The Brennan Center, along with over a hundred fair lending advocates, sent the following letter to Mortgage Settlement Oversight monitor, Joseph A. Smith, urging him to improve public knowledge of banks’ consumer relief activities and to more aggressively enforce the settlement’s requirements. More than a year ago, federal and state authorities promised the national mortgage settlement agreement would end mortgage servicing abuses and help prevent unnecessary foreclosures. But to date, homeowners report that little has changed on the ground. Banks are routinely violating the agreement’s servicing standards. And very few homeowners are receiving affordable modifications under the settlement, especially in communities of color and low-to-moderate income neighborhoods that have been hardest hit by the foreclosure crisis.
Joseph A. Smith
Office of Mortgage Settlement Oversight
301 Fayetteville St., Suite 1801
Raleigh, NC 27601
Members of the Monitoring Committee
Via electronic mail
Dear Mr. Smith and Members of the Monitoring Committee:
We write to follow up on your interim report regarding Ally Financial’s compliance with the national mortgage settlement, and to again stress the need for greater transparency to ensure the effectiveness of this settlement agreement for communities of color and other hardest-hit communities.
Homeowners and advocates around the nation have grown frustrated by the banks’ failure to provide information about consumer relief under the settlement, and by the slow pace of change on the ground for hardest-hit communities. You heard these frustrations voiced at the recent forum hosted by the National Council of La Raza, National Urban League, and the National Coalition for Asian Pacific American Community Development. Just last week, the Alliance of Californians for Community Empowerment, Center for Popular Democracy and the Home Defenders League called upon Wells Fargo to “be honest with Californians by reporting data on its principal reduction, short sales, and foreclosures by race, income, and zip code.”
These statements reflect a broad consensus: we need greater transparency and accountability to ensure that banks comply with their fair lending obligations, and remedy the damage of foreclosures in communities of color and other low-to-moderate income communities.
Federal and state authorities promised that this settlement would end mortgage servicing abuses and help prevent unnecessary foreclosures. In exchange for waivers of liability on substantial legal claims, the settling banks promised to invest billions of dollars toward alleviating the nation’s foreclosure crisis. As part of the settlement, the banks specifically agreed not to “discriminate against any protected class of borrowers.” [Consent Judgment Ex. D, at 1.]
This fair lending protection is central to resolving the nation’s foreclosure crisis. Discriminatory and predatory lending practices inflated the subprime lending bubble and caused the nation’s financial collapse and foreclosure crisis. Today, banks are reportedly failing to maintain REO properties in communities of color adequately, and there is evidence that vacant homes lost to foreclosure are driving down property values and driving up crime in hardest-hit neighborhoods.
The national mortgage settlement must help break this cycle of discriminatory lending. Unfortunately, your reports fail to provide any insight into whether the settlement is benefitting communities of color. Without transparency, we cannot maximize the benefit of this settlement for struggling homeowners, or learn how to improve upon this settlement for future agreements. This is a missed opportunity that must be addressed.
First: the Monitor should use its access to loan-level data to improve public knowledge of the banks’ consumer relief activities.
As your Ally Financial report illustrates, the Monitor must use the banks’ mortgage servicing data (including “access to databases reflecting total populations and loan level information on loans in these populations”) to confirm the banks’ relief activities. [Ally Report at 7–8.] For example, your auditors are carefully reviewing whether banks have set property values appropriately. [Ally Report at 24.] This review cannot be conducted without information on where these properties are located – exactly the kind of loan-level geographic data that the public has been seeking for months to no avail.
The Monitor should share this data at a census tract or zip code level, so that the public may finally understand which neighborhoods are being provided with foreclosure relief under the settlement. Without this data, it is impossible to measure the impact of the national mortgage settlement in any meaningful way, or to determine the settlement’s impact on our communities and our economy. And without knowing where relief is going under this settlement, it is impossible to make recommendations for improving the effectiveness of relief under future agreements.
Publishing this data at the neighborhood level would not violate any homeowner’s privacy, but would provide the public with critical information about the state of our nation’s foreclosure crisis.
Second: the Monitor should aggressively enforce the settlement’s servicing reforms and fair lending requirements.
Your interim report on Ally Financial too blithely dispenses with the settlement’s prohibition against discriminatory lending. These fair lending requirements are central to addressing the roots of the foreclosure crisis and ensuring the efficacy of this agreement. They are core responsibilities under the settlement, not merely “indirect requirements” as you describe them in your report. [Ally Report at 28–29.]
Ally’s relief activity was largely structured by the particular set of outreach requirements imposed on that bank. But their counsel’s statement that Ally “did not consider any borrower’s geographic location or status as a protected class member” remains insufficient proof of fair lending compliance. The Monitor must also ask and measure whether banks are taking adequate action to reach out to borrowers.
For example, 78% of housing counselors surveyed by National Housing Resource Center, and over 60% of housing counselors surveyed by the California Reinvestment Coalition, report that their Limited English Proficient homeowners are “never” or only “sometimes” able to speak to their servicer in their native language, or through a translator provided by the servicer. The Monitor must ensure that banks serve all customers fairly, including low and moderate income borrowers and homeowners who do not speak English as a first language.
In addition, the Monitor must aggressively enforce the settlement’s servicing reforms to ensure that all families have a fair opportunity to save their homes. These servicing reforms are needed to spur recovery in hardest-hit communities. Unfortunately, surveys of housing counselors and attorneys suggest widespread violation of the settlement’s servicing requirements.
For example, the settlement requires banks to provide a Single Point of Contact to guide consumers through the loan modification process. This reform is critical to cutting back on delays and improving outcomes for borrowers and lenders. But it does not appear to be working: 81% of housing counselors surveyed by the National Housing Resource Center, and 70% of housing counselors surveyed by the California Reinvestment Coalition, reported that their contact at the bank was only “sometimes,” “rarely,” or “never” accessible, consistent or knowledgeable about relevant program rules.
These surveys also found that the banks are failing to meet their obligations to end dual tracking, respond to borrower applications within required timelines, or accommodate borrowers with disabilities or special needs. Banks are continuing to lose documents and require duplicative submissions, causing unnecessary delays that hurt borrowers, investors and communities.
Past lending practices and servicing violations have disproportionately harmed communities of color. The settlement servicing standards should be enforced with regard to all borrowers, and monitoring must also ensure that settlement relief does not perpetuate past discrimination by continuing to disfavor members of protected classes, or by neglecting these hardest-hit communities.
The Monitor’s most recent reports fail to provide sufficient information about the geography or demographics of borrowers receiving relief under the settlement. Such data is needed to ensure that these mortgage servicers comply with the settlement’s prohibition of discriminatory conduct, as well as the banks’ fair lending obligations under the Fair Housing Act and the Equal Credit Opportunity Act. It is also needed to ensure that this agreement has the greatest possible impact on the nation’s ongoing foreclosure crisis – and that relief is fairly provided to communities of color and other hardest-hit communities who were targeted for subprime lending and are now reeling from particularly high foreclosure rates.
For these reasons, we again urge you to:
- Use the Monitor’s access to loan-level servicer data to show which neighborhoods are receiving homeowner relief under the settlement;
- Aggressively, immediately, and regularly monitor fair lending concerns, and make that process transparent to the public;
- Fully audit fair lending compliance before relieving any of the servicers from their obligations under the settlement; and
- Enforce the settlement’s servicing standards to ensure that all consumers have a fair shot at saving their homes.
It is past time to begin examining these issues in your assessments of the national mortgage settlement, and to use the data at your disposal to help make this and future agreements more effective for promoting fair and responsible lending.
|Able Works||Action NC||Action United (PA)|
|Advocates for Basic Legal Equality, Inc. (ABLE)||Advocates for Neighbors, Inc.||Affordable Housing Services|
|AFL-CIO||Alliance for a Just Society||American Civil Liberties Union|
|Americans for Financial Reform||Bedford-Stuyvesant Community Legal Services||Bet Tzedek Legal Services|
|Brennan Center for Justice at NYU School of Law||California Reinvestment Coalition||California Rural Legal Assistance, Inc.|
|Campaign for a Fair Settlement||Causa Justa :: Just Cause||Center for NYC Neighborhoods|
|Civic Center Barrio Housing Corp.||Columbia Legal Services||Community Housing Council of Fresno|
|Community Housing Development Corporation||Community Legal Services (Philadelphia, PA)||Connecticut Fair Housing Center|
|Consumer Action||Consumer Credit Counseling Service of Orange County||Consumer Credit Counseling Service of the North Coast|
|Consumers Union||Corporate Action Network||Courage Campaign|
|Cypress Hills Local Development Corp.||Delaware Bar Foundation||Empire Justice Center|
|EPACT Education Fund||ESOP: Empowering and Strengthening Ohio’s People||Fair Housing Council of the San Fernando Valley|
|Fair Housing Napa Valley||Fair Housing of Marin||Greater Boston Legal Services, Inc.|
|Greenlining Institute||Gulfcoast Legal Services||Home Defenders League|
|HomeFree-USA||Housing and Economic Rights Advocates (HERA)||ISAIAH|
|JASA/Legal Services for the Elderly in Queens||Korean Churches for Community Development||Leadership Center for the Common Good|
|Legal Aid Foundation of Los Angeles||Legal Aid of East Tennessee||Legal Aid of Nebraska|
|Legal Aid Society of Metropolitan Family Services||Legal Services NYC||Legal Services of Central New York, Inc.|
|Maryland Consumer Rights Coalition||Maryland Legal Aid Bureau||Memphis Area Legal Services|
|MFY Legal Services||Minnesotans for a Fair Economy||Mission Economic Development Agency|
|Mississippi Center for Legal Services||Missourians Organizing for Reform and Empowerment||Mountain State Justice, Inc.|
|NAACP Legal Defense and Educational Fund, Inc. (LDF)||National Association of Consumer Advocates||National Coalition for Asian Pacific American Community Development|
|National Consumer Law Center (on behalf of its low-income clients)||National Council of La Raza||National Fair Housing Alliance|
|National Legal Aid & Defender Association (NLADA)||National People’s Action||NEDAP|
|Neighborhood Housing Services of the East Bay||Neighborhood Legal Services, Inc.||New Bottom Line|
|New Hampshire Legal Aid||New Hampshire Legal Assistance||New Jersey Communities United|
|NJ Communities United||Pennsylvania Legal Aid Network, Inc.||Philadelphia Unemployment Project|
|PLAN Action Fund||Planning for Sustainable Communities||Professor F. Willis Caruso, Director of the Pro Bono Program of The John Marshall Law School|
|Progressive Leadership Alliance of Nevada||Public Counsel||Public Law Center (Santa Ana, CA)|
|Queens Legal Services||Right to the City Alliance||Rural Community Assistance Corporation|
|San Diego City-County Reinvestment Task Force||Staten Island Legal Services||Tenants Together|
|Texas Legal Services Center||Thai Community Development Center||The Asian Pacific Policy & Planning Council (A3PCON)|
|The Fair Housing Consultants of Lakewood||The Fair Housing Council||The Fair Housing Council of San Diego|
|The Greater Sacramento Urban League||The Housing & Economic Development Corporation (HEDC)||The Leadership Conference on Civil and Human Rights|
|The Legal Aid Society for the District of Columbia||The Mississippi Center for Justice||The North Florida Center For Equal Justice, Inc.|
|The Northwest Justice Project||The Progressive Leadership Alliance of Nevada||The|
Public Interest Law Project /
California Affordable Housing Law Project
The Unity Council
|Vermont Slauson Economic Development Corporation (VSEDC)||Western New York Law Center|