you feel your servicer is not acting in compliance with the settlement, you can go to the Office of Mortgage Settlement Oversight’s webpage at www.mortgageoversight.com and click on “Report My Loan Issue” to fill out a form and make a complaint with the Consumer Financial Protection Bureau.
To learn more about the National Mortgage Settlement, go to http://nationalmortgagesettlement.com or contact your mortgage servicer.