Bank of America, Citigroup Faulted on Foreclosure Pact

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For Sale Real Estate Sign With Foreclosure Notice
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By Aruna Viswanatha

WASHINGTON -- Top U.S. banks including Bank of America and Citigroup failed to fully comply with a government settlement to correct mortgage servicing abuses, a monitor of the settlement said Wednesday.

Bank of America failed to file accurate documents in bankruptcy proceedings, and Citigroup's mortgage unit failed to notify borrowers about missing documents within 30 days of a request for a short sale, the monitor, Joseph Smith Jr., said.

The two banks have submitted plans to fix those problems and are in the process of correcting earlier failures, he said.

The problems stem from a $25 billion deal between federal and state authorities and five top mortgage servicers in 2012 designed to end foreclosure abuses.

Under the settlement, Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC) and Residential Capital were required to improve their procedures for dealing with struggling borrowers. They were also required to submit to dozens of tests to measure their improvement.

In a statement, Bank of America said it has "worked diligently" to comply with the terms of the settlement and to ensure struggling borrowers know they are being treated fairly.

The problems with the bankruptcy filings were limited to one quarter and impacted a "relatively small population," the bank said. %VIRTUAL-article-sponsoredlinks%It also said none of the problems resulted in inaccurate foreclosures or improper denials of requests to modify loans.

One bank, Wells Fargo, didn't fail any tests this year, according to Smith's report.

Smith said in a statement that while the banks still have additional work to do, he was hopeful the fixes would improve how borrowers are treated.

JPMorgan failed in some instances in 2013 to make decisions on borrower applications to modify loans within a timetable required, and it failed a test that measures whether loans were delinquent at the time a foreclosure was initiated, according to the report.

But Smith said those problems were not widespread at the bank and that JPMorgan had fixed the problems and compensated harmed borrowers.

A JPMorgan representative said in a statement, "We proactively addressed the monitor's findings and are pleased that he determined that our corrective action plan is complete."

In October, Bank of America and Wells Fargo pledged to improve communications with borrowers seeking to modify their loans, after authorities found additional problems not covered by the 2012 deal.

One state, New York, accused Wells Fargo in federal court of breaching the terms of the $25 billion deal and said the bank did not go far enough in its commitments. That dispute is pending.

Bank of America, Citigroup Faulted on Foreclosure Pact

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