The Mortgage Settlement's Big Day

Today, October 2, is the last day for the nation's five largest mortgage companies to implement the servicing reforms in the National Mortgage Settlement. As California Monitor, I issued my first report to highlight one of the most important changes--restricting dual tracking. Dual tracking is the name given to the race between foreclosure and loan modifications. Because banks control both processes, beyond some specified waiting periods by state law, many families lose the race to get a decision on whether they can save their home with a loan modification. Restrictions on dual tracking are key to avoiding preventable foreclosures and creating fundamental fairness in the foreclosure process.

The report gives some data on dual tracking to bring visibility to this
issue. After the jump, I report some bad news and good news on how the
Settlement implementation reforms are going. 

The California Monitor Program received 224 complaints about dual tracking since the Settlement was announced. The bad news is this clearly understates the degree of the problem. Most families do not file a complaint, and even among the 1,482 total complaints received, some may focus on confusing communication from their banks, meaning my staff doesn't realize dual tracking is occuring into well into its work to help the family. The good news is the trend line is sharply downward in September. As the chart shows, dual tracking complaints were half as frequent last month.

I am going to continue to monitor dual tracking complaints in the upcoming
months. If the mortgage servicers are honoring their promises in the
Settlement, the number of complaints should fall sharply. The National Monitor, Joseph
Smith, will use the metric set out in the Settlement to formally measure the
mortgage servicers' compliance with the dual tracking rules.

Behind the complaint numbers are families dealing with uncertainty, fear,
and frustration. My report features the stories of California homeowners who
were dual tracked and faced imminent sale dates, despite submitting complete
loan modification applications. While the California Monitor Progrm worked
successfully with mortgage companies to stop dozens and dozens of sales during
the Settlement implementation period, the point of the Settlement reforms is
structural change. Homeowners shouldn't need a law professor as their ally to
receive fair treatment.

The next few months are an important test for whether mortgage companies
were successful in their efforts to retool their operations. The Settlement
holds the promise of change, and I'm very eager to see the degree to which
those changes reduce challenges of families struggling with their mortgages.