California
Reinvestment
Coalition

Chasm Between Words
and Deeds VIII:
Lack of Bank
Accountability Plagues
Californians
April 2012
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 Introduction
The recent multi-state settlement agreement between 49 state Attorneys General and the Big 5
Banks represents a turning point in the foreclosure crisis that has now plagued California for
over five years. The relief provided to consumers under the agreement was not commensurate
with the harm caused to struggling families and communities throughout the state and nation.
However, it imposes important new standards on loan servicers, creates obligations to modify
loans and reduce loan principal, and creates mechanisms that could finally hold banks
accountable to their promises.
The foreclosure crisis has devastated California’s communities, especially its communities of
color. In January, nine out of the 10 metropolitan areas with the highest foreclosure rates in the
nation were in California.1 Unfortunately, there is no end in sight. Currently over two million
California homeowners are underwater, owing more on their homes than they are worth2.
Since the housing bubble started to collapse in late 2006, the state and nation have struggled to
develop effective foreclosure prevention strategies. Since then, many government and industry
programs have come and gone. These proposals have differed from one another, and each has
suffered from different drawbacks. But ultimately, all of the proposals and programs have failed
in light of industry intransigence and the inability of policy makers to hold banking institutions
accountable to the requirements of these programs.
In fact, San Francisco Assessor-Recorder Phil Ting recently released a report documenting his
office’s audit of 382 San Francisco homes that went through foreclosure from 2009-2011. The
audit revealed that 84% of sampled foreclosures contained at least one clear violation of
California’s foreclosure laws.3
CRC began surveying housing counselors in 2007 in order to highlight the huge disconnect
between what the banking industry was saying about its performance on foreclosure prevention
initiatives, and what consumers and their advocates were experiencing on the ground. Housing
counselors are on the frontline of the efforts to help homeowners stay in their homes and their
responses help fill a crucial data gap.
CRC’s January/February 2012 survey collected responses from more than 70 counselors
representing 50 housing counseling agencies across California that collectively serve thousands
of borrowers a month. This is CRC’s eighth survey since 2007. Sadly, little has changed over
these years. Without enforcement of clear obligations and imposing real consequences for bank’s
failure to comply, it is difficult to expect better outcomes for borrowers and communities.

1

RealtyTrac January 2012 Foreclosure Report, http://www.realtytrac.com/content/foreclosure-marketreport/january-2012-us-foreclosure-market-report-7022.
2
NPR, California to sign mortgage settlement, February 9, 2012, http://www.npr.org/2012/02/09/146626629/n-ycalifornia-to-sign-mortgage-settlement
3
“Assessor-Recorder Phil Ting Uncovers Widespread Mortgage Industry Irregularity in San Francisco Foreclosures
[Press Release],” Office of the Assessor-Recorder of San Francisco, February 15, 2012.

1

 This survey focuses on six key problems still confronting California homeowners. The findings
of this report are organized by the six findings identified here.
Finding #1: The dual track continues to devastate families and challenge housing counselors;
Finding #2: Principal reduction loan modifications are needed, but still rare;
Finding #3: Fair housing concerns have not been addressed amidst concerns that hard hit
borrowers and communities fare worse in getting loan modifications;
Finding #4: The federal Independent Foreclosure Review process represents a poor federal
response to abusive foreclosure practices
Finding #5: The need for nonprofit housing counselors has never been greater, yet their capacity
is shrinking; and
Finding #6: Servicers continue to do a poor job of preventing unnecessary foreclosures, though
some servicers are worse than others.

Finding #1: “Dual track” problems continue to devastate families
and challenge housing counselors.
“This is still the worst problem our clients face. The frustration of dealing with months and
years of the loan modification morass only to have the house sold out from under the
borrower is unacceptable. Fannie Mae should be investigated for all the dual track
foreclosures they have caused.”
Previous CRC surveys indicated that the “dual track” problem, where loan servicers proceed
with foreclosure against a homeowner who is working in good faith to negotiate a loan
modification, is a major problem.




This year 100% of counselors reported that the foreclosure process “often” or
“sometimes” started or continued while a modification application was still under review,
up from 95% last year (see Chart 1 below).
Meanwhile, 86% of counselors reported that clients “often” or “sometimes” have their
home sold while a modification application is still under review.
It is notable that 78% of counselors reported that homes were “often” or “sometimes”
sold in violation of HAMP rules and 70% were “often” or “sometimes” sold in violation
of GSE rules.

These last two points highlight the need for laws and regulations to come with strong
enforcement mechanisms and penalties to create incentives for servicers to comply, and provide
redress to household when servicers do not comply.

2

 Chart 1: Dual Track Problems Persist

Source: CRC Counselor Survey January/February 2012

When housing counselors were asked how common dual track issues were with the Big 4
Servicers, the most common response was that dual track was “always” a problem (see Chart 2).
Chart 2: Dual Track Among Big 4 Servicers

% Counselors Responding

60%

55%
50%

49%

50%

46%

40%
26%

30%
20%

20%

23%

21%
14%

20%18%

19%
14%

12%
7%

10%
2%

1% 1%

1%

0%

0%
Bank of America

Citibank
Always

JPMorgan Chase

Almost always

Sometimes

Rarely

Wells Fargo
Never

Source: CRC Counselor Survey January/February 2012

3

 


Bank of America had the worst track record, with 75% of counselors reporting that dual
track problems “always” and “almost always” occurred.
JPMorgan Chase came next with 72%, then Wells Fargo with 70% and finally Citibank
with 63% of counselors reporting that dual track issues “always” or “almost always” took
place.

This problem is evident on a national scale too. A February 2012 nationwide survey by the
National Association of Consumer Advocates (NACA), the National Consumer Law Center
(NCLC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) also found
dual track to be a major problem.4 The survey found that over 90% of respondents represented a
homeowner placed in foreclosure while awaiting a loan modification. Of these, 85% represented
a homeowner awaiting a HAMP loan modification and 66% represented homeowners with
Fannie or Freddie loans. Over 80% of respondents represented a homeowner over the last year
where the actual foreclosure sale was attempted while the borrower was awaiting a loan
modification.
The dual track problem creates stress and uncertainty for clients who then become more focused
on foreclosure than the workout process. It is demoralizing and devastating when people have
the hope of a modification and then their home is suddenly up for sale or sold. In their
desperation, clients become easy targets for scams or are pressured into a short sale or
bankruptcy to postpone the sale date.
Since counselors have to keep track of and fight for a modification and a sale date postponement,
the dual track problem also strains limited staff and resources of nonprofit housing counselors.
Ultimately, dual track makes modifications more difficult, leads to more unnecessary
foreclosures, and prevents counselors from serving more clients.
One of the housing counselors said it best, “This causes a lot of stress for the client while they
are trying to get their modifications and it causes a lot of extra work for us as we are having to
not only fight for the modification but are also fighting in many cases to get the sale dates
postponed at the same time.”
Another housing counselor from San Diego reports, “it makes it difficult to resolve mortgages
when there is uncertainty as to if the home will be sold. Also, it drives many clients to bankruptcy
trying to stop the sale date rather than achieving a final resolution with the lender.”

4

”Servicers Continue to Wrongfully Initiate Foreclosures: All Types of Loans Affected”, National Association of
Consumer Advocates (NACA), the National Consumer Law Center (NCLC) and the National Association of
Consumer Bankruptcy Attorneys (NACBA), February 22, 2012, available at http://www.nclc.org/images/pdf/prreports/pr-wrongful-foreclosure-survey-results.pdf

4

 Housing Counselors Describe the Impact of Dual Track, CRC January/February 2012 Survey
“Makes advice and or information worthless when clients are following the correct processes only to see
their home foreclosed while they are in the middle of the process.”
“I am now 3 months into an illegal foreclosure while under HAMP for a GSE Freddie Mac loan (Freddie
yet to respond). I've reached out to as many people as would listen and then some, with an eviction fast
approaching for a widower father of a 4 and 6 yr old boys who already lost their mom. Servicers do what
they do, and even if they make a mistake and give the house back, there is no compensation for the stress
and trauma families are put through.”
“Since I practice bankruptcy, the automatic stay prevents the foreclosure, if the homeowner gets to me
before the sale. However, many of the homeowners who come to me have been trying to get a loan mod
outside bankruptcy and have been dual tracked; necessitating my filing their bankruptcy notwithstanding
a pending loan mod.”
“Clients don't understand - they want to believe if they turn in an application nothing can happen until
they hear whether it was approved. When we explain dual track, they freak out and don't want to try. It
takes away their hope.”
“The amount of time, paperwork and reporting to keep track of files is multiplied due to constant efforts
to postpone the Trustee Sale. This also affects the ability to assist more borrowers since the capacity is
limited due to fund restriction.”
“Creates an enormous burden on staff who are already working with heavy caseloads well above
capacity. Everything needs to be dropped and hours need to be spent on the phone trying to stop the sale.
In some cases the only option is for the clients to file bankruptcy in order to stop the sale and buy more
time.”
“The level of stress that nothing (except bank's mercy) can stop the foreclosure or a client has to file for
bankruptcy to buy time to finish out the request for modification. One hand is telling you we need this and
that paper, while the other (foreclosure dept) has the attorneys accelerating the legal process. They do
grant postponements on 30 day intervals which we have to be on top of because if we don’t request it, the
foreclosure is put on us for not doing so.”
“Adds stress to the already stressful situation. Causes our staff to engage in "crisis mode" counseling
instead of "process mode."
“Clients become frustrated with how lenders take forever to review a file while still in foreclosure and we
as counselors are having to constantly follow up to make sure lender doesn't sell the property.”
“It produces unnecessary chaos, clients often times have to file for bankruptcy in order to postpone sale
dates. Representatives show a lack of interest in trying to assist the homeowners to keep their homes.
Because of the desperation clients will often become easy targets for scammers”.
“More work and necessary contact to the servicers. Not only does the foreclosure process continue, but if
borrower did not call in to request extension of trustee sale, the modification departments or loss
mitigation department very rarely notifies the foreclosure department and trustee to stop sale without
borrower calling and making a request.”
“My clients live in constant fear.”
“End Dual Track!!! When is this going to happen? If it doesn't happen, all other servicing standards are
meaningless. Time lines and transparency of modification standards would be good servicing standards especially if enforced. The enforcement mechanism needs to be clear.”

5

 Finding #2: Principal reduction modifications are needed and
financially feasible, but still rare.
“I have never seen a reduction [in principal].”
“We have only seen principal reduction with loans owned by the bank/servicer. Fannie and
Freddie are the biggest challenge when implementing principal reductions for our client.”
“None in my experience. I saw 2 in 2009 by Bank of America but only because they were
Countrywide originated and offered the reduction to pacify the client from filing lawsuits.”
Principal reduction represents one of the best opportunities to stabilize families and
neighborhoods, and to allow our housing market to begin to recover. The lack of principal
reduction remains an immense barrier to sustainable modifications. With the large number of
homeowners underwater, principal reduction is essential to protecting California’s homeowners
and stabilizing communities. Reducing the principal on a loan can help borrowers by making the
payments more affordable and in line with the actual value of their homes. A recent nationwide
survey of housing counselors by the Center for New York City Neighborhoods found that
principal reduction was cited as the most important way to widen HAMP’s eligibility to reach
those who are not currently being helped.5
In CRC’s survey this year, 84% of counselors indicated that the Big 4 Servicers “always” or
“almost always” fail to reduce principal when granting modifications (see Chart 3).
The different rate at which banks are willing to grant principal reductions on loans they own
indicates that they are capable of granting principal reductions but choose not to (see Chart 4).
Banks recognize that when they own the loan, it often makes sense for the bank to reduce
principal. Some estimates have banks reducing principal on 20% of their loan modifications
where the bank owns the loan. If banks are willing to reduce principal on loans that they own,
they should not be reluctant to do so for investors on whose behalf they service loans. This
dynamic raises serious questions about whether loan servicers are operating in the best interests
of investors and borrowers. It also raises serious questions about why the Acting Director of the
Federal Housing Finance Agency refuses to allow principal reduction on Fannie Mae and
Freddie Mac loans, which constitute the majority of loans in our state.6



For loans owned by the servicer, 53% of counselors reported that clients “never” receive
principal reductions when granted a loan modification, with 43% saying “sometimes” and
4% saying borrowers “often” receive principal reduction.
In contrast, for loans not owned by the servicer, 79% of counselors reported that
borrowers “never” are granted a principal reduction when they obtain a loan
modification. Meanwhile, only 21% of counselors report borrowers “sometimes” get
principal reduction when their loan is not owned by the servicer.

5

The Future of HAMP 2012 - A National Survey of Housing Counselors by National Housing Resource Center
See “97 California Organizations Demand Immediate Foreclosure Policy Changes from FHFA,” March 15, 2012,
available at http://www.calreinvest.org/news/97-california-organizations-demand-immediate-foreclosure-policychanges-from-fhfa
6

6

 Chart 3: Modifications Fail to Include Principal Reduction

% Counselors Responding

70%

67%

66%
59%

60%

52%
50%
40%
32%
30%

24%

25%

24%

20%
10%

6%

9%

8%
5%

3% 1%

3% 3% 3%

3%

6%
1%

0%
Bank of America

Citibank
Always

JPMorgan Chase

Almost always

Sometimes

Rarely

Wells Fargo
Never

Source: CRC Counselor Survey January/February 2012

Chart 4: Principal Reduction Modifications

% Counselors Responding

90%
79%

80%
70%
60%

53%

50%

43%

40%
30%

21%

20%
10%

4%

0%

0%
Often

Sometimes
Owned by servicer

Never

Not owned by servicer
Source: CRC Counselor Survey January/February 2012

This stark contrast between loans that are and are not owned by the bank/servicer indicates that it
is financially feasible to grant principal reductions, that homeowners could and should be
receiving principal reductions at a higher rate, and that banks are not necessarily operating in the
best interest of investors. For consumers, it seems unfair that whether and what kind of
assistance they receive depends on who owns their loan.
7

 Finding #3: Fair housing concerns have not been addressed amidst
concerns that hard hit borrowers and communities fare worse in
getting loan modifications.
“Spanish-speaking departments within the banking community are HORRIBLE. There is no love
for La Raza. I was actually told that the representatives on the phone do not take notes(?!).
Many Spanish-speaking clients are losing their homes to lack of information and are
experiencing oppositional attitudes.”

Borrowers of color may receive worse outcomes
When asked if counselors think that borrowers of color are experiencing worse outcomes than
white borrowers when trying to avoid foreclosure, the majority thought this was true. Fifty-eight
percent of counselors thought that borrowers of color “often” or “sometimes” experienced worse
outcomes, up from 44% last year (see Chart 5).
Chart 5: Disparate Outcomes for Borrowers of Color Increasing

% Counselors Responding

60%

56%

50%
42%
40%
33%
30%
21%

23%

25%

20%
10%
0%
Often

Sometimes
2011

No

2012
Source: CRC Counselor Survey January/February 2012

Many counselors’ comments suggested that disparate outcomes were due to the fact that
borrowers of color might more often be limited English proficiency (LEP) individuals, lack
financial education, or might not fully understand the loan modification application process.
Others indicated that borrowers of color do not have money to pay for attorneys to file
bankruptcy to stall the trustee sale date as often as white borrowers. Other reasons given include
that borrowers of color often had worse loan terms in the first place, are more often taken
advantage of by scams and have higher unemployment rates.

8

 “When English is limited, some clients feel very intimidated by the whole process, get taken
advantage of more easily by scammers. Often there is a lack of education”
“Yes because in a lot of cases they were given a loan that they could not afford in the first place
and now are trying to qualify for a loan modification and they don't qualify if the loan amount is
too high and their income is too low, especially if they had an option-ARM loan.”
“From my experience, Latino borrowers with limited English and modest incomes have the most
challenges. Files I have reviewed indicate origination problems - steering to subprime products,
excessive fees, misleading information, and bad loan products. No recognition by servicer of
origination issues in loan modification process, repeated request for docs, extremely long
processing/decision-making times. I also think there are gender disparities for women who are
separated, divorced or whose husbands have died. There is a complete disconnect by the
servicers in how to deal with these loan mods and they continue to want to process the loan as if
the husband is still a part of the process.”
“Yes, but I am not sure that its because the lender is not helping them because of their color. It
can be because they're the ones that are losing more jobs. I do see that clients that don’t speak
English have a harder time dealing with their lender. They get assigned a representative that
doesn't speak their language. Also, the servicer might not accept a hardship letter if its not in
English. If a client cannot speak English, how can they write a letter in English????”

Borrowers are steered into less favorable non-HAMP modifications
Even when homeowners do receive a loan modification, they are consistently encouraged to take
non-HAMP proprietary modifications. Non-HAMP modifications generally come with less
favorable terms for the consumer. Eighty-two percent of counselors reported that clients
“sometimes” or “often” were encouraged to take non-HAMP proprietary modifications even
when they appeared to qualify for HAMP modifications. This is a slight reduction from last year
when 89% of counselors reported this to be the case.
Counselors reported that this outcome is commonplace because banks often say that a borrower
is not qualified for a HAMP modification even if it appears that they are, or because the bank
takes so long to process the modification that the borrower takes a non-HAMP modification out
of desperation instead. Several counselors were quite pessimistic about the banks’ motives and
thought that they pushed borrowers into non-HAMP modifications because it is more profitable,
requires less paperwork and reporting on their part, they want to avoid HAMP rules or because
they want HAMP to fail.
“In my experience, there has never been a logical concrete reason. The excuses given don’t
make any sense and the only reasonable explanation is that the non-HAMP is more
advantageous to the lender.”

9

 Finding #4: The federal Independent Foreclosure Review (IFR)
Process represents a poor federal response to abusive foreclosure
practices.
“Servicers, except Wells Fargo, began to give more loan modifications after the Consent Order
was signed. However, the servicers made sure to mail out the Notice about the Independent
Foreclosure Review before homeowners heard any publicity about the program. Most
homeowners threw them away since they did not know what it was and further because the
Notice was not written in their native language.”
In response to concerns about robo-signing and other foreclosure abuses, the Federal Reserve
Board and the Office of the Comptroller of the Currency (OCC) entered into consent decrees
with fourteen banking institutions. As part of the process mandated by the banking regulators,
servicers were to mail letters to approximately 4 million consumers inviting them to file claims
establishing they suffered financial harm as a result of servicing or foreclosure problems.
This process is significant in that it represents a major response from the banking regulators to
abuses by banking institutions improperly foreclosing on homeowners. At the same time, the
recent national multi-state Attorney General with the five largest servicers (Ally, Bank of
America, Citibank, JPMorgan Chase, and Wells Fargo) was linked to this IFR process, in that
disappointingly low restitution dollars for victims of foreclosure under the settlement agreement
(up to $2,000 for certain borrowers who lost their homes) were rationalized as merely
complementing the IFR process where consumers could be compensated for actual harm
suffered.
But many problems have been identified with this process. Questions have been raised about the
independence of consultants hired by banks to implement the process, the lack of clarity around
what constitutes “financial harm” and what compensation will be available to consumers who
prove it, whether consumers will be asked to waive legal rights they may have, whether
information provided by consumers through this process will be used by financial institutions to
the detriment of consumers, whether consumers can reasonably be expected to understand the
legalistic and confusing forms and process established by the consent decrees, and the fairness of
limiting potential relief only to those in the foreclosure process during 2009 and 2010 when
millions have suffered from the same foreclosure abuses in preceding and ensuing years.
Some of these concerns have surfaced in survey responses. While only 43% of housing
counselors fielded calls or visits from homeowners who received notices regarding the IFR
process and 82% reported that it was too early to tell if the process was working, borrower
responses as reported by housing counselors already reveal potential problems.
In particular, 65% of counselors reported that homeowners did not know what the notice was,
53% reported that homeowners thought it was a scam, and 43% reported that homeowners either
did not know what they stood to gain or did not know how to fill out the form (see Chart 6).

10

 Chart
Client Concerns
Concerns Regarding
Chart
6:6:
Client
Regarding
OCC/Federal Consent Decree Process
Independent Foreclosure Review Process
70%

65%

% Counselors Regarding

60%
53%
50%

43%

43%

40%

30%

28%
20%

20%
10%

10%

10%
3%

0%

Source: CRC Counselor Survey January/February 2012

Finding #5: The need for nonprofit housing counselors has never
been greater, yet their capacity is shrinking.
“We need more funding. After having a small section in the news media regarding a loan
modification success, we received over 120 calls in only 3 days. This shows that we need more
agencies, counselors… and of course funding to support all of these new borrowers.”
Housing counselors work tirelessly with largely uncooperative loan servicers to find ways for
homeowners to stay in their homes and keep communities together across the state. Despite
numerous hurdles and continuing difficulties, and due in large degree to the hard work and
assistance of these counselors, successful loan modifications are taking place. In fact, 51% of
counselors reported that sustainable loan modifications increased from 2010 to 2011.
This hardly means that their work is done;
 Seventy-five percent of housing counselors report that they expect demand for their
services to increase in the coming year.
 Meanwhile, 37% of their offices are restricting their counseling capacity and only 11%
are expanding, with the remaining 51% keeping constant (see Chart 7).

11

 Chart 7: Gap Between Housing Counselor
Capacity and Need for Services

% Counselors Responding

60%
51%
50%
40%

37%

30%
20%
11%
10%
0%
Restricting

Expanding

Keeping constant
Source: CRC Counselor Survey January/February 2012

All of this is particularly disturbing since homeowners will require additional assistance getting
through the IFR consent decree process and navigating the recent Attorney General settlement.
These two processes are already being cited by scam artists who are trying to deceive consumers
into paying them for assistance they can better get for free from nonprofit housing counselors.
Recent regulatory fines presented a golden opportunity to pay for much needed housing
counseling and legal services. Yet, shockingly, the Federal Reserve and the OCC may allow
banking institutions to pay off these fines by crediting to them the costs they incur in
implementing the flawed IFR process.7 This raises the prospect that penalties imposed for
wrongdoing will merely subsidize a program that winds up benefiting few borrowers.

7

“In an effort to facilitate a broad settlement of related state and federal claims, and to obtain an agreement that will
maximize the effectiveness of assistance provided through an integrated set of remedial programs, the Board
decided to act in conjunction with the comprehensive settlement between those five firms, the U.S. Department of
Justice, and the state attorneys general announced on February 9. The total settlement amount includes the Board's
monetary sanctions. Under the terms of the Board's monetary sanctions against these firms, each firm must pay to
the Board, for remittance to the U.S. Treasury, the amount imposed by the Board on the firm that the firm has not
expended within the next two years in providing borrower assistance or remediation in compliance with the federalstate settlement agreement or on a program acceptable to the Federal Reserve,” in Testimony of Suzanne G. Killian,
Senior Associate Director, Division of Consumer and Community Affairs of the Federal Reserve Board of
Governors, Before the Committee on Oversight and Government Reform, U.S. House of Representatives, Field
Hearing, Brooklyn, New York, March 19, 2012.

12

 Finding #6: Servicers continue to do a poor job of preventing
unnecessary foreclosures.
Homeowners still suffer from bad outcomes and struggle to remain in their homes
The country’s primary foreclosure prevention tool is the Obama administration’s Home
Affordable Modification Program (HAMP). However, despite the professed goals of the Home
Affordable Modification Program, housing counselors indicate that loan servicers continue to fail
to work with borrowers to keep them in their homes. This year, when asked the likelihood of
various outcomes for clients that appeared to be qualified for loan modifications, counselors
reported that receiving a permanent HAMP modification or a permanent non-HAMP
modification were not common (see Chart 8).
“It really isn’t working and it’s costing everyone involved a lot of money to just spin their
wheels. If programs like this are going to be put into effect, please think them through and put
processes in place that will ensure servicers will follow through.”

60%
51%
50%
31%

17%

ur
e

4%

os

y

4%

Fo
re
cl

u
in

nc
e

sa
le
D

an
en
t

no
n

en
t

3%
0%

Pe
rm

an

14%

0%

Sh
or
t

H

tr
i
in
Pe
rm

St
uc
k

no
n
ed
en
i

D

al

AM
P
H

H
ed
en
i
D

AM
P

0%

6%
1%

4%
1%

0%

Fo
rb
ea
ra

3%

AM
P

4%

H

10%

ee
d

10%

ru
pt
c

15%

Ba
nk

20%

30%

29%

30%

lie

40%

AM
P

% Counselors Responding

Chart 8:
2: Likelihood
Likelihood of
of Outcomes
Outcomesfor
forQualified
QualifiedBorrowers
Borrowers
Chart

Always

Almost Always
(Source: CRC Counselor Survey January/February 2012)

 More counselors—55% of those responding—cited “denied HAMP modification” as
“always” or “almost always” occurring compared to other possible borrower outcomes.
 The second most common outcome was “stuck in trial modification” with 44% of
counselors reporting this “always” and “almost always” occurs.
 34% of counselors noted both that borrowers “always” or “almost always” are denied
non-HAMP (proprietary) modifications or experienced foreclosure.

13

 When asked how often qualified borrowers are denied loan modifications by the Big 4 Servicers
(Bank of America, Citibank, JPMorgan Chase and Wells Fargo), a large percentage of housing
counselors noted that qualified borrowers are “always” or “almost always” denied modifications
(see Chart 9).


JPMorgan Chase (54%) and Bank of America (52%) remain the worst offenders, with the
largest percentage of “always” and “almost always” responses from counselors. There
has been some improvement from last year however, when 65% of counselors reported
JPMorgan had these outcomes, while 63% of counselors reported these outcomes for
Bank of America.



Citibank was slightly better this year, with 45% of counselors reporting they “always” or
“almost always” deny qualified borrowers, compared with 51% last year.



Wells Fargo saw 44% of counselors reporting that they deny modifications for qualified
borrowers “always” or “almost always”, compared to 58% last year.
Chart
3: Qualified
Borrowers
DeniedLoan
LoanModifications
Modifications
Chart
9: Qualified
Borrowers
Denied
50%

% Counselors Responding

45%

47%
44%

42%
41%

40%
37%

40%
35%

34%

32%

30%
25%
20%
15%

10%

8%

10%
5%

14%

13%

11%
4%

3%

1%

7%

7%
1%

1%

0%
Bank o f Am erica

Citibank
Always

JPMorgan Chase

Alm ost always

Som etime s

Ra rely

W ells Fargo
Neve r

Source: CRC Counselor Survey January/February 2012

14

 Servicers fail to meet many (any?) of the key metrics
As in surveys past, counselors cited poor performance for the industry along a number of factors:
 Escalations. Counselors were least likely to report “positive” outcomes in dealing with
Fannie and Freddie; HAMP escalations; servicers directly; or state agencies (see Chart
10a);
 Delay. A shocking 88% of counselors reported that Bank of America “always” or “almost
always” takes too long to decide and respond, with 87% reporting the same for
JPMorgan, 83% for Wells Fargo, and 71% for Citibank.
 Lost documents. A majority of counselors reported that the Big 4 Servicers “always” or
“almost always” lose client documents (see Chart 10b).
 Inconsistent information given. JPMorgan Chase was cited by 61% of counselors as
“always” or “almost always” providing inconsistent or incorrect information. The figures
were 60% for Bank of America, 53% for Wells Fargo, and 46% for Citibank.
 Unsustainable loan modifications. Even when modifications were granted, JPMorgan
Chase was cited by 36% of housing counselors as “always” or “almost always” offering
loan modifications that are not sustainable for the long term, Citibank was similarly cited
by 35% of counselors, while Bank of America and Wells Fargo were both cited 31% of
the time.

Chart 10a: Mixed and Negative Results Trying to Escalate
70%

63%

% Counselors Responding

60%
53%

48%

50%

42%

45%

40%

33%

30%

30%

20%

19%

22%
17%
13%

15%

10%
0%
To Fannie or Freddie

With the HAMP solution With the loan servicer
To a California state
center
agency (AG, DRE, DOC,
etc)
Positive

Mixed

Negative

Source: CRC Counselor Survey January/February 2012

15

 Chart 10b: Banks Often Lose Client's Documents
45%

% Counselors Responding

40%

39%

38%

35%

25%

34%

32%

32%

30%

38%

36%

28%

24%

23%
19%

20%
14%

15%
10%

14%

10%

5%

2%

0%

0%

9%

9%

Bank of America
Always

Citibank
Almost always

0%
JPMorgan Chase
Sometimes

Rarely

0%
Wells Fargo
Never

Source: CRC Counselor Survey January/February 2012

All servicers are not created equal
CRC asked housing counselors how often they encountered various issues with the Big 4
Servicers and uncovered many negative trends, similar to those revealed by last year’s survey.

Rating the top servicers
Housing counselors were asked to rate the top servicers based on how likely the servicers were to
help borrowers save their homes when they thought that outcome was possible. As seen below in
Chart 12, the majority of counselors reported that all the servicers were “terrible” or “bad.”





HSBC, OneWest and Aurora received the worst ratings, with 98%, 95% and 94% of
counselors, respectively, reporting that these servicers were either “terrible” or “bad.”
84% of counselors reported that Bank of America was “terrible” or “bad,” with 83%
citing both Citibank and JPMorgan Chase as “terrible” or “bad” and 82% giving this
assessment to American Home.
US Bank was cited by 76% of counselors as “terrible” or “bad,” and Ocwen/Litton/Saxon
and Wells Fargo were both given this rating by 74% of counselors.
The GSE servicers Fannie Mae and Freddie Mac were not rated much better than the
others, with 66% of counselors rating them as either “terrible” or “bad.”

16

 The Worst Servicer
Housing counselors were asked which servicer has the worst performance in terms of foreclosure
prevention and why. Counselors named 16 servicers. Bank of America, cited 28 times, was rated
the worst bank again this year (see Chart 11). With 12 mentions, One West came in second and
Wells Fargo came in third with 11 mentions. Some counselors opted to name just one servicer,
while others mentioned more than one servicer.8
Chart 11: Worst Servicer Tally
30

28

# of Responses

25
20

5

11
6

4

4

3

2

1

1

G

10

12

ra
tg
ag
e

15

1

1

1

1

1

1

PH
ni
H
on
Ba
nk
U
S
Ba
nk
U

BC
H

ee

en
tr

M
AC

re
G

Fi
r

st

M
or

Au
ro

SE
s
G

O

ne
W
W
Bo
es
ac
fA
t/
ho
In
vi
d
ym
a/
W
ac
el
ls
Fa
rg
o
Ch
as
e
H
SB
O
C/
Ci
cw
ti
Be
en
ne
/L
fic
itt
ia
on
l
/S
ax
on

0

Source: CRC Counselor Survey January/February 2012

8

See Appendix A for a compendium of all comments from housing counselors in response to the question, “which
servicer would you say has the worst performance in terms of foreclosure prevention? Why?”

17

 Chart 12: Rating the Top Servicers
70%

65%

60%

% Counselors Responding

50%
40%

56%

55%
46%

51%

49%
45%

38%

37%
36%

30%

28%
18%

44%

41%
35%

36%

33%

20%

48%

47%

34%
32%
26%

28%

24%

26%

27%

18%

18%

17%

12%

% Counselors Responding

7%

6%

10%

4%

4%

0%

0%

0%

0%

2%

2%
0%

Terrible

0%

Bad

Good

2%

6%
0%

Great
Source: CRC Counselor Survey January/February 2012

18

 Recommendations
CRC and its allies continue to fight for relief for hardworking families on many fronts.
AG settlement agreement
After a year of negotiations, the nation’s Attorneys General recently agreed to the terms of a $25
billion settlement with big 5 banks over their foreclosure practices. On February 9th, 2012
California’s Attorney General Kamala Harris announced that she would join the settlement,
which will include $12 billion in principal reduction for underwater California homeowners, and
which imposes new servicing reforms on loan servicers, amongst other things. California
Attorney General Kamala Harris was able to secure some positive commitments for California
because she was willing to hold banks accountable and sue them for wrongdoing if necessary.
However, ensuring that borrowers truly benefit from this settlement will require enforcing the
terms of the deal, and penalizing banks when they do not meet the targets set forth in the
agreement.




The federal monitor to the AG agreement should require that banks report monthly on the
race, ethnicity, gender and census tract of borrowers receiving assistance under the
agreement to ensure that fair housing laws and principles are respected.
The California monitor should work with advocates and counselors to ensure banks are
complying with the California commitment, share reports on bank performance with the
public, and step in immediately upon any showing of noncompliance by the banks
Discretionary funds going to the Attorney General’s office under the Agreement should
be targeted to housing counselors, legal service offices, tenant outreach and eviction
defense organizations, and nonprofit housing developers to maximize participation in the
agreement, prevent unnecessary displacement of homeowners and tenants, and allow
REO properties to be reclaimed as community resources that provide affordable housing
to low income households

State legislation
The AG agreement only covers five institutions and runs for three years. Servicing reforms
mandated under the agreement should be expanded to ensure that the industry is more responsive
to the needs of homeowners and communities. And most importantly, consumers need to be able
to hold financial institutions accountable for their continued failure to abide by promises,
programs, policies, rules and laws. The Attorney General has sponsored six bills that comprise
the California Homeowner Protection Bill of Rights.


The California Legislature must finally pass, and Governor Brown should sign, strong
dual track protections. Borrower must be considered for loan modifications before the
foreclosure process is begun. Where the foreclosure process has started, borrowers who
submit loan modification applications should have the process halted while their
applications are considered. Any such protections are meaningless if they do not come
with a private right of action that holds banks responsible for violations and provides
redress to victimized consumers so they can remain in, or return to, their homes.
19

 




The California Legislature must enact additional due process protections for
homeowners. Victims of robo-signing must be able to halt their foreclosures. And all
mortgages and loan notes and their assignments or sale to others must be recorded in the
County Recorders office so that borrowers and the public can know who owns their loan
and has the right to foreclose.
Tenants continue to represent over one-third of affected households according to Tenants
Together. Tenants deserve additional protections, including a minimum of 90 days notice
as provided for in federal law, which is sunseting.
All foreclosure and loan modification-related notices should be translated into the six
most commonly spoken languages in California, in order to maximize consumer
understanding, comply with fair housing and language access laws, and to prevent
unnecessary foreclosures.

Principal reduction
Acting Director Ed Demacro must change FHFA policy on principal reduction, which is having
devastating impacts on California borrowers and communities. He should follow the advice of
economists and political leaders (and the practice of banks where they service loans that they
own), and allow principal reduction modifications, which will benefit homeowners,
neighborhoods, taxpayers, and the larger economy.
Servicing standards
The Consumer Financial Protection Bureau must develop strong, uniform servicing standards so
that present day abuses will not be repeated.
When asked about principles that should inform the development of uniform servicing standards,
counselors had a lot to say. Top principles articulated include the need for:












Strong enforcement and accountability of any rules in place
Principal reduction
Quicker turnaround timelines for servicers reviewing loan modifications
Greater transparency throughout the process, including the use of online tools (HOPE
Loan Port) and around the Net Present Value formula
Greater accessibility, better communication and more respectful treatment of borrowers
Ending the dual track
More assistance for borrowers who are not yet in default
Protection for consumers from the danger of loan mod scams
Dealing with investors who are a potential barrier to loan modifications, either because
they are not aware of what servicers are doing, or they are themselves part of the problem
and reluctant to follow rules and guidelines
Recognition that the strong demand for housing counseling necessitates greater funding
and other support
Sustainable loan modifications, and protection of retirement savings of distressed
borrowers

20

 


Property maintenance requirements that respect tenant rights and fix properties to an
FHA-financeable standard so first time homebuyers, low-income borrowers and
borrowers of color have an opportunity to purchase homes.
Banks should be encouraged to extend long term leases to tenants living in REOs in order
to prevent unnecessary displacement, as Fannie Mae currently does.

This report was prepared by Kevin Stein of CRC and Sarah Brett, with helpful edits by Amelia
M. Martinez Cantos and Kristina Bedrossian of CRC. Helpful comments on early versions of the
survey were given by Lisa Sitkin of Housing and Economic Rights Advocates and Martin Eichner
of Project Sentinel, as well as Alan Fisher and Amelia Martinez of CRC. Comments were also
provided by Judy Hunter of the Rural Community Assistance Corporation and Maeve Elise
Brown of Housing and Economic Rights Advocates. All errors are strictly those of the primary
author.
California Reinvestment Coalition advocates for the right of low-income communities and
communities of color to have fair and equal access to banking and other financial services. CRC
has a membership of nearly 300 nonprofit organizations and public agencies across the state.

21

 Appendix A: Counselor comments regarding servicer(s) with worst
performance in terms of foreclosure prevention
Wells Fargo. I find it takes too long for them to respond, and they always lost paperwork/ documents.
Also it is very difficult to contact the servicer who is responsible for the case.
BofA, HBC, Wachovia, Indymac. They foreclose while they were doing the Loan Mod.
PHH Mortgage is the worst. They have very bad customer service and you do not feel the willingness to
help homeowners.
Indymac. Their ability to receive documents (unless it is online) is atrocious. They seemingly are always
missing docs that are already there. Their online portal is limited in data transfer capacity. Some of their
loans are insured, giving them no motive to modify.
Wells Fargo does not offer loan mods, only repayment plans
Bank of America - process too long, incorrect info given, repeated request for docs, unsustainable mods
and no principal reduction offered in cases where Countrywide clearly targeted qualified Latino
homeowners with subprime vs. prime loan product, dual tracking and poorly trained consultants with
collection backgrounds
Wells Fargo. Asked for same items for one year, then denied borrower.
HSBC and One West, they will request all the documentation for a loan mod, once the file is deemed
complete they will deny because the investor will either not participate in the program or is not doing loan
mods. Terrible.
Wells Fargo - send out letters to homeowners stating "we are here to help you avoid foreclosure." But in
the end, they string the homeowner along month after month, and in many cases, year after year. They ask
the homeowner to submit docs, let the clock run out, wait 45-60 days before they even look at the
submitted docs. When the counselors continue to inquire as to when they will make a decision on the
docs, the homeowner is required to re-submit docs all over again. How is this preventing foreclosure?
Bank of America. Paperwork lost, loans lost, total chaos, lack of training, disorganized, unreliable. Close
second - IndyMac
Saxon. Because their representatives are always rushing and with not much time to verify which
programs are available for clients.
BOA, lost docs, after MHA is denied: only offer short sale, refuse to work w/consumers & listen to them.
Untrained staff: not aware of all programs offered by BOA, No call backs, not same person to work with,
always whomever answers phone, incorrect info given
Chase has been very slow to respond and seem to string people along-keep them paying when they are
going to deny them. They aren't good at returning calls.

22

 Bank of America. The reason is the time that they take to review the documents and have an outcome.
For instance, if the client is 1 or 2 months late, by the time B of A makes a decision for approval or denial
the client is already in foreclosure and owing much more than before. Therefore, the lender may end up
denying the request because they are unable (since they owe much more now) to modify the loan within
the lender’s guidelines.
Chase. Their local Oakland HOC center has gone from neutral to horrible since [one particular employee]
left.
Bank of America has too many departments, too many systems, no centralize system of reviews. And
have contradicting information. And lost documents, I have experienced personally on many occasions
documents where fax sent and the bank representatives have the first page but do not show in their many
systems other documents that were included in package, even when cover letter was received and showed
how many pages must be attached or included and do not provide courtesy to call or e-mail or attempt to
communicate to let borrower know of missed documents. Also do not completely read explanations
letters. And never take responsibility for themselves, always blame borrowers for not providing
documents on time, but never ever acknowledge mistakes. In many cases borrowers lost opportunity to
receive loan modification because of neglect on their part and blame toward ONLY borrowers.
Bank of America, because they cannot be trusted. Their biggest problem seems to be logistics. They are
simply too big and it is obvious that the size of this organization under its current management system is
unmanageable.
GSE Fannie and Freddie, being they are GSE they should be setting the example as to how quickly and
responsive they are to assisting homeowners yet I find they are one of the hardest to work with and will
not postpone sale dates even when a modification is in review...bad bad bad shame on them
Litton---impossible to get a hold of a representative. Also First Mortgage---they take years sometimes to
review, and are understaffed.
Bank of America because they will approve you for a loan modification and change their minds and
equally as bad is Wachovia/Wells Fargo they take so long to say no.
Wells Fargo and Bank of America- they take forever to review documents then claim the past due amount
is too large to approve a modification
Bank of America and Chase. Don’t see a lot of home owners getting assistance and sometimes the home
owners are given different information from the account managers, none of the information is the same
Bank of America hands down. They represent the highest number of foreclosure cases yet do little to
cooperate with HUD agencies.
Bank of America. They are so large and too many things fall through the cracks. Cannot reach or get
return phone call from Single Point of Contact.
I think a lot of the major ones are about the same in the performance. There is a lot of miscommunication
when you call the servicer. There are different notes in the system, one day the homeowner calls and gets
told one thing and then a week later the homeowner gets told something else. Or the homeowner gets
transferred to different departments so it takes a while to get a hold of someone who knows the status.

23

 Bank of America; because they have had so many changes in their communications, file assignments,
telephone number changes, borrowers not being able to make over-the-phone payments unless they are
made with assigned contact person, reps not knowing/following HAMP guidelines.
Wells Fargo has the worst performance in terms of foreclosure prevention. Wells Fargo NEVER approves
loan modifications for our homeowners! For some reason no homeowner qualifies for HAMP and no
homeowner qualifies for their in-house loan modification. Also, we can never get in touch with the
SPOC! The SPOC's do not respond to phone calls or e-mails. My experience of Wells Fargo is that they
have intentionally fought the loan modification program from day one, much like a teen suffering from
teenage defiant oppositional disorder. Its difficult to work with a servicer that boldly defies the OCC's
Consent Order and takes an oppositional stance to every homeowner trying to get a loan modification.
Bank of America- between the amount of loans they service and their poor customer service. Also, can
recall at least two cases where clients were not even behind in payments yet they were in process of being
foreclosed and had to go through hoops to prove they paid.
HSBC, because they don't modify loans
Bank of America. They seem to be very confused about what is needed and take a long time to process. I
continually get asked for more information, some of which is already provided in the HOPE loan port.
B of A - no one seems to know what they are talking about. Inconsistent answers to questions. Passed
from one department to another.
Fannie and Freddie. Hands down the GSE is the single biggest impediment to preventing foreclosure. My
experience is mostly with Fannie. The 12-month rule barring loan modifications, regardless of how long a
borrower has been in the process, results in unnecessary foreclosures of qualified borrowers. Dual
tracking is probably the single biggest reason houses go to sale for qualified borrowers. The HAMP
enforcement team is run by Fannie so there is no accountability and no way to effectively escalate cases.
Indymac has the worst performance in terms of foreclosure prevention. Very difficult to obtain any
assistance. We had a client that was a victim of dual tracking and had their home foreclosed on.
B of A because of the volume of homeowners
One West Bank/IndyMac. They continue to request updated documents forever.
Bank of America- They keep running the customers around and around
Union Bank / No monitors, they do as they please
Bank of America they are just too large to be functional. The process and procedure is different for every
file it seems and they can't seem to process a complete package in a timely manner.
Bank of America -- INEPT

24