Many of the same mortgage servicing practices which drew loud complaints when they were previously conducted by banks, are now the subject of new complaints against nonbank mortgage servicers which have taken over some of the business. These allegedly deceptive and unfair practices may include alleged robo-signing meaning signing or affirming testimony without reading it or knowing what it says, as well as "improper fees and lost paperwork." Michael Corkery, "New York Demands Mortgage Firm's Data" p. B3, col. 6 (New York Times Nat'l ed., "Business Day" Section, Thursday, March 6, 2014).
Banks are not offloading all of their mortgage servicing business, however. Banks which are also in the business of mortgage servicing are selling their subprime mortgage servicing to nonbank mortgage servicers also called "specialty" servicers. Id. (pointing out that "traditional banks seek to exit the business of servicing subprime mortgages." [Emphasis added.])
How, you might well ask, could nonbank or specialty mortgage servicers not be bound by the National Mortgage Settlement? The NMS ostensibly resolved the very unfair and deceptive practices in mortgage servicing that are now complained of when nonbank mortgage servicers practice them. So, if the nonbanks bought mortgage servicing business from banks, should the nonbanks not be bound by the National Mortgage Settlement entered into by the five (5) largest bank mortgage servicers in the U.S. at the time?
This question was raised in "HELP WANTED: MUST HAVE EXPERIENCE PRACTICING INSURANCE, SETTLING CLAIMS / Interested parties please apply to the United States Department of Justice," an article published here on February 26, 2014. Clearly the nonbank, specialty servicers do not consider themselves bound. And it is not because they are not regulated like banks, but because they think they are not bound by the National Mortgage Settlement.
All five bank mortgage servicers agreed to separate Consent Judgments as a part of the National Mortgage Settlement. All five Consent Judgments contained the same Exhibit A which used the same language to identify the successors and assigns which will be bound by the settlement including the agreement to suspend if not terminate many of the alleged deceptive and unfair mortgage servicing practices:
References to Servicer shall mean [fill in the name of one of the five bank mortgage servicers] and shall include Servicer's successors and assignees in the event of a sale of all or substantially all of the assets of Servicer or of Servicer's division(s) or major business unit(s) that are engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied properties. The provisions of this Agreement shall not apply to those divisions or major business units of Servicer that are not engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied one-to-four family properties on its own behalf or on behalf of investors.
Pages A-41 to A-42, in voluminous Exhibit "A," the parties' "Settlement Term Sheet" attached to all five Consent Judgments (all five were entered under date of April 4, 2012), in United States of America, et al. v. Bank of America Corp., et al., Dkt. Nos. 10, 11, 12, 13 and 14 (D.C.D.C. Case No. 1:12-cv-00361).
Banks are not offloading their entire business of mortgage servicing. They are only selling off the business of servicing subprime mortgages. Michael Corkery, New York Times, March 6, 2014, supra.
And so the nonbanks do not consider themselves bound by the National Mortgage Settlement even when the nonbanks buy subprime mortgage servicing rights from the five bank mortgage servicers who agreed to it:
- Bank of America;
- JPMorgan Chase;
- Wells Fargo;
- Citigroup; and
- Ally Financial.
See the article posted here on January 30, 2012 shortly after the terms of the National Mortgage Settlement were publicly announced, which lists the five bank mortgage servicers and begins to describe many of the settlement's terms and background in the first of a series.
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