Why don’t banks live up to their mortgage promises?

Thought the news about the big banks’ mismanagement of the housing/mortgage crisis couldn’t get worse? Two new reports are out. You were wrong.

Federal regulators required the first report as part of the execution of the January settlement with the nation’s largest lenders. This $8.5 billion settlement was agreed to when it was shown that the banks had failed to live up to the terms of their earlier 2011 agreement with the regulators, and had spent more than $1 billion on consultants while providing relatively little relief to wronged borrowers.

Perhaps the worst part of this report was the fact that some of our largest banks improperly foreclosed on many more people than previously reported. Included were more than 700 members of the military and a number of families who were evicted even though they were current on their payments. Under the Serviceman’s Civil Relief Act, mortgage lenders cannot foreclose, or seize property while a service member is on active duty without court approval.

As Retired Air Force Col. John S Odom Jr., who represents military personnel on foreclosure issues, said: “It’s absolutely devastating to be 7,000 miles from your home fighting for this country and get a message that your family is being evicted. We have been sounding the alarms that the banks are illegally evicting the very men and women who are out there fighting for this country. This is a devastating confirmation of that.”

The second report came from the monitor of the March 2012 National Mortgage Settlement between large banks and the state Attorneys General. That $25 billion settlement was the largest mortgage settlement in U.S. history. It was the result of the Attorneys General uncovering widespread problems with the banks’ servicing of mortgages. Mortgage documents had been lost, forged or misrepresented in what came to be known as the “robo signing” scandal.

The monitor’s recent report covered what had happened during the nine months immediately following the settlement. In that time, only 50,000 people had the principle on their first mortgage modified to lower their obligation. That accounted for only 14 percent of the settlement money, much less than the 30 percent that was specifically set aside for reduction of the principle on first mortgages. This delay in reaching the agreed-to rate of first mortgage principle reduction means that as time passes more and more homeowners will be forced into foreclosure.

Originally published 9 March 2013 on delawareonline.com