In an effort to reduce redundancy in the mortgage modification process, the ‘Big Five’ servicers agree to make the response time longer before starting the foreclosure process.
The big five, commonly referred to, are Bank of America, Citibank, Wells Fargo, Ally Bank, and JP Morgan/Chase.
One of the changes to the response time is an additional 30 days to submit documentation for a mortgage modification. The reason for this is due to servicers’ multiple requests for documentation from different bank representatives and departments.
Bank of America and Wells Fargo went beyond that though. They also claimed they will be adding more personnel to work with borrowers on loan mods.
With additional personnel, the two banks will be appointing a dedicated representative to work directly with housing agencies that borrowers are using.
Lastly, B of A and Wells said they will be using a web-based portal in order to share documents between departments rather than the multiple requests to the borrower, thus making the qualification process more streamlined for both the bank and the borrower.
Illinois Attorney General, Lisa Madigan, has made mortgage servicers one of her focuses especially after receiving a flood of complaints from a number of legal aid groups, housing counselors and even borrowers.
Madigan is also a member of the National Mortgage Settlement Monitoring Committee, which oversees the multi-billion dollar national mortgage settlement.
Her staff discovered earlier this year that 60% of the loan modification files in Illinois, servicers failed to comply in at least one requirement of the national mortgage settlement guidelines.
Additionally, 45% of the files showed multiple document requests from servicers.
Kevin Kanouff, CEO of Statebridge Co, a specialty servicer offered his own observation;
"I do not know if this is needed at larger servicing shops, but what I find striking is that borrowers seem to have no difficulty producing timely documentation on purchase mortgages, but some have a hard time producing documentation when they want a mod.The documentation requested on a mod is less than on a purchase, but some borrowers feel that they are entitled to mods and therefore should not have to prove their financial condition to justify a mod."
He went on to say, "This is not difficult for servicers to implement, but this will primarily increase foreclosure timelines in this jurisdiction leading to reduced home values."
The typical foreclosure timeline in Illinois is around 2 years, from the initial filing to an auction sale, which means, if the modification should not qualify, then that additional 30 days creates an even larger domino effect in the existing foreclosure pipeline.
Although sharing documentation electronically will be efficient for both bank and borrower, and the additional bank representatives appointed as direct liaisons for outside agencies assisting borrowers, this begs the question; Is the lengthened response time even necessary? Or is this just another way to delay the ultimate inevitable?