NY Dept. of Financial Services wins agreements with three servicers [Mortgage Banking]

On Nov. 10, New York Superintendent of Financial Services Benjamin M. Lawsky announced his department had secured agreements with Morgan Stanley, New York (and Irving, Texas-based Saxon Mortgage Services Inc. - its mortgage servicer); American Home Mortgage Servicing Inc., Coppell, Texas; and Vericrest Financial Inc., Oklahoma City, to reform their servicing practices. The agreement is modeled on an earlier one entered into with Goldman Sachs Bank, Ocwen Financial and Litton Loan Servicing, according to a press release issued by New York'sDepartment of Financial Services (DFS).

"Today's agreements are an important step forward in cleaning up some of the mortgage industry's most troubling practices. These new reforms are now spreading out in the industry at a time when homeowners truly need relief in the wake of the financial crisis. We will continue to do everything we can to make these reforms the norm in the servicing industry," Lawsky said.

He added, "I commend Morgan Stanley, Saxon, American Home and Vericrest for being leaders in agreeing to implement this new higher standard to protect homeowners from abuse, and I urge others in the industry to follow their lead."

Some of the provisions included in the agreement would redress practices such as robo-signing; weak internal controls that compromise the accuracy of foreclosure documents; improper denials of loan modifications; dual tracking of borrowers into modification and foreclosure; and failure to offer a single point of contact.

The New York DFS noted that the new agreements on servicing practices "do not preclude any investigations of past practices or release any claims or actions whatsoever."

The agreements require the following changes: impose staffing and training requirements that will prevent robo-signing; require servicers to withdraw any pending foreciosure actions in which filed affidavits were robo-signed or inaccurate; end dual tracking; provide a dedicated single point of contact for all borrowers seeking loss mitigation or in foreclosure; require forced-placed insurance to be reasonably priced; impose more-rigorous pleading requirements in foreclosure actions so only entities possessing legal right to foreclose can sue borrowers; require servicers to return equity in the property to borrowers who were wrongfully foreclosed upon; and require servicers to strengthen oversight of foreclosure counsel and third-party vendors.